How Our Skilled NY Estate Planning Attorneys Could Help Keep Your Legacy Safe from State and Federal Estate Taxes

When you create a comprehensive estate plan, it’s important to consider the tax implications as you plan to transfer your assets after you die. The New York estate tax can pose a significant financial risk to large estates, leaving executors burdened and depriving heirs of their fair share in your legacy. What New York's estate tax means to you

There are a number of different strategies you can use to minimize estate taxes, including placing assets in a trust and making gifts while you’re alive. Working with our experienced estate planning attorneys can help you navigate the complicated New York tax laws to ensure your legacy is protected. The Landskind & Ricaforte Law Group, P.C. can help ensure your legacy’s longevity during probate and estate administration. Here, we discuss the New York estate tax and how our lawyers could protect your success from unexpected taxation.

The New York State Estate Tax

New York is one of several states that has its own estate tax. In simple terms, the estate tax is a tax on the net value of a deceased person’s assets—including their real properties, bank accounts, and investment funds. Estate tax rates vary but are capped at 16%.

Although the estate tax can pose a significant financial threat to an heir’s inheritance, it is only applied to large estates that meet a certain threshold. This threshold changes each year, with adjustments made for inflation and other fluctuations.

The current estate tax threshold in New York is $6.94 million, with all estates of lesser value exempted from the tax in its entirety.

What the Estate Tax Covers

The Empire State’s estate tax covers all assets included in the “taxable estate.” This is the value of the estate that exceeds the threshold of $6.94 million. Almost any type of asset could push an already large estate over the threshold. Examples include, but are not limited to, the following:

  • Real property
  • Cash savings
  • Bank accounts
  • Motor vehicles
  • Personal possessions
  • Art and jewelry collections

If an estate’s net value meets the criteria for taxation, a graduated tax is applied to any amount exceeding $6.94 million. This is termed the “marginal rate,” which varies from 5% for taxable estates of between $1 and $500,000 and 16% for taxable estates of more than $10.1 million.

Exemptions to the New York Estate Tax

New York provides an automatic estate tax exclusion of $6.94 million. However, when calculating the value of a large estate, certain deductions can be applied to decrease its overall value. The most common of these deductions fall into the following categories:

The Marital Deduction

The most significant estate tax deduction is available to almost all married couples. Under New York law, any assets left to a surviving spouse are automatically exempted from the estate tax—no matter their amount or value. However, the marital deduction only provides a temporary reprieve, as their own estate will most likely be subject to taxation. 

The Charitable Deduction

Any assets that are left to a qualifying charity, or charitable trust, are typically exempt from the estate tax. According to the Internal Revenue Service (IRS), a qualified charity is a “nonprofit group that is charitable, scientific, religious, educational, or literary in purpose or works to prevent cruelty to children or animals.” Donating to a qualifying charity must be made during the decedent’s lifetime, through provisions cited in their will, or by creating a charitable trust. 

Mortgage and Debt-Related Deductions

Mortgages, debts, and other outstanding asset-related balances are not included in a decedent’s taxable estate.

Administration-Related Deductions

Certain administrative expenses may also be deducted from the taxable estate. These expenses include fees paid to any executor, accountant, and attorney, as well as financial losses incurred before assets have been transferred to heirs.  

The Federal Estate Tax

Affluent New Yorkers face another threat to the integrity of their estate: the federal estate tax.

The federal estate tax, much like the New York state estate tax, only applies to estates that exceed a certain value. In 2024, the federal estate tax exemption was set at $13.61 million.

However, even though the federal estate tax threshold is much higher than the state’s, the IRS levies much higher rates on the taxable estate. These rates vary from 18% on taxable amounts of $1 to $10,000 to 40% on taxable amounts of more than $1 million.