The New York State Department of Taxation and Finance recently announced that the state’s basic exclusion amount for New York State Estate Tax in 2026 is $7,350,000, but what does that mean? Essentially, if your taxable estate is under that amount at the time of your death, there is no Estate Tax due to New York State. However, if your taxable estate is over that amount, then a good portion of your assets will go to pay New York State instead of your heirs or beneficiaries.
Currently, New York is the only state with a “tax cliff” for its Estate Tax. New York does allow a 5% buffer before being subjected to the cliff, so if you die in 2026 and your taxable estate is between $7,350,000 and $7,717,500.00, your estate only pays Estate Tax on the amount over the basic exclusion amount. Unfortunately, if your taxable estate is over $7,717,500.00, the Estate Tax is imposed on your entire estate, starting from the very first dollar.
What can be in a Taxable Estate?
It is also important to know what assets are included when calculating a taxable estate in New York, as the valuation can include non-probate assets, such as certain trusts. The assets generally included in the estate valuation for Estate Tax purposes include, but are not limited to: real estate, bank accounts, brokerage accounts, retirement accounts, life insurance, personal property (such as collectibles, cars, jewelry, furniture, art, etc.), business interests, jointly owned assets, and even gifts made within three (3) years of the date of death. Another important factor to note is that the valuation used to calculate each asset’s value is the value as of the date of death, not the value when the asset was acquired.
As New York State’s basic exclusion amount is adjusted annually, it is important to review your estate plan and asset values regularly, especially if you are near or over the threshold. There are various estate planning tools available to assist in avoiding leaving your heirs with a large Estate Tax bill, but each individual’s situation must be evaluated to determine the best strategy. This can include strategic lifetime gifting, providing for charities in your estate planning or, if you are married, providing for your spouse through a credit shelter trust.
Working with an experienced attorney to obtain the proper legal guidance can help you avoid New York’s Estate Tax cliff, ensure that you preserve and protect your assets and provide your family with the maximum inheritance.
