Alert: Change to New York State Estate Tax

On Friday April 12, 2019, Governor Andrew Cuomo signed into law the New York Fiscal Year 2020 Budget.  This budget bill includes changes to the NYS Estate Tax Provisions.

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 to certain taxable gifts made by New York residents within three years of death up through the new expiration date of December 31, 2025 (the “three-year clawback”).This three-year rule had previously expired on January 1, 2019 and did not apply to anyone who previously made gifts and died after December 31, 2018.

The Budget Bill, however, applies retroactively and now establishes certain taxable gifts made within three years of death in the case of New York residents with dates of death after January 15, 2019 and prior to January 1, 2026. Excluded from the three-year clawback provisions of Section 954(a)(3), is real or tangible personal property having an actual situs outside New York State and gifts made when the decedent was not a resident of New York State.

What does this mean for New Yorkers?

The Federal exemption for Estate and Gift Tax under the 2017 Tax Reform Act was significantly increased to a current rate of $11,400,000 per person, or $22,800,000 per family. There is currently no New York Gift tax and the New York State exemption, for Estate tax purposes, is currently $5,740,000 per person.  That exemption is zero for taxable estates in excess of 105% of the exemption amount ($6,027,000)

Affluent individuals should consider securing use of these increased Federal exemptions sooner rather than later as this benefit will not last!  The Federal exemption is scheduled to revert back to pre-2018 exemption levels in the year 2026, however, the IRS has confirmed to us in Proposed Regulations (issued November 23, 2018) that there will not be a claw back into the taxable estate when the exemption is lowered after 2025.  Therefore, if you use the current $11,400,000 in full to make non-taxable gifts, and subsequently die when the exemption has reverted back to an estimated $6,000,000, you will not be penalized with additional Federal tax.

You would be responsible for additional NYS Estate tax if you make that $11,400,000 gift and die within three years—as under the current bill, it will need to be added to your taxable New York State estate.  Should you survive that three-year period, however, you will have been successful in making a significant reduction in your New York State Estate.


Lisa Rispoli Lisa Rispoli is the Partner-in-Charge of Trust & Estate Services at Grassi and leader of the firm’s Private Client Services group. She has over 30 years of experience in accounting, estate planning & valuation, as well as gift, estate and trust taxation. Lisa is adept at working with clients and their professional advisors to develop estate plans to transfer family, business and personal wealth... Read full bio

Categories: Trusts & Estates