Changes to the Taxation of New York Estates and Trusts

April 29, 2014

By: Carole M. Bass, Edward B. Becker, Shari A. Alexander, Kerrie C. Horrocks, Alan H. Kupferberg, Kara Rademacher, Gideon Rothschild, Daniel S. Rubin, Gideon Rothschild, Ira W. Zlotnick, and Irving Sitnick

Moses & Singer Client Alert

Governor Cuomo recently signed legislation that makes significant changes to New York's taxation of trusts and estates.  While the changes provide some tax relief for many New Yorkers, they may prove to have the opposite effect for affluent New Yorkers.

1) New York Estate Tax:  The New York estate tax exemption amount, which was previously $1 million per person, will increase each year over the next five years.  On and after January 1, 2019, the New York estate tax exemption will match the federal estate tax exemption which is $5,340,000 (an amount which will increase each year for inflation).  The benefit of the exemption is phased out for taxable estates between 100% and 105% of the exemption. Taxable estates of 105% or more of the exemption completely lose the benefit subjecting the entire estate to New York estate tax.

2) Look Back for Lifetime Gifts:  Gifts made within three years of death will be added back to the value of the estate for tax purposes.  The add back could potentially increase an estate's tax liability, especially if the estate is close to exceeding 105% of the New York exemption amount.

3) Trust Income Tax Changes:  Previously, non-grantor trusts created by New York residents that have no New York resident trustee, no assets located in New York and no New York source income were deemed exempt and paid no New York income tax.  The new law provides that a New York beneficiary receiving a distribution of accumulated income from an exempt New York resident trust will now be taxed on that income.

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