Wealth Matters for Physicians

ArticleEstate Taxes May Be a Hidden Problem for New York Physicians



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Andrew Altfest and Keith Feinberg

Andrew Altfest, MBA, CFP® and Keith Feinberg, JD, CFP®

If you’re a medical professional who lives in the State of New York, your estate planning may face a danger you may not even know about.

The federal Tax Cuts and Jobs Act of 2017 put in place at the start of 2018 was beneficial for most large estates, but states’ estate tax regimes operate independently, and can have a very different impact. How do the two systems, federal and state, work in your favor — or against you — if you’re a New Yorker?


Implications of the new tax laws

In 2019, the Internal Revenue Service (IRS) lifted the inflation-adjusted federal estate and gift tax exemption to $11.4 million per individual, up from $11.18 million in 2018. That means an individual can now leave $11.4 million to heirs without paying federal estate or gift tax, while a married couple will be able to shield $22.8 million using one or more planning strategies.. [1]  

Over the past several years, many states have enacted legislation to gradually increase estate tax exemptions to match the former federal exemption. As a result, there’s now a roughly $5 million gap between the federal and state estate tax exemptions in New York. An estate plan that centers entirely on leveraging the new, larger federal exemption could end up wildly exceeding the state exemption.

For New York State residents, the estate tax exemption is much lower than the federal one, at $5.74 million. If a New York physician dies with an estate valued at an amount falling between the New York and federal exemptions, the New York estate tax will be applied to the entire estate.


New York’s ‘estate tax cliff’

In most states, an estate is taxed on a percentage of the amount by which its value exceeds the state’s exemption. However, New York implements a “cliff rule”; if a taxable estate exceeds the exemption by more than 5 percent (a buffer zone of only about $265,000), the exemption is effectively disregarded and the entire estate is subject to the estate tax. The estate “falls off the cliff.” With a top rate of 16 percent, an enormous tax bill can arise, if planned incorrectly or carelessly.[2]

If your taxable estate is currently equal to or over the exclusion amount, or you believe that over time it will be as your practice grows, then the cliff could be a peril for your family.

For estates below the New York exemption, the cliff may not directly matter, but it’s still important to revisit your estate plan to make sure it reflects your wishes, your present circumstances and current law.


Know your exposure

Even if your estate is not currently taxable, or you live outside New York State, certain tax law changes may cause provisions of your estate plan to operate differently than originally intended. Altfest can provide trust and estate guidance, and work with your legal advisor to find the right structure for your estate.


How an Altfest advisor can help

Altfest financial advisors have years of experience working on estate planning with healthcare professionals. We welcome you to reach out when you’re ready to discuss a transition for your hard-earned practice, or to review your estate plan to ensure you and your family are prepared appropriately.


Click here to schedule a complimentary consultation with an Altfest financial advisor.



[1] https://www.irs.gov/pub/irs-drop/rp-18-57.pdf


This article was designed to complement the discussion and should not be a complete resource for this topic. Altfest Personal Wealth Management does not provide tax, legal, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions.



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