WHY NEW YORK CITY IS THE WORST PLACE TO RETIRE? High cost of real estate and estate “death” taxes
We all know living in and around the greater New York City area is an expensive proposition. But to truly appreciate just how expensive living in the New York area is we need only look at the high price of rent and real estate. In fact in 2012, the average sale price for a Manhattan apartment was $1.5 million, up 9% from 2011. To make matters worse, many of these apartments, which sold for $1.5 million last year, were no bigger than one bedroom.
But small exorbitantly priced homes are only the beginning. In a recent U.S. News and World Reports article, the New York City area was deemed the worst place to retire for more reasons than just high property prices.
Aside from the lofty real estate market in New York, lurks one of the worst state estate tax structures in the nation. Without proper estate planning, our tax structure is truly a NY estate law nightmare. Couple this with the most expensive healthcare costs in the nation and it is no wonder why retirees do not walk but run from New York City in search of greener pastures.
In New York any and all estates of $1,000,000.00 or more are taxed at the gradually increasing tax rate beginning at 6% and climbing up to 16%. To truly appreciate how costly this is you need only look at a state like Tennessee whose state estate tax threshold is scheduled to increase to $5 million.
For illustrations purposes, lets take two similarly situated residents, one of New York and the other of Tennessee. Each resident has $4 million dollars in their estate. The estate of the resident of New York will owe $440,000.00 in New York State Estate Tax, approximately 11%, while the estate of the resident of Tennessee will owe $0.00. In fact, for the tax year 2016, the Tennessee State Estate Tax is completely repealed on any and all estate assets.
In contrast to states like North Carolina and Tennessee who have recently repealed their “death tax” completely, it is understandable why the New York Estate Law is scaring people away.
While there are many reasons why New York can be a difficult place to retire, in some ways New York still has more to offer. New York has three out of the top 10 hospitals for people retirement age in the entire country; Mount Sinai, Hospital for Special Surgery and NYU Langone Medical Center. For those individuals who love this city and are unwilling to leave, a little New York estate planning is mandatory.
As you can see, if a one bedroom apartment in Manhattan can fetch $1.5 million, most New York City estates will easily exceed the $1,000,000.00 NYS estate tax threshold. For this reason it is important to have multiple estate strategies. First, any New York estate lawyer will always begin planning an estate with a simple will. If your estate has been properly prepared the probate of your will in New York is nothing to fear. These New York estate strategies can range from gifting assets out of one’s estate before they pass to setting up life estates and trusts for children and grandchildren. Currently, the Federal Gift Tax allows an individual to gift $5.25 million dollars from their estate, tax-free throughout their lifetime. Add the portability exemption from a surviving spouse and a couple can gift up to $10.5 million dollars.
The bottom line in NY for any estate lawyer is to shield as many of our client’s assets from New York estate tax liability as possible. Thankfully, many of the new Federal Estate changes to the estate law from the Fiscal Cliff Legislation can help. If you or a loved one want to know more about the NYS “death” tax, feel free to talk to a NY probate lawyer with the Offices of Jason W. Stern & Associates at (718) 261-2444. Creative NY estate solutions are more accessible than you think.