When most people hear “estate tax,” they assume it’s a problem for the ultra-wealthy. At the federal level, that’s largely true: in 2026, an individual can pass $15 million free of federal estate tax. But New York has its own estate tax, with a much lower threshold and an unusual feature known as the “cliff.” If you live in New York, it’s important to understand how it works.
What is the New York estate tax “cliff”?
For 2026, New York’s exemption (officially called the “basic exclusion amount”) is $7,350,000. If your taxable estate is at or below that number, your estate owes no New York estate tax. However, once your estate goes more than 5% over the exemption — $7,717,500 in 2026 — the exemption disappears entirely. Instead of paying tax only on the amount over the line, your estate pays tax on everything, starting from the very first dollar.
A quick example shows why the cliff matters. An estate worth $7,350,000 owes nothing to New York. An estate worth about $7,750,000 — only $400,000 more — owes roughly $740,000 in New York estate tax. In other words, that extra $400,000 can end up costing your family nearly twice its value. That’s the cliff.
Could this apply to me?
Even if you don’t think of yourself as wealthy, your estate may be closer to the cliff than you expect. Your taxable estate includes your home, retirement accounts, investments, business interests, and even the death benefit on life insurance you own. For many New York families, those numbers add up quickly. Married couples should pay special attention: unlike the federal system, New York doesn’t offer “portability,” a mechanism that allows a surviving spouse to use whatever exemption the first spouse didn’t use. In New York, without careful planning, the first spouse’s exemption can simply be lost, which could push the surviving spouse’s estate into taxable territory at their death.
Can you plan around the cliff?
The good news is that it’s possible to plan around the cliff, and the right tools depend partly on whether you’re married.
For couples, the goal is to make sure both spouses’ exemptions get used. A common tool is a credit shelter trust (sometimes called a bypass trust). When the first spouse dies, assets up to the New York exemption amount go into a trust that can still provide for the surviving spouse, but those assets aren’t counted in the survivor’s estate later. There are several ways to structure a credit shelter trust, and the right one depends on your assets, your family, and how much flexibility you want down the road. Among other factors, how your assets are titled matters, since a trust can only be funded with assets the first spouse actually owns. As with any estate plan, there’s no one-size-fits-all approach.
If you’re single, divorced, or widowed, there is only one exemption to work with, so planning focuses on keeping your taxable estate below the cliff. Options may include a provision in your Will or Trust that sends just enough to charity to bring your estate under the threshold, lifetime gifts to family (New York has no gift tax, though gifts made within three years of death are generally added back to your estate), or an irrevocable life insurance trust that keeps a policy’s death benefit out of your estate. Many of these tools work for married couples as well, and the right combination depends on your goals and wishes.
Finally, because the exemption changes every year, it’s smart to revisit your plan regularly, especially as your assets grow.
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If you think your estate may be near the New York threshold, I’d be glad to talk through your options and help you build an estate plan that keeps more for the people you love. Schedule your Planning & Priorities Session to start the conversation.
Jennifer Krakowsky is an estate planning attorney and the founder of Jennifer Krakowsky Law PLLC, a boutique trusts and estates practice serving clients throughout Westchester County and the surrounding areas — including Tarrytown, Irvington, Ardsley, Dobbs Ferry, Hastings-on-Hudson, Scarsdale, Eastchester, Edgemont, White Plains, Yonkers, Sleepy Hollow, Briarcliff Manor, Hartsdale, Larchmont, and Mamaroneck. This post is for general information only and is not legal or tax advice. Attorney advertising.
