These legislative developments and current market conditions create (1) a window of opportunity for gifting and other estate planning strategies to permanently remove assets from the future federal and New York estate tax, and (2) a need to review existing wills and other estate planning documents to ensure that they continue to carry out planning objectives.Ī comparison of the federal estate, gift and GST tax provisions under the prior law and the 2017 Tax Reform Act is set forth below:Įstate, Gift and GST Tax Exemption Amounts The extreme market volatility, with wide swings in valuations of marketable securities and other asset classes, opens gifting opportunities. In addition, there is no New York gift tax but taxable gifts made within three years of death are once again added to a New Yorker’s estate for estate tax purposes. There is a “catch” to the federal legislation, as it “sunsets” the doubling of the federal estate, gift and GST tax exemptions on January 1, 2026, reverting to their pre-2018 exemption levels, as indexed for inflation.įor New Yorkers, the New York estate tax exemption has risen to $5,740,000 per person. These amounts are indexed for inflation and have risen to $11,400,000 per person ($22,800,000 for a married couple) for 2019. The federal estate, gift and generation skipping transfer (“GST”) tax exemptions doubled as of January 1, 2018, from $5,490,000 in 2017 to $11,180,000 per person (and to $22,360,000 for a married couple). The Federal and New York Estate Planning LandscapeĪs we have discussed in our prior Stroock Special Bulletins, Congress passed far-reaching changes to the Internal Revenue Code (the “2017 Tax Reform Act”) that provide significant estate planning opportunities. Although the advocacy efforts of the New York State Bar Association and the New York State Society of Certified Public Accountants (with Stroock attorneys participating significantly in those efforts) were successful in removing the retroactive features of this statute for the period between January 1-15, 2019 (which preceded the release of the Governor’s executive budget on January 15, 2019), we are once again back to a regime where the three-year clawback must be considered in planning a New York resident’s estate. Under the Governor’s initial proposal, the January 1, 2019, expiration date for the three-year clawback was changed to Janu, and this provision would have applied retroactively as of January 1, 2019. That provision includes in a New York resident’s taxable estate the amount of any taxable gifts made by a person dying prior to January 1, 2019, reduced by certain carve-outs including for gifts made when a decedent was not a resident of New York, and gifts of real or tangible personal property having an actual situs outside New York state at the time the gift was made. The Governor’s Fiscal Year 2020 Executive Budget was released on January 15, 2019, and would have retroactively extended as of January 1, 2019, the three-year “clawback” provisions of NYTL 954(a)(3). This Stroock Special Bulletin discusses how New Yorkers may plan their estates in light of this new development. The Budget Bill, however, applies retroactively and now ensnares certain taxable gifts made within three years of death in the case of New York residents dying prior to January 1, 2026. The three-year clawback had previously expired on January 1, 2019, and, by its terms, was to no longer apply to New Yorkers who previously made gifts and subsequently died after December 31, 2018. Included within the Budget Bill is an amendment to retroactively extend the three-year “clawback” provisions of Section 954(a)(3) of the New York Tax Law (the “NYTL”) to certain taxable gifts made by New York residents within three years of death up through the new expiration date of Decem(the “three-year clawback”). On April 12, 2019, Governor Andrew Cuomo signed into law the New York Fiscal Year 2020 Budget (the “Budget Bill”).
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