I received an email last night from O’Connor Davies (http://www.odpkf.com), which provides an important update about possible changes to New York State law for the estate tax. The changes would add a gift tax and may be approved in this year’s NYS Budget (it could pass by April 1). Therefore, if you were thinking about making a gift this year, you may want to make it very soon. Please see the email below from O’Connor Davies.
James Maisano, Esq. is a practicing attorney who also serves on Westchester Board of Legislators. Check out Jim’s website at www.JamesMaisanoEsq.com , and you can also find this post on his Solo Legal Blog (please see disclaimer there). Jim’s law office can be contacted at [email protected] or (914) 636-1621
New York State Proposed Budget Bill for Estate and Gift Tax Reform
Stuart Stengel Partner, [email protected], 914.381.8900
Time may be running out to take advantage of the lack of a gift tax in the State of New York. Governor Cuomo has proposed a change in New York State’s estate tax law in an attempt to bring New York’s estate taxes in line with Federal tax law. As part of the estate tax law changes, gifts made after March 31, 2014 will be subject to the New York estate tax.
In essence, the new budget bill proposes a comprehensive overhaul of the estate, gift, generation skipping transfer and trust income tax laws which includes:
- Increasing the New York State estate tax exclusion over the next five years to coincide with the applicable Federal exclusion—increasing the current amount ($1,000,000) to $2,065,500 on April 1, 2014, $3,125,000 in 2015, $4,187,500 in 2016 and $5,250,000 in 2017* and adjusted for inflation with the Consumer Price Index thereafter.
- Decreasing the top estate tax rate from 16% down to 10% by April 2017
- Adding back gifts made by New Yorkers after March 31, 2014 to their New York gross estate on their death.
- Repealing the New York State Generation Skipping Transfer Tax
- Taxing distributions of accumulated income to New York beneficiaries of non-resident trusts and exempt resident trusts
The net effect of the change in law means that assets gifted after March 31, 2014 would be subject to New York’s estate tax to the extent their inclusion exceeds the exclusion threshold. Essentially, this is a reinstatement of the gift tax on wealthier New Yorkers upon their demise.
ACTION RECOMMENDED: Although the time period is brief and this proposed budget bill has yet to be finalized, if you are affected by the proposed new rules, you may wish to contact your tax advisor about making gifts prior to April 1, 2014. Any gifts made under the current New York law will not be included as part of a your New York gross estate and will pass without a payment of gift taxes to the extent you have not exceeded the Federal estate and gift tax exemption of $5,340,000.
* Exemptions amounts are subject to change pending passage of 2014-2015 executive budget.