Now that Governor Cuomo and legislative leaders have agreed on the 2015-2016 Executive Budget, there are questions about what's in store for New York’s estate and gift tax system as a result. Here is the lowdown:

1. Due to a drafting error, the estate tax was slated to disappear after March 31, 2015. To remedy this, the expressed timeframe associated with the estate tax was removed, preventing a lapse of the estate tax, which now applies generally to all decedents irrespective of the date of death. The New York estate tax exclusion amount increased from $1 million to $2,062,500 for individuals dying on/after April 1, 2014,  then to $3,125,000 for individuals dying on/after April 1, 2015, then to $4,187,500 for individuals dying on/after April 1, 2016, and finally to $5,250,000 for individuals dying on/after April 1, 2017 and before January 1, 2019. Beginning January 1, 2019, the New York exclusion amount is to be linked to the federal exclusion amount, including inflation indexing. 

2. Last year’s Executive Budget increased the New York gross estate of a deceased resident by the amount of any taxable gifts made within three years of death, if the decedent is a New York resident at the time the gift is made and at the time of death. The add-back provision was enacted to prevent a perceived death-bed abuse whereby individuals on their death-beds could make a gift up to the federal exclusion amount without incurring a federal gift tax, without incurring a New York gift tax (since New York does not have a gift tax), and the gift would reduce the estate for New York estate tax purposes.  As enacted last year, the current statutory language provides that the gift add-back does not apply to gifts made on or after January 1, 2019 (when the New York exclusion amount will be linked to the federal amount).  An amendment in all three bills provides instead that the gift add-back does not apply to estates of individuals dying on or after January 1, 2019. 

3. Since a non-resident’s intangible personal property is not included in computing the New York estate tax liability, deductions associated with that intangible personal property are expressly disallowed.

4. The way last year’s budgetary language was drafted, if a New York resident gifted an out-of-state residence within three years of death, the value of the real property would be added back to that individual’s estate, but if that same individual had died with that same out-of-state property, it would not be included in the New York gross estate.  A change was enacted so that real and tangible out-of-state property is expressly excluded from the gift add-back.

Source: Leimberg Services