New York State Budget Extends “Clawback” of Gifts for New York Estate Tax Purposes

By: Ami S. Longstreet, Ryan T. Emery

New York State Budget Extends “Clawback” of Gifts for New York Estate Tax Purposes

As an update to Ryan’s 2014 blog that in part discussed New York’s treatment of gifts, New York had let a provision in the law lapse that required the value of certain gifts to be included back into a New York resident decedent’s estate for New York estate tax purposes if the gift was made within three years of death.  This lapse meant that estates of deceased persons dying on or after January 1, 2019 were no longer subject to this tax provision.

However, the 2019-20 New York State Budget now extends this tax provision to estates of deceased persons who die prior to January 1, 2026.  This new tax law extender applies retroactively, meaning it applies again to the estates of deceased persons who died in 2019.

The new law does give a minor window of reprieve and excludes gifts made between January 1, 2019 and January 15, 2019.  As with the prior version of the law, gifts involving assets that are located outside of New York State (e.g. non-New York real property) are excluded as well.

In light of this new extender provision, high-net wealth individuals concerned about New York estate taxes should not procrastinate in making gifts to loved ones or to charity.