What's happening
This bill creates a presumption that credit shelter bequests set aside the maximum amount shielded from both federal and New York state estate taxes.
Why it matters
Helps prevent unintended tax consequences. The bill ensures that when someone’s will, trust, or beneficiary designation uses a common formula to set aside the maximum estate-tax-sheltered amount, that formula will automatically account for both federal and New York state estate taxes—potentially reducing the risk of unexpected state tax liability for heirs.
Provides clarity and consistency for estate planning. By establishing a clear presumption about how these formula clauses are interpreted, the bill reduces ambiguity and the likelihood of costly legal disputes among beneficiaries or between families and the state.
Allows for exceptions based on explicit intent. The law preserves flexibility by permitting court proceedings to determine or override the presumed intent if there is evidence that the decedent wanted a different result, ensuring that unique family or personal circumstances can still be recognized.
Responds to differences between federal and state estate law. Since New York’s estate tax exemption does not always match the federal exemption, the bill closes a gap that could otherwise subject estates to avoidable state taxes, directly impacting the amount ultimately inherited by New York residents’ beneficiaries.
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Who cares
Headline styles
Shield More Inheritance from Taxes
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to judiciary
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Shield Estates From Double Tax
In Assembly Committee · Ways And Means · Sponsor Jeffrey Dinowitz
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
6080
2019-2020 Regular Sessions
IN SENATE
May 16, 2019
Introduced by Sen. HOYLMAN -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary
AN ACT to amend the estates, powers and trusts law, in relation to providing a presumption that credit shelter bequests be construed to set aside the maximum amount that may be shielded from both federal and state estate taxes
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The estates, powers and trusts law is amended by adding a new section 2-1.12-a to read as follows: § 2-1.12-a Application of formula clause
(a) If: (i) a decedent who is a resident of New York state dies after March thirty-first, two thousand nineteen; and
(ii) by reason of the death of such decedent, property passes or is acquired from such decedent under a will, a trust or a beneficiary designation which contains a formula providing, in sum or substance, for a bequest or other disposition of the maximum amount of property that can be sheltered from federal estate tax by reason of available credits against such tax; then, unless the governing instrument specifically provides otherwise by referring to this section, such formula shall be deemed to refer to the maximum amount of property, if any, that can be sheltered from both federal estate tax and New York state estate tax by reason of the applicable credit amount allowable against each of the federal estate tax liability and the New York state estate tax liability.
(b) Notwithstanding paragraph (a) of this section, nothing in this section shall be deemed to preclude a proceeding from being brought that seeks an order: (i) construing the decedent's intent concerning the effect of a formula bequest or other disposition contained in a will, trust or beneficiary designation, or
(ii) overriding the presumption set forth in subparagraph (ii) of paragraph (a) of this section.
§ 2. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD01346-01-9
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the estates, powers and trusts law, in relation to providing a presumption that credit shelter bequests be construed to set aside the maximum amount that may be shielded from both federal and state estate taxes
Purpose
The purpose of this bill is to overcome the presumption that credit shelter bequests be construed to set aside the maximum amount that may be shielded from both federal and New York state estate taxes.
Summary of provisions
Section 1: Amends the estates, powers and trusts law is amended by adding a new section 2-1.12-A to overcome the presumption that credit shelter bequests be construed to set aside the maximum amount that may be shielded from both federal and New York state estate taxes.
Read the full memo (756 words)
Section 2: Provides for an immediate effective date.
Justification
Currently, New York's estate tax exemption is $5,250,000, much less than the current $11,200,000 federal estate tax exemption. Section 952(c)(1) of the New York Tax Law (the "NYTL"), enacted in 2014, has been raising the New York estate tax exemption amount periodically over the past few years, and may eventually eliminate the disparity with the federal exemption. Specifically, the law recently increased the state's exemption amount from $4,187,500 to $5,250,000 (effective April 1, 2017), and ultimately to the then federal exemption on January 1, 2019. For all subsequent years, the New York State exemption will equal the federal exemption, indexed for inflation. Under NYTL Section 952(c)(1), individuals with taxable estates less than or equal to the applicable New York State exclusion amount will pay no state estate tax. However, the New York exemption is phased out rapidly for estates valued between 100% and 105% of the state exclusion amount, with individuals whose taxable estates exceed 105% of the exemption amount effectively taxed on the entire estate.
It is common for married testators to take advantage of the federal estate tax exemption by including dispositions in their testamentary documents intended to transfer the remaining federal exemption to indi- viduals other than the surviving spouse without intending to trigger any estate tax upon the first spouse's death. These bequests are typically drafted with a formula designed to capture the full federal exemption amount effective and available at the time of the first spouse's death. Such "credit shelter bequests" remain prevalent in estate planning docu- ments despite the introduction of portability at the federal level by which the second spouse to die may use the predeceased spouse's remain- ing federal exemption. Indeed, many testators still include these bequests in order to utilize any remaining generation-skipping transfer tax exemption, provide creditor protection, direct the ultimate disposi- tion of the devised property or capture the appreciation on such proper- ty free of federal estate tax. Unfortunately, recent changes to the federal and state tax laws may create unintended consequences for dece- dents whose estate plans have not been updated. For decedents dying after March 31, 2019, the effective federal tax exclusion amount is so high, at $11,200,000, that it is unlikely that an individual would ever intentionally set aside the full federal exemption amount, particularly when portability is an option. However, because many testators' estate planning documents have not been (and may not be) revised to account for the recent change to NYTL Section 952(c)(I), a significant number of New York estates may be subject to this unintended consequence.
To avoid an influx of reformation actions in the courts, the state legislature has enacted remedial legislation to address unexpected consequences arising from changes in tax law. For example, in the year 2000, in light of the elimination of the state death tax credit, the legislature enacted EPTL Section 21.12. Under this EPTL Section, certain testamentary documents executed prior to February 1, 2000 containing formula bequests which reference the credit for state death taxes are construed without regard to the reference. Further, in response to the 2010 repeal of the federal estate tax and the generation-skipping trans- fer tax, the legislature enacted EPTL Section 2-1.13 to require inter- pretation of certain formula bequests as if they were made pursuant to the Internal Revenue Code provisions in effect prior to the repeal.
Therefore, the EPTL should be modified to incorporate proposed Section 2-1.12-A in order to remedy the effects of NYTL Section 952(c)(1) on decedents whose testamentary documents include credit shelter bequests or other dispositions of the federal exemption amount.
Legislative history
2017-18 - A.11049 - Referred to Ways and Means
Fiscal implications
None.
Effective date
This act shall take effect immediately
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.