New York Estate Tax Basics
New York is one of 12 states (plus DC) that imposes its own estate tax separate from the federal estate tax. The New York estate tax applies to the estates of New York residents on their worldwide assets, and to non-residents on real and tangible property located in New York. Understanding both state and federal taxes is essential for New York residents with significant assets.
2026 Exemption and Rates
For 2026, the New York estate tax exemption is $7,350,000. Estates below this threshold pay no New York estate tax. Tax rates are graduated, starting at 3.06% for taxable amounts up to $500,000 and increasing to 16% for amounts over $10.1 million. The federal exemption for 2026 is approximately $15,000,000 per individual. Many New York estates are subject to state tax but not federal tax.
The Estate Tax Cliff
New York's most dangerous trap is the estate tax cliff. If your taxable estate exceeds 105% of the exemption (approximately $7,717,500 in 2026), you lose the exemption entirely and your whole estate is taxed from the first dollar. An estate of $7.35 million pays zero tax, while an estate of $7.72 million could owe over $600,000. This makes precise planning critical for estates near the threshold.
No Portability in New York
Unlike federal estate tax law, New York does not allow portability of a deceased spouse's unused exemption. If the first spouse to die does not fully use their exemption, that unused amount is lost and cannot be transferred to the surviving spouse. This makes credit shelter trusts (bypass trusts) essential for married couples who want to maximize both exemptions.
Common Planning Strategies
Estate tax planning strategies for New York residents include: Credit Shelter Trusts to use both spouses' exemptions; Qualified Personal Residence Trusts (QPRTs) to transfer homes at reduced gift tax cost; Grantor Retained Annuity Trusts (GRATs) for appreciating assets; Charitable giving to reduce the taxable estate; and life insurance trusts to provide liquidity for taxes without increasing the estate.
Filing Requirements
A New York estate tax return (Form ET-706) must be filed within 9 months of death if the gross estate exceeds the filing threshold. Extensions of time to file can be requested, but do not extend the time to pay. Interest and penalties apply to late payments. Even if no tax is due, a return may be required to establish values and start the statute of limitations.
Frequently Asked Questions
Your taxable estate includes all assets you own or control at death: real estate, bank accounts, investments, retirement accounts, life insurance (if you own the policy), business interests, and personal property. It also includes assets in revocable trusts and the value of certain transfers made within three years of death.
Because New York does not allow portability, married couples should consider credit shelter trusts (also called bypass trusts). When the first spouse dies, assets up to the exemption amount fund the trust, which benefits the surviving spouse but is not included in their estate. This preserves both exemptions.
Changing your domicile to a state without estate tax can eliminate New York estate tax on your worldwide assets. However, New York will still tax real and tangible property located in the state. Changing domicile requires more than just moving and must be carefully documented.
Estate tax is paid by the estate before assets are distributed to heirs. Inheritance tax (which New York does not have) is paid by the people who inherit. Some states have one, both, or neither. New York has only an estate tax.