USA – NEW YORK Law and Practice Contributed by: John M. Teitler, Nancy A. Murphy and Constance E. Shields, Teitler & Teitler, LLP
10. Fiduciary Regulation, Standards and Taxation 10.1 Corporate and Professional Fiduciaries In New York the regulation of trustees depends on whether the fiduciary is an individual or a corporate and professional trustee. New York has a strict regu- latory scheme for institutional trustees, but it does not regulate individual trustees. Regulation of fiduci- ary companies is found under the New York Banking Law. The only entities that are permitted to serve as corporate fiduciaries in New York are: • New York chartered public trust companies; • banks with fiduciary powers such that they are governed by the New York State Department of Financial Services; or • foreign banks authorised to exercise trust power in New York. New York does not permit the creation of private trust companies that are permitted in other US states. Some of the most common jurisdictions for private trust companies are South Dakota, New Hampshire, Nevada, Wyoming, and Tennessee. 10.2 Taxation of Trusts Trusts are taxed in New York if they have New York situs income, or they are New York resident trusts. A trust is a New York resident trust if it is: • created by the will of an individual who was resi- dent in New York at the time of his or her death; or • created while the grantor was domiciled in New York at the time the trust became irrevocable. A New York resident trust is taxed on its worldwide income, regardless of where the assets or beneficiar- ies are located. However, a resident trust may meet the Exempt Resident Trust exemption if it fulfils a three-part test. 1. All the trustees are domiciled outside of New York. 2. All of the trust property is located outside of New York. 3. All of the trust income and gains are generated by property outside of New York.
If a trust is an Exempt Resident Trust, then it still files a New York information tax return, but does not pay any state income taxes. 11. Planning for Non-Traditional Families 11.1 Succession Rights and Estate Taxes for Non-Traditional Families Generally, a non-marital child is the child of his or her mother, and a non-marital child is the child of his or her father if a court during the father’s lifetime makes an order of filiation or the father has signed an instru- ment acknowledging paternity. A non-marital child may also be deemed a child of the father if parentage is shown by clear and convincing evidence, such as openly acknowledging the child as his own. New York law generally provides broad equality in succession rights across different family structures, but the rules differ depending on the relationship cat- egory. The governing statutes primarily arise from the New York Estates, Powers and Trusts Law (EPTL) and New York’s estate tax statutes. New York and the federal government recognise same-sex marriage. New York law does not provide inheritance rights to unmarried partners. New York law provides broad inheritance rights for non-marital children, but proof of parentage may be required. Adopted children inherit the same as biologi- cal children in New York. New York significantly modernised its law on surro- gacy by passing the Child‑Parent Security Act, which took effect in 2021. The Act ensures parents in sur- rogacy or assisted reproduction are legal parents from birth. The Act eliminated the need for second-parent adoption, enabling non-biological parents to be listed on birth certificates and qualify for intestate succes- sion. Posthumously conceived children have conditional inheritance rights. For such a posthumously con- ceived child to inherit, several conditions as set forth in the New York EPTL, Section 4-1.3 must be satisfied.
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