1. The Power of Trust. The Power of Growth. The Power of Teamwork.
2014 New York Tax Law Changes:
Estates, Gifts & Trusts
Presented by: Amy Joyce
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2. 2014-2015 New York Executive Budget
Overview
Effective as of April 1, 2014:
I. Estate Tax – Increased Exemption Amount; No Rate Change.
II. Gift Add-Back – Lifetime Gifts Added Back to Taxable Estate.
III. Income Taxation of NY Exempt Resident Trusts:
a. Throwback Tax – Tax imposed on accumulated trust income
distributed to New York beneficiaries.
b. Incomplete Gift Non-Grantor Trusts – Entity trust taxed as
grantor trust for New York income tax purposes.
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3. New York Estate Tax Changes
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Top Estate Tax Bracket:
 Gov. Cuomo proposed to reduce the top estate tax rate from 16% to 10%;
however, the reduction was eliminated from the final version of the
budget bill.
 Rates are graduated from 3.06% on the first $500,000 to a top rate of 16%
for estates > $10.1 million.
 Rates apply to estates of decedent’s dying between 4/1/2014 and
3/31/2015, but the legislation doesn’t provide any other rate table after
3/31/2015. Intentional or drafting error?
 Most commentators speculate that the absence of a rate schedule for
decedent’s dying after 3/31/2015 indicates an intent to force the rate
schedule to be revisited as part of next year’s budget bill negotiations.

4. New York Estate Tax Changes (cont’d)
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Death Occurs During:
New York Exemption
(100%):
Full Phase-out of NY
Exemption (105%):
4/1/2014 – 3/31/2015 $2,062,500 $2,165,625
4/1/2015 – 3/31/2016 $3,125,000 $3,281,250
4/1/2016 – 3/31/2017 $4,187,500 $4,396,875
4/1/2017 – 3/31/2018 $5,250,000 $5,512,500
1/1/2019 & thereafter Same as Federal
(projected to be $5.9 million)
Same as Federal + 5%
Exemption Amount:
 Increases annually until equal to the Federal exemption by 2019.
 The applicable credit is rapidly phased out as the taxable estate goes from 100% to
105% of the exclusion amount.
 The apparent “cliff” is merely an extension of the prior law.

5. New York Estate Tax Changes (cont’d)
• The additional $262,500 (taxable estate in excess of basic exclusion amount) appears
to be subject to a marginal NY estate tax rate of 170%; however, the tax rate imposed
without regard to any basic exclusion amount is only 8.2%.
• Planning Tip: Reducing the estate with a $262,500 charitable bequest would result in
a tax saving of $452,300. The tax saving is greater than the amount of the bequest,
pushing the estate value down to the exclusion level.
• Bottom Line – Estates under the NY BEA (and up to 5% in excess of the NY BEA) will
get a benefit from the increased exemption amount; however, due to adjustments to
the bracket structure in the new law, estates with assets valued in excess of 105% of
the NY BEA will find themselves with the same tax burden they would have had under
the old law.
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The “Cliff” Effect
Date of
Death
NY Taxable
Estate NY Exemption
Excess Over
NY BEA NY Estate Tax
Example 1 5/1/2017 $5,250,000 $5,250,000 $0 $0
Example 2 5/1/2017 $5,512,500 $5,250,000 $262,500 $452,300

6. New NY Estate Tax – It’s Not Really New
 The “new” phase out of the New York Basic Exclusion Amount (“NY BEA”) is not
new at all – it was always a part of New York’s estate tax law.
 Prior to 4/1/2014, the NY estate tax was calculated as the lesser of:
1. The “Table A Marginal Calculation” – The excess taxable estate over
$1,000,000 x 41% (the marginal pre-2002 Federal estate tax rate), and
2. The “Table B State Death Tax Credit Calculation” – The amount calculated
under the repealed State Death Tax Credit schedule, which did not
consider the $1 million exclusion in determining the final amount of
estate tax due (as is the case under the new law).
 Once the “Table A Marginal Calculation” exceeded the “Table B State Death Tax
Credit Calculation”, the calculation switched to the “Table B” calculation. As a
result, the “lesser of” calculation had the effect of quickly “phasing out” the $1
million NY exclusion amount under pre-4/1/2014 law.
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7. New NY Estate Tax – It’s Not Really New (cont’d)
• The “break even” amount under the old law was $1,093,785; above this amount, the $1
million exemption was completely phased out and the entire NY taxable estate was subject
to NY estate tax.
• Thus, the “cliff” under the new law is the same as under the old law with the notable
difference that the $1 million exclusion has increased.
• Under the new law, only one calculation is required and the “break even” amount is 105%
of the NY BEA.
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“Lesser of” Calculation Under Pre-April 1, 2014 Law
Taxable Estate Table A Marginal Calc. Table B Credit Calc. Lesser of A or B
Example 1 $1,050,000 $20,500
(41% of excess over $1 million)
$36,000 $20,500
Example 2 $1,150,000 $61,500
(41% of excess over $1 million)
$42,000 $42,000

8. Limited Gift Add-Back
• Prior Law - Lifetime gifts were not subject to NY gift tax and were not included in the NY
gross estate. Thus, deathbed gift could substantially decrease a decedent’s New York
taxable estate.
• Proposal – Add back all lifetime gifts to the NY gross estate (same rule as Federal).
• New Law – Although the add-back for taxable gifts survived the final budget, its
application has been significantly narrowed. Under the new law, there is an add-back to
the NY gross estate for taxable gifts made from 4/1/2014 to 12/31/2018, and within 3
years of death.
 Initially, the gift tax add-back seemed at odds with the estate tax regime: Gifts by a
NY resident of non-NY property were not specifically excluded from the gift tax add-
back, but non-NY property is specifically excluded from the taxable estate of a NY
resident.
 TSB-M-14(6)M [8/25/14] clarifies that gifts of property located outside NY at the
time of the gift are not added back to the NY gross estate.
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9. Changes to Income Taxation of New York
“Exempt” Resident Trusts
What is a NY “Resident” Trust?
NY income tax is imposed on a non-grantor (i.e., entity) resident trust, defined as
any of the following:
1. Trust created by a NY decedent (i.e., testamentary trust).
2. Irrevocable trust created by a NY domiciliary.
What is a NY “Exempt” Resident Trust?
A resident trust will not be subject to NY income tax if three conditions are
satisfied:
1. All trustees are domiciled outside of NY.**
2. All trust assets are located outside of NY.
3. All trust income is derived from non-NY sources.
**For a resident trust that holds only intangible assets, NY income tax could be eliminated by
merely appointing a non-NY trustee.
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10. Changes to Income Taxation of New York
“Exempt” Resident Trusts (cont’d)
The Throwback Tax
 Prior Law – Neither the trust nor the beneficiaries of a NY Exempt Resident
Trust were subject to NY income tax.
 New Law – The throwback tax applies to income:
1. of a NY exempt resident trusts,
2. which is distributed to a NY resident beneficiary,
3. that was not previously taxed by NY, and
4. that has been accumulated during taxable years beginning on or
after 1/1/2014 for which there was a NY resident beneficiary who
was at least 21 years of age.
 Effective Date – Retroactive to 1/1/2014 for accumulated income and to
6/1/2014 for distributions.
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11. Changes to Income Taxation of New York
“Exempt” Resident Trusts (cont’d)
Incomplete Gift Trusts (“INGs”)
 What is an Incomplete Gift Trust?
An incomplete gift trust has the following characteristics:
 Transfers to the trust structured as incomplete gifts in order to avoid gift tax.
 Trust assets are included in the grantor’s taxable estate.
 Trust is a separate taxpayer (rather than a grantor trust) for income tax purposes.
 Purpose of INGs – To avoid state income tax for taxpayers in high income tax states
who are more concerned about annual income taxes than estate taxes.
Example: NY resident creates an ING with a Delaware trustee, and the trust has
only intangible assets. Absent the new law, such a trust would not be subject to
income tax in New York or Delaware.
 NY Rule – Under the new law, ING trusts are treated as grantor trusts for NY income
tax purposes, thereby eliminating the avoidance on NY income tax.
 Effective Date – Retroactive to 1/1/2014 but does not apply to trusts dissolved
before 6/1/2014.
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