Mella ordered that the New York state notice of deficiency imposed against the estate be vacated and that the state issue a refund. To add insult to injury, Biondi said, the state will not only have to refund the $530,000 in estate taxes it took from the Seiden estate, it also will have to pay four percent interest on the funds it improperly taxed from the date it appropriated them as a tax deficiency.
Biondi said that the ruling could have legal ramifications far beyond New York's borders. He said that estate beneficiaries in any state that assessed estate taxes in 2010 and "piggybacked" on the federal estate tax code could decide to challenge taxation of a QTIP using the New York decision for guidance.
Biondi said that in his opinion, New York legislators were to blame for not taking legislative action in response to the 2010 federal estate tax repeal as it affects QTIPs, or anytime a federal estate tax return is not required to be filed and a New York return is, which happens whenever the federal estate tax exemption threshhold is higher than the state's.
According to Biondi, the law cannot now be corrected retroactive to 2010. Instead, New York tax department officials addressed the 2010 change by issuing a memorandum, which Biondi said had no legal effect.
Wiggin and Dana attorney Robert Benjamin agreed.
“Our client’s position [is] that the courts must apply the laws as written,” Benjamin said. “Both Seiden estates followed the law that was in effect at the time. [That] ruling could have implications for all other QTIPs created in the state during 2010, regardless of size.”
Financial Advisor asked the law firm on what legal grounds the New York State Department of Taxation and Finance could appeal the decision, if it chose to do so.
“They could appeal … on the ground that the surrogate did not apply the law correctly to the facts of this case, [but] the facts were undisputed,” the law firm said through its public relations representative.
Financial Advisor also asked New York’s Tax Department to respond for comment.
James Gazzale, assistant public information officer for the New York State Department of Taxation and Finance, declined comment.