With the goal towards modernizing New York's estate and gift
tax, Governor Cuomo, with New York State's 2014-2015 budget,
has proposed changes to the estate and gift tax law. The first
change calls for increasing the New York State estate tax exemption
over a four year period to $5,250,000 and, by 2019, the state
estate tax exemption is to be in conformity with the federal estate
tax exemption. In conjunction with this, the top New York State
estate tax rate will be gradually reduced from 16% to 10% over the
same four year period. In addition, the New York generation
skipping transfer tax enacted in 1999 will be repealed. The revenue
generated by the New York generation skipping transfer tax returns
was approximately $500,000 annually and the impact of this repeal
More significantly, the 2014-2015 budget proposal calls for the
adding back into the New York gross estate the value of any
lifetime taxable gifts made by a New York resident decedent after
March 31, 2014. The addition to the gross estate of taxable gifts
made during the lifetime of a New York resident decedent will
increase the state estate tax due.
The final proposed change to New York estate and gift tax law is
the closing of the resident trust loophole. Currently, income
earned by a trust may be included in the income of the grantor, the
trust or the beneficiaries but the accumulated income of
non-resident trusts, exempt resident trusts and incomplete gift,
non-grantor trusts are not taxed at the grantor, the trust or the
beneficiary level, i.e. the resident trust loophole. The proposed
budget change would tax beneficiaries of non-resident trusts and
exempt resident trusts on the accumulated income of the trusts when
the income is distributed to the beneficiary. In addition, the
income of incomplete gift trusts established by a New York resident
would be taxed in the current income of its grantor.
Governor Cuomo's proposed 2014-2015 budget is set to be
finalized April 1st. Accordingly, we strongly recommend that New
York residents work in the interim with their tax and estate
planning advisors to determine if and how the budget proposals (if
passed) may impact their estate plans and income tax
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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On October 5th, 2016, the Internal Revenue Service and Treasury Department published final, temporary and reproposed regulations1 under Sections 707 and 752 of the Internal Revenue Code of 1986, as amended.
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