New York is among the states that levies its own estate tax. Many people don’t have to worry about it because their estates are below the exemption amount (threshold). For estates of those who die in 2026, that amount is $7,350,000. That’s about half the threshold for the federal estate tax.
If you’re preparing to put your estate plan in place, it’s critical to know whether the amount being left to beneficiaries (generally with the exception of your spouse and charitable organizations) is greater than that.
There are a number of ways to legally reduce the value of your estate to prevent the government from taking a share of it. That’s one reason it’s worthwhile to work with an experienced estate planning professional.
Avoiding the tax cliff
It’s still important to know how the New York estate tax works. Our state has some unique estate tax laws.
If the estate value is more than 5% above the threshold, the entire estate is subject to the estate tax. If it’s over the threshold by 5% or less, some tax will be owed, but only on the amount over the threshold. That’s why 5% over the threshold is what’s known as the “tax cliff.” Estates valued at more than that are fully taxable, which can mean a significant amount of money going to the state.
As noted, there are multiple ways to avoid the tax cliff or getting anywhere near it. These include gifting assets while you’re still alive, leaving a greater amount to your spouse and/or charities.
In fact, New York law includes something called the “Santa Clause.” You can stipulate that if your estate may fall off the cliff, the amount over 5% above the threshold will be given to one or more charitable organizations.
Preserving your assets for the people and causes that are important to you and avoiding unnecessary taxes, penalties and legal issues for your loved ones requires careful planning. Seeking trusted legal guidance can help.