Estate taxes are often misunderstood, yet they play a significant role in estate planning—especially for New Yorkers. These taxes are imposed by the Federal Government and some states when a person passes away. They are based on the total value of the person’s estate at the time of death. If you’re planning or helping a loved one with their affairs, understanding how estate taxes work can help you make informed decisions that preserve your wealth and protect your beneficiaries.
Below, we break down the significant components of estate taxes and explain how they may impact your planning.
Step 1: Valuation
Every estate tax calculation begins with determining the value of the estate. This includes almost everything the individual owned at the time of death:
- Real estate
- Bank accounts and cash
- Investments, such as stocks, bonds, and retirement accounts
- Business interests
- Personal property, including vehicles, jewelry, artwork, or collectibles
Past financial activity can also play a role. Large gifts made during one’s lifetime may be counted toward the taxable estate depending on when they were given and how they were reported. Additionally, the location of assets—especially real estate—can influence tax exposure. For example, a New York resident who owns a vacation home in another state may be subject to that state’s estate or inheritance tax laws as well.
Accurate valuation is essential, as it determines whether the estate falls above or below state and federal tax thresholds.
Step 2: State Estate Tax
Not all states impose estate taxes, but New York does—and it’s known for having one of the more complex estate tax structures.
New York’s estate tax applies to estates valued over $7.3 million. Unlike the federal estate tax, New York also has what is often called a “cliff”—meaning if the value of the estate exceeds the exemption amount by more than 5%, the estate may lose the exemption entirely and be taxed on the full value. New York also has a clawback provision. Gifts given within 3 years of a person’s death are clawed back into the gross estate.
Currently, only 17 states and the District of Columbia impose either an estate tax or an inheritance tax. This is one reason many New Yorkers choose to change their domicile to tax-friendly states such as Florida, which has no state estate tax and no state income tax. However, changing domicile requires careful planning and documentation, so it’s essential to understand the process before making the shift.
Step 3: Federal Estate Tax
On the federal level, the estate tax exemption is significantly higher. For 2026, the exemption is:
- $15 million for an individual
- $30 million for a married couple
If the value of your estate falls below these thresholds, you likely will not owe federal estate taxes. However, for high-net-worth individuals or families with significant real estate, business interests, or investment portfolios, federal estate tax exposure is still a possibility. It’s also worth noting that federal exemption amounts are not permanent.
Step 4: Stay Informed
Estate tax laws evolve frequently. For example, before April 2014, New York’s estate tax exemption was just $1 million, far lower than today’s threshold. Because of these frequent changes, a plan created several years ago may no longer provide adequate protection.
Regular reviews with an estate planning attorney can ensure that:
- Your documents reflect current tax laws
- Your strategy takes advantage of available exemptions
- You’re prepared for upcoming changes like the 2026 federal sunset
Estate taxes are complex, but with proactive planning, you can significantly reduce their impact and preserve more of your legacy for the people and causes you care about.
If you’d like personalized guidance on estate tax planning or want help reviewing your current strategy, contact Miller & Miller Law Group to schedule a consultation.
📞 Schedule a confidential consultation today. Be sure to mention this article during your consultation so we can focus on your specific concerns and guide you with personalized advice.
This article is a service of Miller & Miller Law Group. We do not just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love.
