When Congress doubled the Federal Estate Tax exemption in 2018, many Americans breathed a sigh of relief — couples could pass over $20 million tax-free at the federal level. Even though the 2026 Federal Tax Exemption will allow couples to pass over $30M, anyone with New York property should not get relaxed! New York’s own estate tax, with an exemption of $7.16 million, comes with a nasty surprise: the Estate Tax Cliff.
How the Cliff Works
In most states, you’re only taxed on what exceeds the exemption. For example, in Maine, if Joe dies with an $8 million estate and the exemption is $7 million, only the extra $1 million is taxed.
In New York, however, once your estate exceeds 105% of the exemption (currently $7.518 million), the entire estate — not just the excess — becomes taxable. If Joe were a New Yorker, his heirs would lose over $750,000 to state estate tax instead of paying only a small amount on the overage. Crossing the cliff by even a dollar can mean a huge tax bill.
Importantly, this “cliff” applies to all property located in New York — even if you live in another state.
How to Stay on Solid Ground
- Use Trusts Wisely
An irrevocable trust can move appreciating assets, like a beach house or investment account, out of your taxable estate. This allows growth to occur tax-free for your heirs while maintaining some control through the trust terms.
2. Add a “Santa Clause” to Your Will
This clever clause directs any amount over the exemption to a charity of your choice. The result? Your heirs inherit more, and your favorite cause benefits — a win-win that can save hundreds of thousands in taxes.
3. Make Lifetime Gifts
New York has no gift tax, so you can transfer assets during your lifetime without affecting your state exemption — provided the gift is made at least three years before death. For families near the cliff, this can be a powerful strategy.
The Bottom Line
A well-planned estate can avoid the New York “cliff” altogether. Work with an experienced estate planning attorney to structure your assets, trusts, and charitable gifts so you can preserve wealth for your loved ones — not Albany.
This commentary reflects the personal opinions, viewpoints and analyses of the Legacy Trust & Capital Partners employees providing such comments and should not be regarded as a description of advisory services provided by Legacy Trust & Capital Partners or performance returns of any Legacy Trust & Capital Partners client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Legacy Trust & Capital Partners manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
