The New York (and other states) death tax trap.
Florida Bar Journal › Vol. 77 Nbr. 9, October 2003
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The New York (and other states) death tax trap.
It is no secret that more people retire to Florida than any other state. Indeed, Florida's population increased by approximately 340,000 people between July l, 2001, and July 1, 2002. (1) Many individuals who move to Florida from another state become Florida residents, but keep a home in their former state as a secondary residence. These individuals are often referred to as "snowbirds." Our "snowbirds" (or their estates) may be in for a very unpleasant surprise if they own real estate or tangible personal property in their "former" states.
Most practitioners and estate planning clients are aware of the changes made to the estate tax exemption and estate tax rates in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (2) as well as the creation of a carry over basis regime in 2010 and sunset of these provisions in 2011. Another significant, but rarely spoken about, change made by EGTRRA to the estate tax provisions of the Internal Revenue Code of 1986, as amended, was the phase-out and eventual repeal of the state death tax credit (SDTC) provided under Code [section] 2011. Prior to EGTRRA, a credit was allowed against the Federal estate tax for any estate, inheritance, legacy, or succession taxes ("death taxes") actually paid to any state or the District of Columbia with respect to any property included in a decedent's gross estate. (3) The maximum allowable credit for state While the article focuses on New York state, a majority of northern states either have or are contemplating a death tax independent of the federal estate tax. death taxes was determined under a graduated rate table; the top rate was 16 percent. (4) Pursuant to EGTRRA, the SDTC was reduced by the following percentages: 25 percent in 2002, 50 percent in 2003, and 75 percent in 2004. (5) In 2005, the SDTC is repealed and a new deduction for death taxes actually paid will apply. (6) While the replacement of the SDTC with a deduction received relatively little attention, ...See the full content of this document
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