If you live in New York and your estate may exceed the state’s exemption amount, your estate plan needs to account for the state-level estate tax. Even if you won’t owe federal estate tax, your estate could still owe New York estate tax.
This is a separate system, and it has rules that differ in some surprising ways. If your assets are close to or above the exemption amount, you’ll want to understand how it works and the impact of the so-called “cliff.”
How the New York Estate Tax Works
New York imposes an estate tax on the value of your estate at the time of your death. This includes nearly all of your assets, such as real estate, retirement accounts, personal property, business interests, and even proceeds from life insurance policies.
This applies whether those assets go through probate or not. For example, a revocable living trust avoids probate, but it does not avoid estate taxation.
As of 2025, the New York estate tax exemption is $7.16 million per individual. If your estate’s value is below that number, it will not owe estate tax. But if it exceeds that figure, the entire estate, not just the amount over the exemption, may be subject to tax. This feature is unique to New York.
The Estate Tax Cliff
Most states with an estate tax only apply it to the amount above the exemption. New York takes a different approach. If your estate exceeds 105% of the exemption amount, which is roughly $7.52 million in 2025, the entire estate becomes taxable. This is referred to as the “estate tax cliff.”
For example, if your estate is worth $7.6 million, which is just over the threshold, your estate will not pay tax on just the $440,000 above the exemption. Instead, it will be taxed on the full $7.6 million.
This results in a much larger tax bill than you might expect. Estates only slightly over the exemption can face a disproportionately high tax liability unless proper planning is done in advance.
Estate Tax Rates in New York
If your estate is subject to New York estate tax, the rate ranges from 3.06% to 16%, depending on the size of your estate. The rate increases as the taxable estate grows, and the total tax can become significant for higher-value estates.
Unlike the federal system, New York’s maximum rate of 16% kicks in well below the federal exemption, meaning more families fall within the taxable range at the state level.
No Portability in New York
Another important difference between New York and the federal estate tax system is portability.
At the federal level, a surviving spouse can use any unused portion of their deceased spouse’s exemption. This feature allows married couples to protect up to $27.98 million in 2025 without special planning.
New York does not offer portability. Each person has an individual exemption of $7.16 million. If one spouse passes away without using their full exemption, the unused portion cannot be transferred to the surviving spouse.
For married couples with substantial combined assets, this makes trust-based planning especially important.
Who Must File an Estate Tax Return
If a New York resident dies with a gross estate over $7.16 million, the executor must file a New York estate tax return. This includes residents and nonresidents who own real estate or tangible personal property in the state.
The filing is required even if deductions may reduce the taxable estate below the threshold. Missing this step can create delays or penalties.
Deductions That May Reduce the Taxable Estate
Your gross estate may be reduced by several deductions before the estate tax is calculated. These include:
- Property left to a surviving spouse, which qualifies for the marital deduction
- Gifts to qualifying charities or religious organizations
- Certain debts, funeral costs, and administration expenses
With the help of an attorney, you may be able to structure your estate to include these deductions and bring the taxable value below the threshold.
How to Plan Around the Tax
There are planning strategies that can help reduce or avoid New York estate tax liability. These may include lifetime gifting, charitable giving, credit shelter trusts, or changing the ownership structure of certain assets.
The right approach depends on the size and nature of your estate, your family situation, and your long-term goals.
Learn More!
To learn more about important estate planning topics, view our on-demand webinar. It’s free, and you can visit our Manhattan, NY estate planning webinar page to gain access.
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