Significant Changes Proposed to New York Estate and Income Tax Laws

March 2014

The New York State Legislature is considering some significant proposed changes to the New York estate tax law, the tax treatment of gifts by New York residents, and New York income taxation of certain trusts. Some important provisions are highlighted below. All of these proposals are subject to further review and may change before the enactment of final legislation, but some provisions, if enacted, will apply as of April 1 of this year.

Provisions of interest to all New Yorkers 

1) Changes to NY Estate Tax Exemption Amount & NY Estate Tax Rate

If enacted, the proposed law would make significant changes to the New York estate tax law.

The New York estate tax exemption amount (i.e., the amount an individual can pass free of New York estate tax) would gradually increase from the current exemption amount of $1 million to $5.25 million over the next few years, with indexing for inflation after January 1, 2019.

For estates up to the exemption amount in any given year, there would be no New York estate tax.

The exemption is gradually phased out for estates above the exemption amount, with the result that for estates
valued at 105% of the exemption amount or more, there would be no New York exemption, and the entire estate would be taxed for New York purposes.

The top New York estate tax rate would be gradually reduced from 16% to 10% over the next few years.

The net effect of these changes would be a reduction in New York estate tax payable for most estates, but the phase out of the exemption amount, if enacted, will create planning challenges in some situations.

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