USA – NEW YORK Law and Practice Contributed by: John M Teitler, Nancy A Murphy, Constance E Shields and Von Sanborn, Teitler & Teitler LLP
Teitler & Teitler LLP 230 Park Avenue Suite 2200 New York New York 10169 USA Tel: +1 212 997 4400 Fax: +1 212 997 4949 Email: jmteitler@teitler.com Web: www.teitler.com
1. Tax 1.1 Tax Regimes
gate amount of taxable gifts (as defined under the federal internal revenue code) made three years prior to the decedent’s death to the extent such gifts are not included in the individual’s federal gross estate. Cer - tain gifts may not be added back to the gross estate, including gifts made while the decedent was a non- resident, or gifts of real or tangible personal property located outside of New York when the gift was made. A non-resident decedent may be subject to estate tax on real or tangible personal property located in New York. 1.2 Exemptions The United States and New York permit a marital deduction and exempt property passing to a surviv - ing spouse who is a United States citizen from estate tax. A marital deduction is not allowed for property passing to a noncitizen surviving spouse, unless such property is held in a trust that qualifies as a qualified domestic trust (QDOT). The New York estate tax exclusion amount is cur - rently around USD 7 million. However, it is important to note that the exemption is effectively phased out for estates that exceed this amount by more than 5%. This means that if an estate exceeds approximate - ly USD 7 million, the entire estate will be subject to New York estate tax. Additionally, New York does not permit spousal portability of the unused estate tax exemption. The estate tax rate in New York is gradu - ated and ranges from approximately 3% to 12%.
The United States and New York impose an annual income tax on resident individuals, trusts and estates. For US federal tax purposes, an individual’s residence is based on citizenship, holding a “Green Card”, or a pure day count. For New York purposes, residence is generally determined based on an individual’s domi - cile/permanent abode. An estate is a New York resi - dent if the decedent was domiciled in New York at the time of death. A trust is generally deemed to be a New York resident trust if the trust consists of property of a person domiciled in New York at the time of transfer, or if the creator of the trust was domiciled in New York at the time the trust became irrevocable, or when a trust in a last will was created by a person who was domiciled in New York at the time of death. US and New York residents are taxed on worldwide income. Non-resident individuals, trusts and estates are taxed on New York-sourced income only. Impor - tantly, a resident trust may not be subject to New York income tax if: • all trustees are domiciled outside of New York; • all the trust corpus is located outside of New York; and • there is no New York-sourced income. An individual who is a resident of New York at the individual’s death is subject to New York estate tax. While New York does not impose a gift tax on lifetime gifts, it does add back to the gross estate the aggre -
680 CHAMBERS.COM
Powered by FlippingBook