New York Estate Tax: Threshold Changes Every Resident Must Know
Feb 28, 2024
New York Estate Tax: How Recent Changes Could Save Your Family Thousands
New York’s estate tax threshold just increased—but most families still don’t know the new rules or how to avoid costly mistakes.
Current New York Estate Tax Threshold
2025 threshold: $6.94 million (up from $6.58 million)
Tax rate: Up to 16% on amounts above the threshold
Cliff effect: If your estate exceeds the threshold by more than 5%, you lose the entire exemption and the full estate becomes taxable.
What This Means for New York Families
Estates under $6.94 million: No New York estate tax is due.
Estates at $7.3 million: Could owe over $500,000 in state estate taxes due to the “cliff effect.”
Married couples: With proper planning, a combined exemption of $13.88 million is possible, but this requires specific legal steps.
Caveat: The “cliff effect” is unique to New York and can result in a much higher tax bill if your estate is only slightly above the threshold. Planning is essential to avoid this pitfall.
Common New York Estate Planning Mistakes
Mistake #1: Not understanding the cliff effect, which can cause families to lose the entire exemption if the estate is just over the limit.
Mistake #2: Failing to use both spouses’ exemptions, which can double the amount shielded from tax but requires the right trust or planning documents.
Tax-Saving Strategies for New Yorkers
Credit shelter trusts: Allow both spouses to use their exemptions, protecting more wealth from estate tax.
Life insurance trusts: Remove life insurance proceeds from the taxable estate, reducing the total value subject to tax.
Gifting strategies: Make use of annual and lifetime gift exclusions to gradually reduce your estate’s value over time.
Note: Each strategy has specific requirements and may have tax or legal implications. It’s important to keep documents up to date and review your plan regularly, especially if your estate is near the threshold.
Don’t let New York’s estate tax take your family’s inheritance. Proactive planning can make a significant difference.
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Disclaimer: This blog post is for general informational purposes only and does not constitute legal advice. Estate tax outcomes can vary widely depending on your personal circumstances and the evidence available. Always review your options carefully before making decisions about your estate.