How to Minimize the Possibility of Your Estate Paying a New York Estate Tax

By: Anthony J. Enea, Esq.

For many New Yorkers the prospect of their estate being subject to a New York Estate Tax has become an issue of significant concern. The New York Estate Tax exemption for 2026 is Seven Million Three Hundred and Fifty Thousand ($7,350,000) Dollars per person, a relatively large amount for the vast majority of New Yorkers. That being said, one particularly problematic issue for married couples is what steps need to be taken to ensure that both their estates are able to make use of said exemption and thus be able to shelter Fourteen Million Seven Hundred Thousand ($14,700,000) dollars from a potentially significant estate tax because of New York’s infamous “estate tax cliff.”

Unlike the Federal Estate and Gift Tax Exemption, which for 2026 is Fifteen Million ($15,000,000) Dollars per person and is portable between spouses (a couple has a combined Thirty Million Dollars of Exemption) New York’s exemption is not portable between spouses. Thus, if the first spouse to die has no assets in their name alone (they are joint with their spouse, spouse is beneficiary, the transfer on death (TOD) or payable on death (POD) beneficiary); then in that event the exemption of the first to die spouse could be entirely lost, unless a statutorily allowable Renunciation is made, and the spouse has not derived any benefit from the assets post-death. Because of this, poor planning could result in the surviving spouse having only one New York estate tax exemption which increases the possibility of the second to die estate being subject to the New York estate tax. In New York, if one dies without a surviving spouse, and if their estate is greater than five (5%) percent above the exemption amount being, Seven Million Seven Hundred Seventeen Thousand Five Hundred ($7,717,500) Dollars or more, then in that event, said decedent’s estate is considered to have “gone over the estate tax cliff” and their entire estate will be subject to New York’s estate tax, not just the amount above the exemption. The New York estate tax is calculated on a sliding scale capping out at sixteen (16%) percent of the entire estate. If one’s estate is subject to a federal estate tax; the tax is forty (40%) percent of the amount above the exemption. 

In light of the above, what steps can a New Yorker take to minimize the possibility of their estate being subject to New York’s estate tax:

1. Retitle their assets so that they and their spouse have an amount as close as possible to the New York exemption in their name alone; so as to be able to utilize the exemption of the first spouse to die and not lose it. For example, if a husband and wife have a $7 Million Dollar estate, they can divide their non-retirement assets so that they each have alone $3.5 Million Dollars and do an estate plan that includes a “disclaimer trust” or “credit shelter trust.” Upon the death of the first to die, the surviving spouse can disclaim (not take) those assets and they would remain in the disclaimer trust for the benefit of the surviving spouse created either in the Last Will & Testament or Revocable Living Trust of the first spouse to die. Alternatively, the Last Will and Testament or Revocable Living Trust terms can force the necessary amount into a trust, called a “Credit Shelter Trust.” These planning techniques can help minimize the possibility that the estate of the second to die spouse will be over the New York estate tax cliff;
2. Own real property (house, condo, coop and raw land) or valuable tangible property (gold, silver, etc.) that is physically located outside of the State of New York. Property held outside of the State of New York is not taxable in New York for New York estate tax purposes. For example, your house or condo located in Florida or another state is not taxable for estate tax purposes in New York;
3. Engage in a pattern of gifting of assets to children, grandchildren and other loved ones to reduce your New York taxable estate. Please keep in mind that gifts larger than the personal annual exclusion ($19,000) per person per year may require that one utilize part of their federal estate and gift tax exemption; and file a federal gift tax return. In light of the fact that husband and wife have a combined $30 Million Dollar federal exemption, doing so may be of great value. The gifts can be made outright to said loved one or in a trust for their benefit; 
4. Finally, one can avoid the New York estate tax by moving to a state that does not have a state estate tax. For example, Texas, Arizona, Florida, North Carolina, South Carolina or any other state that does not have a state specific estate tax. 

In conclusion, once a couple or single person living in New York has an estate (including life insurance and retirement accounts, IRA’s, 401k’s, etc.) starting to approach the $7.35 Million amount it is most important that they engage in New York estate tax minimization planning. Remember, whatever you have today will in most instances be larger ten to fifteen years from now.

Anthony J. Enea is the managing attorney of Enea, Scanlan and Sirignano, LLP of White Plains, and Somers New York. He focuses his practice on Wills, Trusts, Estates and Elder Law.  Anthony is the Past Chair of the Elder Law and Special Needs Section of the New York State Bar Association (NYSBA) and is the past Chair of the 50+ Section of the NYSBA.  He is a Past President and Founding member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA).  Anthony is also a Past President of the Westchester County Bar Foundation and a Past President of the Westchester County Bar Association. He is fluent in Italian. He can be reached at (914) 948-1500 or at [email protected]