USA – NEW YORK Law and Practice Contributed by: John M Teitler, Nancy A Murphy, Constance E Shields and Von Sanborn, Teitler & Teitler LLP
New York’s treatment of its basic estate tax exclusion amount differs drastically from the federal system. The current federal exclusion amount is approximately USD14 million, and the federal government allows a credit for the full exclusion amount regardless of the value of the decedent’s estate. In addition, the federal estate tax system includes the concept of “portabil - ity”, by which any unused federal estate tax exemp - tion at the first spouse’s death may be transferred to the surviving spouse to shelter additional assets from gift and estate tax. If the first spouse to pass away has a taxable estate of USD5 million, the unused federal estate tax exemption of about USD9 million can be transferred to the surviving spouse. In most cases, this allows the surviving spouse to use the combined exemption to shelter approximately USD22 million There are various income tax planning opportunities in the United States, particularly in New York, that should be considered. For example, private placement life insurance can be an effective way to shelter income tax as well as Section 1031 like/kind exchanges of real property. There are also other techniques that clients should assess, including various trust types. Notably, the US and NY combined tax rates can be over 55%. 1.4 Taxation of Real Estate Owned by Non- Residents A US/NY non-resident is generally subject to US/NY income, US gift, and US/NY estate tax on real and cer - tain tangible personal property located in New York. The applicable income tax rates for both jurisdictions are between approximately 30% and 55%. 1.5 Stability of Tax Laws from gift and estate taxes. 1.3 Income Tax Planning The US and NY tax rates are somewhat stable; how - ever, these rates may change depending on the fiscal philosophy of any incoming administration. Given the impact of COVID-19, these rates could increase sig - nificantly as the federal and New York governments seek additional funds to cover governmental spend - ing. Absent any action from Congress, the US Tax Cuts and Jobs Act expires on 1 January 2026, and it is expected that tax rates could increase by at least 10%. As part of that, the estate and gift tax exemp - tion would be halved to approximately USD7 million.
On 19 May 2025, the US House of Representatives passed the “One Big Beautiful Bill Act” that would, among other things, permanently extend the estate and gift tax exemptions enacted by the US Tax Cuts and Jobs Act. The bill is now before the US Senate, and various provisions, including proposed permanent tax exemptions, may be modified. At this juncture, it is too early to speculate whether any bill will be enacted into law by 31 December 2025. High-net-worth indi - viduals may wish to take advantage of the currently significant gift tax exemption by making gifts outright or in trust before 31 December 2025. 1.6 Transparency and Increased Global Reporting The United States and New York have an increased focus on transparency and reporting. The Corporate Transparency Act (CTA) came into effect on 1 Janu - ary 1 2024. The CTA is a federal reporting require - ment for owners and managers of a majority of US entities to report to FinCen, among other things, the entities’ information, including any beneficial owners. There are many exceptions to the reporting require - ment available on the FinCen website. As of 26 March 2025, entities created in the United States and their beneficial owners are now exempt from the require - ment to report beneficial ownership information to FinCen. Foreign financial companies remain subject to the CTA. New York has adopted a similar reporting regime called the LLC Transparency Act that applies to LLCs formed or authorised to do business in New York. Entities in existence before 1 January 2024 had until 31 December 2024 to comply with federal and New York reporting requirements. Entities created after 31 December 2024 have to comply soon after creation. These reporting requirements are evolving. 2. Succession 2.1 Cultural Considerations in Succession Planning In the United States, particularly in New York, there is a growing trend among older generations to establish significant trust structures for their children and future generations. Importantly, clients are forming unregu - lated private trust companies in New Hampshire and other states to further their estate planning goals and
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