"Put not your trust in money, but put your money in trust."
Oliver Wendell Holmes, Sr.



On January 21st, Governor Cuomo’s recent budget bill was released including several proposals that (if enacted) will materially affect estate planning for New York residents. While Governor Cuomo has not directly proposed the re-imposition of a NY gift tax, he has proposed that Federal adjusted taxable gifts be added to the NY taxable estate when calculating the NY estate tax. This proposal is nothing more than a back door re-imposition of the NY gift tax. This provision is proposed to take effect April 1, 2014.

UAs you may be aware, the current Federal gift/estate tax exemption is $5,340,000 (inflation adjusted from the $5 million base) while the NY estate tax exemption is only $1 million. In addition, lifetime gifts are currently not taxable by NY and will effectively reduce any NY estate taxes. Therefore, a NY decedent with a taxable estate of $5 million would not pay Federal estate taxes (as the taxable estate is less than the Federal exemption of $5,340,000) but would be subject to a NY estate tax of $391,600 (as the taxable estate exceeds the NY exemption of $1 million). However, since lifetime gifts are only partially included in the NY estate tax calculation, it is currently possible for a NY resident to make lifetime gifts to reduce the NY estate tax liability. As an example, if the same decedent had made lifetime gifts of $4,900,000, his Federal taxable estate would remain at $5 million with $0 Federal tax (since lifetime gifts are fully included in the Federal taxable estate) but his NY taxable estate would be reduced to $100,000 with $0 NY tax, thereby eliminating the $391,600 of NY tax previously mentioned.

The Governor’s budget proposals would greatly reduce (and in some cases completely eliminate) that benefit as they would instead include lifetime gifts made after April 1, 2014 in the NY taxable estate. Therefore, a NY decedent would not receive any reduction in NY estate taxes for such lifetime gifts. If a NY resident has an estate in excess of $5.34 million dollars, consideration should be given to gifting the lifetime exemption prior to April 1st.

It should be noted that included among the budget proposals is an increase in the NY estate tax exemption from the current $1 million to $5,250,000 over the next few years (increasing to $2,065,500 on April 1st and then $3,125,00, $4,187,500 and $5,250,000 on April 1 of years 2015-2017, respectively, with inflation increases after January 1, 2019). In addition, the top estate tax rate bracket will reduce from 16% to 10% by April 2017. While this will help offset the lifetime gift addback, there will still be a NY estate tax effect while the Federal and NY exemptions remain unequal.

As mentioned above, this new rule would only apply to gifts made after April 1st. For those of you who have already used your full Federal exemption, you will still benefit from the current reduction in your NY taxable estate. However, for those of you who have not fully used your Federal exemption, the window of opportunity to reduce your NY taxable estate may be closing shortly and you should contact us immediately to discuss the best method of taking advantage of this planning opportunity before it expires.

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If you are looking for the very best legal advice in estate and succession planning, or estate and trust administration, contact the law firm of Maurice Kassimir & Associates, P.C.

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