Legal Memorandum: Tax Apportionment and QTIP Trusts in NY

Issue: What is the law governing tax apportionment as it relates to QTIP trusts in New York state?

Area of Law: Estate Planning & Probate, Tax Law
Keywords: Tax apportionment; QTIP trusts; Marginal tax rate
Jurisdiction: New York
Cited Cases: 510 N.Y.S.2d 815; 40 N.Y.S. 2d 99
Cited Statutes: N.Y. Decedent Estate Law § 124, § 124 (7)
Date: 03/01/2010

Estate of Gordon, 510 N.Y.S.2d 815 (Surr. Ct. 1986) (Tax apportionment with respect to QTIP trusts is not governed by EPTL 2-1.8.  It is instead governed by EPTL 2-1.12, a new section enacted specifically for QTIP trusts.  These two statutes provide different rates to calculate tax apportionment.  Under EPTL 2-1.12, the marginal tax rate is used to compute the amount of tax recoverable from the QTIP. The average rate is applied under EPTL 2-1.8 to all other kinds of trusts and testamentary and non-testamentary property.)

Estate of Dettmer, 179 Misc. 844, 40 N.Y.S. 2d 99 (1943) (Where assets do not pass through the estate (i.e., a deed constituting a gift in contemplation of death or possession or enjoyment deferred until after grantor’s death), but are included in the gross taxable estate, the fiduciary may recover from the person receiving such interest or in possession thereof the proportionate amount of the tax resulting from such inclusion with which the persons interested in the estate are chargeable under the provisions of § 124 of the Decedent Estate Tax Law.)

BNA comment added to discussion of this case:  In addition, effective September 1, 1964, compensation of an attorney whose services benefited an estate by excluding nontestamentary property from estate taxation may be assessed against the nontestamentary property in proportion to the benefit received by such property (citing § 124 (7) of the N.Y. Decedent Estate Law).

Estate of Chen, New York Surrogate’s Court, Westchester County, 220 NYLJ […]

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