Is There a Gift Tax in New York?

New York does not have a gift tax. But it does have an estate tax on estates over $1,000,000. Ask your attorney, it may be a good idea to create a lifetime irrevocable trust, which would be considered a gift, to avoid estate taxes at death.

Most revocable trusts will not help against Federal estate taxes, as there is a federal gift tax. Such revocable trust may be considered a gift may be subject to Federal gift tax if it exceeds the lifetime gift tax exemption, $5,250,000 in 2013. But if your estate is under $5,250,000 and you live in New York, a lifetime irrevocable trust may save your heirs New York estate taxes.

Don’t have an estate attorney? Give us a call at (212) 233-1233 and schedule a consultation.

Gift amounts to spouses are exempt under the unlimited marital deduction. There is an exception though if your spouse is not a U.S. citizen. For non-U.S. spouse, a tax free exempt gift can only be made up to $143,000. Gifts can be in the form of cash, stock, real estate or other tangible property and gifts can be made to a trust as well for the benefit of your beneficiaries.

Lifetime Federal Gift Tax Exemption Amount

There is also a federal lifetime per person gift tax exemption of $5,250,000. The $14,000 annual gift tax exemption is not included in this lifetime exemption. Also, when your spouse passes away, under the portability rule, you can use their unused portion and add it to your lifetime portion to increase your exemption. So for example, if your spouse has gifted $2,250.000, and you have gifted $5,000,000, you can use your spouse’s remaining gift tax exemption of $3,000,000 and add it to your remaining gift tax exemption of $250,000, giving you a grand total of $3,250,000 as your remaining lifetime gift tax exemption.

Who Pays the Gift Tax?

The donor is responsible for reporting the amount and paying any taxes over the exempt gift tax amount by filing IRS Form 709, United States Gift Tax Return on or before April 15th following the year the gift was made.   The recipient is only responsible for any capital gains taxes that may have resulted when they sell the asset. However, the recipient only pays the gain on the excess of the amount the donor paid. Federal annual gifts make a lot of sense because they reduce the amount of your taxable estate and the recipient benefits by receiving a tax free gift.

Since estate and gift tax matters are complex, most people consult a New York estate attorney before making a gift to make sure it falls within the annual and/or lifetime exemptions. The attorney can explain the gift tax exemption laws to you and help you make the right estate planning decisions.

If you wish to speak to a New York estate attorney, call the Law Offices of Albert Goodwin at (212) 233-1233.