The NY estate tax exemption for 2024 is $6.94 million. If an estate is worth less than this amount, no estate tax is owed. However, New York has a tricky “cliff” for very wealthy estates. If an estate’s value is just a bit above the $6.94 million threshold, taxes are only applied to the amount over the limit. If the estate value is more than 105% of the threshold, then the entire estate is taxed.
Say your estate is worth $7.1 million, it’s above the threshold but not too far over. Because $7.1 million is less than 105% of $6.94 million (which is $7,287,000), you only pay estate tax on the amount that exceeds $6.94 million.
So, if your estate is valued at $7.1 million, the taxable amount is $160,000 (which is $7.1 million minus $6.94 million). You’d pay tax on that $160,000 portion.
However, if your estate were worth $7.5 million, that’s over $7,287,000, which means the entire estate is taxable. So in this case, you’d end up paying estate tax on the full $7.5 million, not just the amount over the threshold. This cliff can significantly increase the tax burden if your estate value exceeds the 105% mark.
Unlike the
federal estate tax, New York doesn’t allow spouses to share their estate tax exemption. Each spouse's estate has to meet the exemption limit on its own, and any unused exemption can’t be transferred to the surviving spouse. Because of this, it’s really important to plan carefully—using tools like trusts can help make the most of each spouse’s exemption and reduce your estate tax liability.
If an estate is worth more than the exemption limit, you must file Form ET-706 with the New York State Department of Taxation and Finance within nine months of the person’s death. You can ask for more time to file, but any unpaid taxes will start accruing interest from the original due date.