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If you have a significant amount of assets that you want to pass on to heirs and are a New York resident, you may wonder how much your heirs will lose to the estate tax. Unfortunately, estate tax laws can be complex and vary from state to state. Therefore, understanding how these apply to your location and impact your estate is crucial for any New Yorker (and any non-New Yorker who owns significant real estate in New York).
In this article, we’ll review the basics of the estate tax and walk through different tactical approaches you can take to maximize the hard-earned gains you pass on to future generations:
Before diving into the state-specific New York estate tax and how it works, let’s get into the estate tax basics.
The estate tax is a tax on assets transferred on a deceased person’s death to individuals other than the deceased person’s spouse. It is paid by the deceased person’s estate and is due nine months after the person’s death. The federal estate tax rate is 40%. That means that if you are leaving your beneficiaries a $23.99 million estate, the estate will owe $4,000,000 in federal estate tax. And that’s even before accounting for any state estate tax liability!
What is the Federal Gift and Estate Tax Exemption?
Each individual has a lifetime exemption from both estate tax and gift tax (see below). This exemption is the value of assets you can give away, throughout your life and after your death, without being subject to federal estate tax. For 2025, this exemption is $13.99 million per person (up from $13.61 million in 2024). Because the exemption is per person, married couples can effectively give away double that amount.
However, the federal estate tax exemption level is scheduled to be reduced by 50% to about $7.15 million when the Tax Cuts and Jobs Act sunsets on January 1, 2026. That is why it’s essential to get started with estate planning sooner rather than later.
Need some help to understand the most convenient tax planning structure to reduce your estate taxes? Our team of tax-planning experts can help!
The gift tax is similar to the estate tax, except instead of applying to transfers upon death, it applies to transfers made during life. Gifts are also taxed at 40% at the federal level. If someone gifts $1,000,000 to her child and the giver has already used up her lifetime exemption amount (discussed above), that gift will generate $400,000 of federal gift tax liability.
What is the Annual Gift Tax Exclusion?
In addition to the lifetime exemption amount, each individual has an annual gift tax exclusion amount. This is the amount someone can gift in any given year to a person without using up any lifetime exemption or having to report the gift on a gift tax return (Form 709). In 2025, the annual exclusion amount is $19,000.
Estate-Tax Planning Overview
The estate tax is pretty draconian. Fortunately, it can be minimized or completely avoided through estate-tax planning. Estate-tax planning is about arranging your affairs to minimize the amount of federal and state estate taxes your heirs will face and maximize how much you pass on to them. In practice, it means making lifetime gifts to irrevocable trusts that are designed to transfer assets to your loved ones as tax efficiently as possible. Valur can help you set up these trusts for free!
New York Estate Tax Exemption
The New York estate tax exemption, like the federal exemption, is a tax exemption that reduces the amount of estate taxes that must be paid. At the state level, the 2025 exemption amount is $7,160,000. In other words, an estate with net assets under that amount will owe no New York estate tax.
New York’s Estate Tax: How Much Is It?
New York’s estate tax rate is progressive, based on the estate’s value.
The table below provides an overview of the New York estate tax rates based on the size of the taxable estate and shows the minimum taxes paid and the marginal tax rate for each bracket, up to a maximum of 16%. In New York, the estate tax exemption amount is $7.16 million for 2025. This means that for any New York estate valued over $7.16 million, estate taxes will be due.
Here’s where things get weird. New York’s estate tax, unlike the federal estate tax, has a “cliff.” What that means is that if someone’s estate exceeds 105% of the estate tax exemption amount, their estate will be taxed on the value of their entire estate, including the amount under the exemption. And if someone’s estate is valued at between 100% and 105% of the exemption amount, they’ll be taxed on a portion of the entire value of their estate.
Taxable Estate
Minimum Taxes Paid
Marginal Rate
$0 – $500,000
$0
3.06%
$500,000 – $1,000,000
$15,300
5.0%
$1,000,000 – $1,500,000
$40,300
5.5%
$1,500,000 – $2,100,000
$67,800
6.5%
$2,100,000 – $2,600,000
$106,800
8.0%
$2,600,000 – $3,100,000
$146,800
8.8%
$3,100,000 – $3,600,000
$190,800
9.6%
$3,600,000 – $4,100,000
$238,800
10.4%
$4,100,000 – $5,100,000
$290,800
11.2%
$5,100,000 – $6,100,000
$402,800
12.0%
$6,100,000 – $7,100,000
$522,800
12.8%
$7,100,000 – $8,100,000
$650,800
13.6%
$8,100,000 – $9,100,000
$786,800
14.4%
$9,100,000 – $10,100,000
$930,800
15.2%
Over $10,100,000
$1,082,800
16.0%
New York Estate Tax Rates in 2025
New York Estate Tax Example
Let’s say your estate is $10 million. You’ll be under the federal estate tax exemption amount. However, you’ll be over the New York estate tax exemption amount. Therefore, your entire estate will be subject to New York estate tax. The total New York estate tax would be $1,067,600, leaving $8,932,400 for your heirs.
Who Pays Estate Tax in New York?
In New York, the deceased person’s estate pays the estate tax. The estate must file Form ET-706, the New York State Estate Tax Return, with the New York State Department of Taxation and Finance.
Strategies to Reduce New York Estate Tax
Different tax planning strategies can help you reduce your taxes in New York. Here are a few common strategies:
Intentionally Defective Grantor Trusts (IDGTs): This is a type of trust that is optimized for minimizing estate taxes. The donor can borrow from these trusts, lend to them, and swap assets with them without income tax consequences. This is a popular strategy for individuals who are either significantly over the lifetime exemption amount or expect to be somewhat over the lifetime exemption amount and live in a low-tax state.
Non-Grantor Trusts: This is a type of trust that is treated as a separate taxpayer for income tax purposes. In addition to being able to move assets out of the donor’s estate, it can save on state income tax and is commonly used for individuals looking to stack QSBS exemptions or who are close to the lifetime exemption amount and in a high-tax state.
Grantor Retained Annuity Trusts (GRATs): The donor contributes assets and receives an annuity in return. The annuity is typically only paid for two years. After the final annuity payment is paid to the donor, any remaining principal passes to the donor’s remainder beneficiaries, free of gift tax. This is an effective way of transferring assets to a donor’s family members, provided that the assets generate greater than around 5% annual returns. This strategy is commonly used in conjunction with the other strategies.
Irrevocable Life Insurance Trusts (ILITs): A type of trust designed to hold life insurance. When the insured (usually the donor) dies, the cash proceeds pass to the donor’s heirs free of estate tax. ILITs are attractive to anyone who expects to be over the lifetime exemption amount. In fact, their combined income and estate tax benefits make them, on paper, more powerful than any other type of irrevocable trust.
Spousal Lifetime Access Trust (SLATs): An irrevocable trust for the benefit of the donor’s spouse and heirs. SLATs are used to shift assets out of the donor’s estate while retaining indirect access to the assets as the grantor’s spouse can receive distributions from the SLAT. This is commonly used when individuals want the benefits of an IDGT but want their spouse to be able to receive distributions from the trust.
Charitable Lead Annuity Trusts (CLATs): This is a type of “split-interest trust” — that is, a trust for the benefit of both an individual and a charity. The charity receives an annuity for a set number of years. At the end of the term, if any principal remains, that principal passes to the donor’s heirs. This is commonly used when families are over the lifetime exemption and want to give to support both their heirs and charity.
You can also compare the quantitative returns and tax savings of these different strategies using our estate tax savings calculator and customize it to your own situation
Conclusion
The federal and New York estate tax can significantly reduce the assets a person’s family receives upon that person’s death. Fortunately, there are several strategies available to minimize the tax liability. You can read more here, use our Guided Planner tool to find helpful solutions, or schedule a time to talk with our expert team.
About Valur
We’ve built a platform to give everyone access to the tax and wealth-building tools typically reserved for wealthy individuals with a team of accountants and lawyers. We make it simple and seamless for our customers to take advantage of these hard-to-access tax-advantaged structures. With Valur, you can build your wealth more efficiently at less than half the cost of competitors.
From picking the best strategy to taking care of all the setup and ongoing overhead, we make things simple. The results are real: We have helped create more than $1.1 billion in additional wealth for our customers. If you would like to learn more, please feel free to explore our Learning Center. You can also see your potential tax savings with our online calculators or schedule a time to chat with us!
Mani is the founder and CEO of Valur. He brings deep financial and strategic expertise from his prior roles at McKinsey & Company and Goldman Sachs. Mani earned his degree from the University of Michigan and launched Valur in 2020 to transform how individuals and advisors approach tax planning.
