USA – NEW YORK Law and Practice Contributed by: John M. Teitler, Nancy A. Murphy and Constance E. Shields, Teitler & Teitler, LLP
• 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- 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. 3. Intestacy and Forced Heirship Laws 3.1 Intestate Succession If a decedent dies without a will and is married with- out children, 100% of the decedent’s probate estate passes by intestacy law to the surviving spouse. If a decedent dies without a will and with children, 50% of the decedent’s probate estate passes to the sur- viving spouse by intestacy and the other 50% of the probate estate passes by intestacy law to the dece- dent’s children. By an acknowledged agreement of both parties, New York permits a waiver of estate and inheritance rights. It is common in New York for parties to enter into pre- nuptial or post-nuptial agreements (or spousal elective share waiver) to modify or waive a party’s estate and inheritance rights. 3.2 Forced Heirship While New York does not have forced heirship rules per se, a decedent married at the time of such dece- dent’s death cannot disinherit the surviving spouse, in the absence of an agreement otherwise. If a decedent dies with a will, the surviving spouse has an elective share to receive one-third of the deceased spouse’s
net estate (generally, gross estate less debts and administration expenses). The surviving spouse has the right to assert the spouse’s elective share, in lieu of taking under the deceased spouse’s will. The elec- tive share is an outright pecuniary amount, and vari- ous testamentary substitutes passing outright to the surviving spouse, such as property held with rights of survivorship, count towards satisfying the elective share. Importantly, if a spouse asserts the elective share, such spouse does not take under the dece- dent’s will. 4. Marital Property and Succession 4.1 Property Regimes During Life and Deathtime Rights and Protections In general, marital property is property acquired dur- ing marriage and prior to the filing of divorce that is not “separate property”. In general, separate prop- erty is property owned prior to marriage and property acquired by a party during marriage by inheritance, a gift from third parties or distribution from a trust. There is extensive guidance under New York divorce law regarding marital property and separate property, and the active and passive nature of each, and the equitable distribution of marital property on divorce. Unlike divorce laws in the State of New York, inherit- ance laws do not differentiate between marital prop- erty and separate property, and the surviving spouse’s inheritance rights generally apply to all property owned by the deceased spouse. It is common for individuals to enter into a pre-nuptial or post-nuptial agreement (or spousal elective share waiver) to define a surviving spouse’s rights on death. 4.2 Prenuptial and Postnuptial Agreements New York permits parties to enter into a pre-nuptial or post-nuptial agreement to define financial rights in the event of death or divorce. There is extensive case law regarding the validity of pre-nuptial and post-nuptial agreements and it is often a fact-specific analysis. The court may give stricter scrutiny to spousal mainte- nance provisions included in a pre-nuptial or post- nuptial agreement.
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