Estate and inheritance tax in New York
Key takeaway
New York trust residency rules depend on the transferor's domicile, when property enters an irrevocable trust, and the trust's connections to New York. New York also allows a state QTIP election with an estate inclusion effect. The rules described here apply to owners of businesses, real estate, and private investments who hold property through trusts or plan an estate.
Trust residence and income tax
New York treats an irrevocable trust as a resident trust when it holds property transferred by a person domiciled in New York at the time of transfer. A trust can have resident and nonresident portions when funding occurs on both sides of a change in domicile. New York guidance treated property transferred while the transferor was domiciled in New York as resident and property transferred after a move to Florida as nonresident.
A New York resident trust can be exempt from New York income tax when all trustees are domiciled outside New York, all trust property is outside New York, and the trust receives no New York source income. The three conditions apply together.
A revocable trust's residence is deemed to change when it becomes irrevocable if its grantor changed domicile to or from New York before that point.
A New York resident trust's tax treatment turns on its trustees, property, income sources, and the domicile of the person who transferred property. New York's stated exemption conditions focus on whether trustees and trust property are outside New York and whether New York source income is received.
QTIP election and surviving spouse's estate
New York permits an estate to elect a QTIP marital deduction on a pro-forma federal estate tax return attached to the New York State estate tax return. The state QTIP election is irrevocable, and the QTIP property is included in the surviving spouse's estate.
New York estate exclusion
New York lists a basic exclusion amount for state estate tax purposes. The amount is a state threshold and is distinct from the trust residency conditions described above.
Thresholds and rates change. Check the state's own current figures.
Common questions
When can a New York resident trust be exempt from New York income tax?
A New York resident trust can qualify when all trustees are domiciled outside New York, all trust property is outside New York, and the trust receives no New York source income.
What happens to a New York QTIP election?
A New York state QTIP election is irrevocable. The QTIP property is included in the surviving spouse's estate. An estate may make the election on a pro-forma federal estate tax return attached to its New York State estate tax return.