Estate and Gift Tax

The federal estate tax is a transfer tax that may apply to the value of your estate when you pass away. It is separate from income taxes and applies only if the total estate exceeds a certain exclusion amount.

The tax rate is progressive, with higher values taxed at higher percentages. While most estates fall below the multi-million dollar federal threshold, those with significant assets must plan carefully to avoid unnecessary taxation.

Yes. In addition to federal rules, New York imposes a state estate tax. The state threshold is lower than the federal one, which means an estate that is not subject to federal tax may still owe taxes to New York.

This makes planning particularly important for Manhattan residents with real estate or other appreciating assets.

Federal law also imposes a gift tax on certain lifetime transfers. The gift tax is linked to the estate tax, sharing a combined lifetime exclusion.

However, federal law allows annual tax-free gifts up to a certain amount per recipient. Larger gifts reduce the lifetime exclusion and must be reported on a gift tax return, even if no tax is ultimately due.

New York does not impose its own gift tax, but certain gifts made shortly before death may be added back into the taxable estate.

Strategic gifting can reduce the size of your taxable estate. By making lifetime transfers, you shift future appreciation of those assets out of your estate.

This is particularly relevant in Manhattan, where real estate values and investment portfolios can grow quickly. Gifting can also help younger generations, but it must be done with careful consideration of both federal rules and New York’s add-back provisions.

New York’s estate tax law contains a unique feature commonly called the “cliff.” If your estate exceeds the state exclusion amount by 5% or more, the entire value becomes taxable, not just the excess.

This creates a sharp dividing line and makes precise planning essential. Without thoughtful strategies, your heirs may face an unexpectedly large state tax bill.

Most property you own at death is included in your taxable estate. This includes real estate, financial accounts, business interests, and personal property.

Life insurance proceeds may also be included if you own the policy at death. Identifying what is and is not included requires a detailed review of your holdings.

Trusts are a core estate planning tool for managing tax exposure. For example, irrevocable life insurance trusts can remove insurance proceeds from your taxable estate, and the payouts can be used to pay estate taxes.

Other trust arrangements can transfer wealth to children or grandchildren while using strategies that leverage the available exemptions. The trustee, acting under the trust terms, manages the assets in accordance with your instructions and the applicable tax rules.

Charitable giving offers both personal satisfaction and tax benefits. Lifetime charitable gifts may qualify for income tax deductions, while testamentary charitable bequests can reduce the taxable estate.

Certain trust structures, such as charitable lead trusts or charitable remainder trusts, allow you to support causes you value while also providing tax advantages and benefits for your heirs.

Without planning, estate and gift taxes can erode the value of what you pass down. Lifetime strategies, such as structured gifts and properly drafted trusts, allow you to preserve more for your beneficiaries.

Coordinating your plan with both federal and state rules ensures that you avoid surprises and maximize available exemptions.