Trusts and Estates Planning Opportunities Arising From Recent Changes to the New York Estate Tax and Trust Income Tax Regimes


On April 1, 2014, the New York state 2014–2015 budget (the "Budget") became effective. The Budget includes legislation (the "Budget Legislation") that makes several significant changes to New York's estate tax regime and to the income tax treatment of trusts created by New York residents that were exempt from tax under prior legislation ("exempt resident trusts") and incomplete gift nongrantor trusts (INGs) created by New York residents.

Under the Budget Legislation, New York imposes a tax on a decedent’s entire taxable estate and allows a credit (the "Applicable Credit Amount") against that tax. The Applicable Credit Amount depends upon the size of the decedent’s taxable estate and the date of death. If the taxable estate does not exceed a certain threshold (the "State Basic Exclusion Amount"), the Applicable Credit Amount will equal the tax, thus resulting in no tax due. If the taxable estate exceeds the State Basic Exclusion Amount, the Applicable Credit Amount phases out very quickly, with the effect that if the taxable estate exceeds the State Basic Exclusion Amount by more than 5%, no credit is allowed. The Budget Legislation sets the State Basic Exclusion Amount at $2,062,500 for estates of decedents dying on or after April 1, 2014. Over the next four years and nine months, the State Basic Exclusion Amount will increase to equal, approximately, the federal applicable exclusion amount from estate tax, as indexed for inflation (the "Federal Applicable Exclusion Amount"), by January 1, 2019.

Please see full advisory below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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