May 24, 2022

Volume XII, Number 144

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May 23, 2022

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New York State Enacts Several Modifications to Estate Tax Law

On April 1, 2015, Governor Cuomo enacted several changes to the New York State estate tax law as part of the Executive Budget for 2015-16. These changes amend the major overhaul of the estate tax regime in last year’s Executive Budget. That 2014 legislation increased the estate tax exclusion amount from $1 million to $2,062,500 for individuals dying between April 1, 2014, and March 31, 2015; to $3,125,000 for individuals dying between April 1, 2015, and March 31, 2016; to $4,187,500 for individuals dying between April 1, 2016, and March 31, 2017; and to $5,250,000 for individuals dying between April 1, 2017, and December 31, 2018. For individuals dying on or after January 1, 2019, the New York State estate tax exclusion amount will equal the federal exclusion amount in effect at that time.

The first change of note is that the estate tax rate schedule now applies to the estates of all decedents dying after April 1, 2014. In last year's budget, the schedule applied only to those individuals dying between April 1, 2014, and March 31, 2015, and then disappeared — which meant there would be no estate tax thereafter. This is no longer the case. All estates will be subject to the estate tax rate schedule enacted last year. The estate tax rate ranges from 3.06% to 16% depending on the size of the estate.

The second major change clarifies the three-year gift add-back provision. Last year's budget included a provision which requires taxable gifts made within three years of date of death to be "added back" to the decedent's gross estate (and thus taxed) if the decedent was a NY resident at the time of the gift and at death. As enacted, this add-back would not apply to gifts made on or after January 1, 2019. This year’s change provides that the gift add-back does not apply toindividuals dying on or after January 1, 2019.

It is also interesting to note what was not modified by this year's budget:

  • There is no portability for New York estates;
  • No state-only QTIP is allowed when a federal return is filed, even if solely to elect portability at the federal level; and
  • The estate tax "cliff" remains intact (the credit for estates between 100% and 105% of the exclusion amount is rapidly phased out and eliminated entirely if the taxable estate exceeds 105% of the exclusion amount).

 

Even with the increased exemption and other modifications enacted over the past few years, the estate tax structure in New York is still very different from that of the federal government, where an individual must have $5.43 million (or twice that for a married couple) before being subject to estate tax. New York residents, as well as non-residents who own New York real estate, need to consider the New York estate tax ramifications of their estates as part of their overall estate planning.

© 2022 ArentFox Schiff LLPNational Law Review, Volume V, Number 124
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About this Author

Schiff Hardin's Private Clients, Trusts and Estates Group offers more than a century of experience and industry leadership in wealth transfer and succession planning. We bring to our clients the experience and depth of a large team of attorneys, supported by complementary, general service capabilities of our firm's lawyers in offices nationwide.

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