If you live in Manhattan, you may assume your estate will automatically be taxed. After all, property values are high, and the rules sound complicated.
The reality is that far fewer estates are subject to federal or New York estate tax than most people think.
Still, understanding the deadlines and the state’s unique rules is critical, because missing an estate tax return filing or misunderstanding the thresholds can cost your family money and time.
Federal Estate Tax Basics
The federal estate tax applies only to estates above the exemption amount. For 2025, that figure is $13.99 million per person. If your estate falls below this threshold, no federal estate tax is due.
Married couples can also take advantage of “portability.” This allows the surviving spouse to add any unused exemption from the first spouse’s estate to their own, effectively doubling the amount that can pass free of tax.
Together, a married couple may be able to protect nearly $28 million in assets.
This means only the largest estates in the country are exposed to federal estate tax. While this is reassuring news, you still need to understand how filing requirements work, because even estates below the exemption may need to consider certain steps.
When the Federal Estate Tax Return Is Due
The federal estate tax return, known as Form 706, must be filed within 9 months of the date of death. An extension of 6 months can be obtained by filing a timely request, though any tax due must still be paid within the original 9-month period.
One reason families file even when no tax is owed is to elect portability of the unused exemption. If a surviving spouse wants to preserve the deceased spouse’s unused federal exemption, a timely return must be filed.
Without this step, the exemption is lost forever. For Manhattan families with property that may appreciate dramatically over time, this election can make an enormous difference for the surviving spouse’s estate.
The New York Estate Tax
New York imposes its own estate tax with different rules. For 2025, the New York exemption amount is $7.16 million. If your estate value is under that amount, no state estate tax is due.
However, New York has an unusual feature known as the “estate tax cliff.” If the estate exceeds 105 percent of the exemption, the exemption is lost entirely. In other words, once the estate value goes slightly above the threshold, the entire estate becomes taxable, not just the excess.
When the New York Estate Tax Return Is Due
New York follows the same deadline as the federal system. The return must be filed within 9 months of the date of death, with the option to request a 6-month extension. Even if no federal return is required, estates that exceed the New York exemption must file a New York return.
This means that a Manhattan family with a $9 million estate would not owe federal estate tax, but they would still need to address the New York return and possibly face state tax liability.
Why Planning Still Matters in Manhattan
You might feel relief knowing that most estates will never pay federal estate tax. That is the good news. But if you live in Manhattan, you cannot ignore New York’s separate rules. Property values here are high, and the estate tax cliff makes careful planning essential.
Estate planning strategies, such as gifting during your lifetime, using trusts, or structuring charitable bequests, can help keep estates below the cliff and reduce state tax exposure. Just as important, estate planning covers far more than taxes. A well-designed plan allows you to:
- Transfer real estate smoothly to the next generation.
- Avoid or minimize the delays of probate.
- Provide for incapacity with powers of attorney and health care directives.
- Protect beneficiaries from mismanagement or outside claims.
By planning ahead, you secure both financial efficiency and peace of mind for your loved ones.
Summing It Up!
So, when is an estate tax return due? The answer is 9 months after death, with an extension available for another 6 months.
A bigger takeaway, however, is that most Manhattan families will not owe federal estate tax at all. The challenge lies in New York’s separate rules, especially the estate tax cliff, which can create unexpected liability for estates that just cross the line.
The good news is that with the right planning, you can reduce or even avoid this risk while addressing all the other goals that matter to your family. Understanding the deadlines and exemptions is the first step. Putting a plan in place is the step that truly protects your future.
Learn More From the Comfort Of Your Own Home!
Attorney S.J. Khalsa is a go-to resource for journalists and academics who have questions about this important process. Some of this invaluable knowledge is actually available to anyone at any time through our on-demand webinar.
You will come away with a great deal of useful knowledge if you take advantage of this opportunity, and you can gain access here: Manhattan, NY estate planning webinar.
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