Is New York Taxing Out the Elderly?

by | Jul 24, 2008 | Elder Law, Estate & Gift Taxes |

My evidence for this is completely anecdotal, but it seems like more and more of my clients these days are considering moving out of state for estate tax reasons.

New York has an unlimited marital deduction for estate taxes, which means that assets passing from one spouse to the other upon the first death are tax-free. However, when the second spouse dies, there is a $1 million exemption, and anything over $1 million is taxed at approximately a 10-17% rate.

It’s understandable for a lot of our snowbird clients, that when the first spouse dies, the survivor moves to Florida permanently. There is currently no estate tax in Florida, but that does not seem to be the motivating factor.

However, I have a current client considering a move to Texas, and one considering a move to New Hampshire, and one of the big factors in each decision has been the New York estate tax. The clients and their children have told me it “shouldn’t be” their motivation, but admit that it is.

As a practitioner, I prepare estate tax returns, and as a New York resident, I take advantage of many state programs that they fund, and so I can’t honestly advocate in favor of abolishing them. However, it concerns me that my clients are choosing where they will spend the rest of their lives based on provisions of tax law.

I invite comments from other estate attorneys: are you seeing the same thing among your clients? Is Upstate New York losing its elderly, as well as its twentysomethings? Or am I making a mountain out of a molehill here?