New York State's 2012 Nonresident Audit Guidelines provide primary and related factors for auditors to consider in determining whether taxpayers are domiciliaries of New York State for income tax purposes, which presumably would be the same factors considered in determining whether a taxpayer is a domiciliary in New York State for state estate tax
Basically, New York's state estate tax
is a "fixed" "soak up" tax meant to reap the maximum revenue benefits from the federal law, as of 1998.
While portability may also be a solution to this problem in some cases, without a separate election, decedents may be forced to incur state estate tax
upon the death of the first spouse to die or "waste" a portion of their federal estate tax exemption.
State estate tax
exemption amounts State 2015 estate tax threshold Connecticut $2,000,000 Delaware $5,430,000 District of Columbia $1,000,000 Hawaii $5,430,000 Illinois $4,000,000 Maine $2,000,000 Maryland $1,500,000 Massachusetts $1,000,000 Minnesota $1,400,000 New Jersey $675,000 New York $2,062,500 for deaths from April 1, 2014, through March 31,2015; $3,125,000 for deaths from April 1, 2015, through March 31,2016 Oregon $1,000,000 Rhode Island $1,500,000 Vermont $2,750,000 Washington $2,054,000
(11) In New York, for example, if the DS's estate files a federal estate tax return and elects portability, the estate is bound by the federal QTIP election for state estate tax
purposes and, as a result, cannot utilize the state AEA.
Nevertheless, the existence of larger estate and GST exemptions, the availability of spousal portability, the potential applicability of state estate taxes
, and the importance of the cost basis of property in light of increased capital gains rates on the decision to make gifts versus bequests, means that estate planning still requires planning for many complex interrelated factors.
It is also worth noting that the majority of states do not impose a gift tax, so lifetime gifting strategies can be particularly effective when attempting to reduce the amount subject to state estate taxes
upon the client's death.
The state estate tax
ramifications of electing a federal DSUEA are beyond the scope of this article.
* State Death Taxes--Florida practitioners and residents are generally less concerned with state estate taxes
, because currently there is no state estate tax
In a 45% combined federal and state estate tax
bracket, this transfer can result in large estate tax savings over a period of time.
This study, which was commissioned to determine why Connecticut was losing its wealthiest retirees, also found that the state estate tax
was the leading cause of out-migration, and that the average estate of those leaving was $7.5 million.
However, when the amounts of the federal and state estate tax
exemptions are different, the planning becomes a little more complicated.