The United States and New York impose an annual income tax on resident individuals, trusts and estates. For US federal tax purposes, an individual’s residence is based on citizenship, holding a “Green Card” or pure day count. For New York purposes, residence is generally determined based on an individual’s domicile/permanent abode. An estate is a New York resident if the decedent was domiciled in New York at the time of death. A trust is generally deemed to be a New York resident trust if the trust consists of property of a person domiciled in New York at the time of transfer, or if the creator of the trust was domiciled in New York at the time the trust became irrevocable, or when a trust in a last will and testament was created by a person who was domiciled in New York at the time of death. US and New York residents are taxed on worldwide income. Non-resident individuals, trusts and estates are taxed on New York-sourced income only. Importantly, a resident trust may not be subject to New York income tax if (i) all trustees are domiciled outside of New York, (ii) all the trust corpus is located outside of New York and (ii) there is no New York sourced income.

An individual who is a resident of New York at the individual’s death is subject to New York estate tax. While New York does not impose a gift tax on lifetime gifts, it does add back to the gross estate the aggregate amount of taxable gifts (as defined under the federal internal revenue code) made three years prior to the decedent’s death to the extent such gifts are not included in the individual’s federal gross estate. Certain gifts may not be added back to the gross estate, including gifts made while the decedent was a non-resident, or gifts of real or tangible personal property located outside of New York when the gift was made.

A non-resident decedent may be subject to estate tax on real or tangible personal property located in New York.

The United States and New York permit a marital deduction and exempt property passing to a surviving spouse who is a United States citizen from estate tax. A marital deduction is not allowed for property passing to a noncitizen surviving spouse, unless such property is held in a trust that qualifies as a Qualified Domestic Trust.

The New York estate tax exclusion amount is currently approximately USD7 million. However, the New York exemption is effectively phased out for estates that exceed the exemption amount by more than 5%, meaning that for estates that exceed this amount (approximately USD7 million), the entire estate is effectively subject to New York estate tax. New York does not allow spousal portability of unused New York estate tax exemption. The New York estate tax rate is graduated and ranges from approximately 3% to 12%.

New York’s treatment of its basic estate tax exclusion amount differs drastically from the federal system. The current federal exclusion amount is currently approximately USD13 million, and the federal government allows a credit for the full exclusion amount regardless of the value of the decedent’s estate. In addition, the federal estate tax system includes the concept of “portability” by which any unused federal estate tax exemption at the first spouse’s death may be transferred to the surviving spouse to shelter additional assets from gift and estate tax. This means, for example, that currently if the first spouse to die has a taxable estate of USD5 million, the unused federal estate tax exemption of approximately USD8 million may be transferred to the surviving spouse and, under most circumstances, be used by the surviving spouse to shelter approximately USD21 million from gift and estate tax.

There are various income tax planning opportunities in the United States and New York that should be considered. For example, private placement life insurance can be an effective way to shelter income tax as well as Section 1031 like/kind exchanges of real property. There are also other techniques that clients should assess as well, including various different trust types. Notably, the US and NY combined tax rates can be over 55%.

A US/NY non-resident is generally subject to US/NY income, US gift, and US/NY estate tax on real and certain tangible personal property located in New York. The applicable income tax rates for both jurisdictions are between approximately 30% and 55%.

The US and NY tax rates are somewhat stable; however, these rates may change depending on the fiscal philosophy of any incoming administration. Given the impact of COVID-19, these rates could increase significantly as the federal and New York governments seek additional funds to cover governmental spending. Absent any action from Congress, the US Tax Cuts and Jobs Act expires on 1 January 2026, and it is expected that tax rates could increase by at least 10%. As part of that, the estate and gift tax exemption would be halved to approximately USD7 million. High-net-worth individuals may wish to take advantage of the currently significant gift tax exemption by making gifts outright or in trust before 31 December 2025.

TheUnited States and New York have an increased focus on transparency and reporting. The Corporate Transparency Act (CTA) came into effect on 1 January 1 2024. The CTA is a new federal reporting requirement for owners and managers of a majority of US entities to report to FinCen, among other things, the entities’ information, including any beneficial owners. There are many exceptions to the reporting requirement that can be found on the FinCen website. New York has adopted a similar reporting regime called the LLC Transparency Act. Entities in existence prior to 1 January 2024 have until 31 December 2024 to comply with federal and New York reporting requirements. Entities created after 31 December 2024 have to comply soon after creation. These reporting requirements are evolving.

There is a growing trend in the United States/New York for older generations to form significant trust structures for their children and future generations. Importantly, clients are forming unregulated private trust companies in New Hampshire and other states in order to further their estate planning goals as well as to ensure their governance views for the coming generations.

There is an increasing trend for multi-national families to obtain US/NY tax advice as well as advice in other non-US jurisdictions. Importantly, such advice is often inconsistent and requires lead tax counsel to co-ordinate tax advisors across a number of countries.

While New York does not have forced heirship rules per se, a decedent married at the time of such decedent’s death cannot disinherit the surviving spouse, in the absence of an agreement otherwise. If a decedent dies with a will, the surviving spouse has an elective share to receive one-third of the deceased spouse’s net estate (generally, gross estate less debts and administration expenses). The surviving spouse has the right to assert the spouse’s elective share, in lieu of taking under the deceased spouse’s will. The elective share is an outright pecuniary amount, and various testamentary substitutes passing outright to the surviving spouse, such as property held with rights of survivorship, count towards satisfying the elective share. Importantly, if a spouse asserts the elective share, such spouse does not take under the decedent’s will.

If a decedent dies without a will and is married without children, 100% of the decedent’s probate estate passes by intestacy law to the surviving spouse. If a decedent dies without a will and with children, 50% of the decedent’s probate estate passes to the surviving spouse by intestacy and the other 50% of the probate estate passes by intestacy law to the decedent’s children.

By an acknowledged agreement of both parties, New York permits a waiver of estate and inheritance rights. It is common in New York for parties to enter into prenuptial or postnuptial agreements to modify or waive a party’s estate and inheritance rights.

New York is an equitable distribution state and equitably distributes marital property in the event of divorce. In general, marital property is property acquired during marriage and prior to the filing of divorce that is not “separate property.” In general, separate property is property owned prior to marriage and property acquired by a party during marriage by inheritance, a gift from third parties or distribution from a trust. There is extensive guidance under New York law regarding marital property and separate property, and the active and passive nature of each.

The transfer of property during life by gift has a carry-over basis. Generally, at death, there is a step up in basis to the value of the property at the date of the decedent’s death.

There are various gift and estate planning techniques to ameliorate the impact of US and NY gift and estate tax. Some of the more common techniques include an insurance trust, grantor retained annuity trust, an intentionally defective grantor trust or spousal lifetime access trust.

Under US/NY law, digital assets are considered a property right. Accordingly, they pass as part of a decedent’s estate. However, some providers have restrictions on the transferability or access of accounts at death, so it may be necessary to contact various providers if an individual wishes to ensure rights after death.

New York and most other states recognise revocable and irrevocable trusts, foundations and charitable organisations. There are also trust distinctions for tax purposes, such as grantor and non-grantor trusts. There are certain states, such as New Hampshire and Wyoming, that permit the creation of private trust companies to administer family trusts. Further, New Hampshire and Wyoming have laws permitting the use of civil law-style foundations.

Trusts are routinely used in the United States and New York. Properly structured, they can be very efficient estate planning vehicles. Additionally, non-US trusts may be recognised in New York and the United States.

There are extensive reporting regimes in both the United States and New York. The tax considerations are generally the same as for US-based trusts except to the extent of accumulated income/gains, which are taxed punitively. In general, the US taxes US situs trust assets and foreign trusts are not taxed based on the citizenship or residency of the fiduciary. Each state enacts its own income tax reporting regime, and the citizenship or residency of the fiduciary may be relevant. For New York income tax purposes, there may be tax planning options by looking at removing New York resident beneficiaries or fiduciaries.

There are a number of ways to change trust terms; however, these are quite fact-specific and require detailed review by a qualified professional. Notably, New York law permits a trust to be “decanted” subject to fairly rigorous rules. Other jurisdictions, such as New Hampshire and South Dakota, have substantially fewer requirements. In some circumstances, New York permits amendments or reformations to trusts.

There are a number of jurisdictions in the United States that have expressly adopted broad asset protection rules for trusts. Currently, New York is not one of those jurisdictions. That being said, there are other asset protection vehicles, such as limited liability companies, which can be quite effective.

There are a number of techniques for family businesses that can assist the transfer of wealth to the next generation. One technique is the use of discounts for gift and estate tax planning. Generally, a professional valuation specialist must be engaged. Other options include family limited partnerships and buy-sell agreements.

A discount is usually applied to the fair market value of the transfer of a partial interest in an entity. This is a technique commonly used by US estate planners.

Disputes arise from a wide variety of issues, including testator/donor capacity, interpretation/language construction of instruments, implementation/administration of a trust/estate, management of corpus, and guardianship proceedings, among many others. Disputes may be between and among fiduciaries, beneficiaries, third-party creditors, and/or governmental taxing authorities or law enforcement agencies. Recent trends include (i) increasingly aggressive enforcement proceedings by federal and state tax authorities against high net worth individuals and trusts, (ii) divorce-related litigation against trustees, grantor-spouses and/or beneficiary-spouses, and (iii) “know-your-customer” and related fiduciary risks associated with connections to sanctions targeted individuals.

The remedies available to claimants are extremely wide-ranging and include money damages, declarative judgments, rescission, trust reformation, injunctive and other equitable relief, and appointment of a guardian (over person and/or property), among other forms of relief.

Corporate fiduciaries are often used. There is no higher standard of conduct as all trustees are held to a fiduciary duty. Fees can be high but are subject to negotiation.

A fiduciary owes a duty of care and prudence and may be personally liable for a breach of fiduciary duty. A fiduciary cannot be exculpated from acting in bad faith, but provisions can be included in the operative instrument to limit exposure to the fiduciary, such as an express provision that a fiduciary will not incur liability in the absence of bad faith and indemnification of the trustee by the trust.

In the United States and New York, fiduciaries are required to use prudent judgement to invest trust assets. Typically, trustees contract with third-party advisors to make investment decisions.

It is common for the trust or other instrument to provide a fiduciary with broad power over the investment of trust assets and to expressly exclude any requirement of diversification. A trust may own a closely held business subject to the express terms of the trust instrument.

A person can have only one domicile at a given time and it is generally considered to be the place with which a person has a sufficient degree of permanent contacts and to which a person intends to return and/or has a permanent home. Indicia of domicile can include a driver’s license, voter’s registration, and vehicle registration, as well as club memberships and religious house of worship affiliations, among other things.

Residence is a place of abode and an individual can have multiple residences. An individual is considered a New York resident for tax purposes if New York is the individual’s domicile or the individual’s permanent place of abode is in New York and the individual spends 184 days or more there.

Even if an individual is considered a non-resident, the individual may remain subject to income tax on New York-sourced income.

There are no expeditious means for an individual to obtain citizenship in the United States.

For minors or adults with special needs, a common planning mechanism is a special needs or supplemental needs trust. The intent of the special needs or supplemental needs trust is to supplement and not diminish federal or state benefits.

In the event of a party’s incapacity, the court would have to be petitioned to appoint a guardian for the person and/or property. Various planning mechanisms can be put in place to minimise the need or scope of a guardianship proceeding, such as revocable trust, durable power of attorney, health care proxy, and living will. If it is desired to have a non-US resident or citizen appointed as guardian, specialised planning may be required.

There is no applicable information in this jurisdiction.

Generally, a non-marital child is the child of his or her mother, and a non-marital child is the child of his or her father if a court during the father’s lifetime makes an order of filiation or the father has signed an instrument acknowledging paternity. A non-marital child may also be deemed a child of the father if parentage is shown by clear and convincing evidence, such as openly acknowledging the child as his own.

New York recently legalised gestational surrogacy agreements in which the surrogate has not contributed the egg used in conception. A child born under such surrogacy agreement, assuming it complies with New York law, is a child of each intended parent. To ensure a surrogacy agreement is lawful in New York, several requirements must be met by the surrogate or intended parent, including United States citizenship or lawful permanent residence status, and New York residence. In addition, if the proposed surrogate has a spouse, such spouse may have to provide informed consent.

Traditional surrogacy agreements (ie, the surrogate contributes the egg) remain unenforceable in New York.

Notwithstanding the rules under the law regarding the definition of a child, a testator may exclude any child from taking any share of the testator’s estate.

New York and the federal government recognises same-sex marriage.

The United States and New York provide for a number of charitable giving opportunities, including tax incentives. They are complex and require careful consideration. Giving to qualified charities will usually reduce income and estate taxes, subject to certain limitations.

Typically, US/NY lawyers use a number of charitable giving techniques, including charitable lead trusts, donor-advised funds and private foundations. While creating a charitable structure may have income and estate tax benefits, often there is a reduction in control and use of the assets.