| Beware of the cliff!…read on:
CLIENT QUESTION:
Hi Lawrence. I heard recently that since I have a $10,000,000 estate that I have a tax problem. I thought the estate tax exemption was about $14,000,000? Can you explain?
MY RESPONSE:
You are right and you are wrong. The FEDERAL estate tax exemption in
2025 is $13,990,000 (close enough to $14 million). This amount is going up
to $15 million in 2026. Also, if you are married, the surviving spouse can
elect to inherit the exemption of the first spouse to die, doubling the exempt amount. You have no FEDERAL estate tax.
However, you may have a NEW YORK estate tax. New York has an exemption of $7.16 million this year. If you die with an estate that exceeds this number
by 5%, then you lose your exemption completely and are taxed on dollar one. We call this the CLIFF TAX. If you go over the amount, you fall off the
tax-free cliff. Yikes.
If you are married, unlike the Federal tax scheme, you do not inherit each other’s exemption. However, with proper planning, a strategy exists where we can use each spouse’s exemption, which may eliminate the tax. If you are not married, you have a New York taxable estate, and we have to get to work immediately to reduce or eliminate this tax.
I hope this helps. |
