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State & Local Taxation

NY State Budget: Trusts and Estates -- Give and Take

Wayne Berkowitz, CPA, J.D., LL.M. 04.14.2014 | Client Alert

Our analysis of the recently passed New York State Budget turns to changes impacting trusts and estates. We have highlighted changes that are of particular importance to those with larger estates.

Extensive Increase in the Estate Tax Exclusion… But

Purportedly designed to stem taxpayer flight from the state, effective April 1, 2014, the estate tax exclusion will rise substantially — via a four-year phase-in — from the current $1 million to $5,250,000 by 2017.  Increases will be indexed for inflation afterwards.

However, there will be little benefit for those with larger estates.  If the estate exceeds the exclusion by more than 5%, the entire taxable estate (i.e., there is no exclusion) is subjected to the NY estate tax. Further, while the rates are graduated, those with larger estates should also be aware that the maximum NYS estate tax rate remains unchanged at 16%.

A Gifting Boomerang

Gifts made by a NY resident on or after April 1, 2014 and within 3 years of that individual's death will be added back into the estate.  This increases the gross estate and may make those gifts subject to the NY estate tax, depending upon the size of the estate as adjusted.

Two Tax Loopholes Sealed

Used as a shelter from New York tax, incomplete gift nongrantor trusts (ING Trusts) will now be treated as taxable to the New York grantor. Also, undistributed income from a New York resident exempt trust will be taxed when it is distributed to a NYS resident.

Questions?  Contact your Berdon advisor or Kayte Steinert-Threlkeld at 212.699.6708 |

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