You may wonder how to pass your wealth to your children without losing too much to taxes. New York’s estate tax can take a significant portion if your estate is near the exemption limit, but some strategies might help you preserve more for your family.
What is the New York estate tax threshold?
For 2025, the estate tax exemption is about $7.16 million. If your estate is below that, you likely will not owe state tax. New York has a steep “cliff” rule, though: if your estate exceeds 105% of the exemption, roughly $7.52 million, you could lose the full exemption. That could make your entire estate taxable from the first dollar, potentially resulting in a much higher tax burden than you might expect.
How can gifting help lower your estate tax exposure?
You might reduce your taxable estate by giving assets while you are alive. New York does not have a state gift tax, but the state may count gifts you make within three years of your death toward your estate.
Annual gifts up to $19,000 per recipient in 2025 are generally considered safe. You might also:
- Pay tuition directly to a school
- Contribute to a child’s education savings plan
- Cover medical expenses directly
These approaches allow you to support loved ones now while potentially lowering your future estate tax liability.
Can trusts help protect your assets?
Trusts can help you manage how your property passes to heirs and may reduce tax exposure. Some options you might consider include:
- Credit shelter trusts: Allow married couples to use both exemptions fully
- Irrevocable life insurance trusts: Keep insurance proceeds out of your taxable estate
- Qualified personal residence trusts: Let your home transfer at a lower taxable value
Each trust works differently, so understanding how each might fit your goals can help you make more informed decisions.
Could charitable giving make a difference?
If your estate is near the cliff, including a charitable clause in your will or trust could reduce taxable assets. Any amount above the exemption could go to charity, which might lower your tax burden while still supporting causes that matter to you.
Why review your estate plan regularly?
Exemption amounts and tax rules can change. New York adjusts the estate tax exemption annually for inflation, and the value of your assets can fluctuate. Reviewing your estate plan every few years or after major life events can help ensure it continues to support your goals effectively.
Protect your legacy
With careful planning, thoughtful gifting and the right trusts, you might reduce estate taxes and leave more for your loved ones. Periodically reviewing your estate tax strategy can help you preserve your wealth and create a lasting legacy while avoiding unexpected surprises.
