A family in Brooklyn inherits their parents’ brownstone, a modest investment portfolio, and a lifetime of collected assets. Almost immediately, their grief is complicated by a new anxiety: taxes. They’ve heard horror stories about a “death tax” and wonder how much of their inheritance will be lost to the government. Their first question is almost always, “How much tax will I have to pay?”
The answer, for a New York beneficiary, is nothing. That’s the first point I clarify for families. New York has no inheritance tax—a tax paid by the person receiving the assets. The financial obligation does not fall on the children. It falls on the estate itself, before a single dollar is distributed. This is the estate tax, and understanding how it works is the foundation of prudent generational planning.
The Two Hurdles: Federal and New York Estate Taxes
Estate taxes operate on two separate tracks—federal and state. They have different rules, different exemption amounts, and different implications for your family’s legacy.
For most people, the federal estate tax is not the primary concern. In 2024, an individual can pass on more than $13 million to their heirs without triggering it. For a married couple, this amount is doubled. While this number is high, it is not permanent—the exemption is scheduled to be cut roughly in half at the beginning of 2026. The more immediate challenge for New Yorkers is our own state’s threshold.
New York’s estate tax exemption is significantly lower—currently $6.94 million. This figure includes almost everything a person owns: real estate, bank accounts, retirement funds, and life insurance proceeds. For many families, especially those who have owned property for decades, it is not difficult to find their assets approaching this limit.
New York’s Estate Tax “Cliff”
Unlike the federal system, which only taxes the amount over the exemption, New York has a harsher rule. We call it the “estate tax cliff.” If the value of a person’s estate is more than 105% of the exemption amount, the exemption vanishes entirely. The tax is then calculated on the entire value of the estate, not just the overage.
This is not a small detail. An estate valued just below the $6.94 million threshold passes to the heirs free of New York estate tax. But an estate valued at just over that 105% mark could suddenly face a tax bill of hundreds of thousands of dollars, payable from the first dollar. The executor’s fiduciary duty, as defined throughout the Surrogate’s Court Procedure Act (SCPA), includes the monumental task of correctly valuing assets and filing the tax return. This duty becomes incredibly high-stakes when a family’s legacy is perched on the edge of this cliff.
Stewardship Through Intentional Planning
This is why we frame estate planning as an act of stewardship. It is not about tax avoidance. It is about making deliberate choices to preserve what you have built for the next generation. A parent’s failure to plan for the estate tax cliff can create a significant financial burden for their children, forcing the sale of a family home or other assets just to satisfy the tax liability.
Prudent planning requires more than a will. It demands a clear-eyed look at your total assets and a strategy for managing their value. For some, this might involve making strategic lifetime gifts to reduce the size of the taxable estate. For others, establishing specific types of trusts can protect assets from being counted toward the threshold. The key is to be intentional and to act well before a crisis hits. Waiting is not a strategy.
If you are a steward of your family’s assets, the first step is to gain clarity. I advise my clients to begin by preparing a simple, confidential net worth statement. Tally your real estate, investments, and other significant assets. If that number is approaching the New York State exemption, it is time to schedule a review of your estate structure with qualified counsel.
