Do I Need to Plan for New York Estate Taxes?
One of the more commonly misunderstood aspects of New York estate planning law is the estate tax, or as it is sometimes called in the media the “death tax.” The reality is that most Brooklyn residents will never need to worry about the possibility of their estate owing such taxes. But it is still important to understand what estate taxes are and how they work so you can make informed decisions about your own estate planning needs.
What Is an Estate Tax?
Quite simply, an estate tax is a tax on your right to transfer property at your death. Both the federal government and New York State assess estate taxes against estates valued over a certain “exempt” amount.
What Is Considered a Taxable Estate?
The estate tax takes into account a person’s entire taxable estate. This is essentially any property the decedent owns or has certain interests in on the date of their death. It is important to note that many assets may be included in a taxable estate but not a probate estate. For example, say you establish a revocable trust to purchase and own real estate in New York. Assets in a revocable trust are not part of your probate estate. But they would be counted towards your taxable estate.
How Much Property Can My Estate Exempt?
Both the federal and New York estate tax exemptions are adjusted annually. The applicable exemption depends on when the decedent dies. For estates of persons who die in 2026, the federal estate tax exemption is $15 million, while the New York State exemption is $7,350,000. This means that any New York taxable estate created in 2026 with less than $7,350,000 in assets will owe neither federal nor estate taxes.
Does Marriage Affect My Estate Tax Exemption?
Both the federal and New York State estate taxes provide for a “unified credit.” What this means is that if you are married, any unused portion of your estate tax exemption can be passed on to your spouse. This effectively doubles the exemption. For example, for a married person passing away in 2026, the unified credit would allow their surviving spouse to claim a $30 million federal estate tax exemption when they die.
How Much Is the Actual Estate Tax Rate?
Both the federal and New York State estate taxes use a progressive marginal rate scale. The federal estate tax rate ranges from 18 percent to 40 percent. The New York estate tax has marginal rates of between 3.06 percent and 16 percent.
Do My Heirs Need to Pay Taxes on any Inheritance I Leave Them?
Neither the federal government nor New York State impose any form of inheritance tax, although a handful of other states do have such taxes. Keep in mind, estate taxes are paid by the estate itself, not the beneficiaries.
Contact a Brooklyn Estate Planning Lawyer
Even if you do not own enough assets to worry about potential estate tax liability, you can still benefit from having a dedicated estate plan. Our Brooklyn estate planning lawyer is here to help. Contact Yeung & Associates, PLLC, today at 718-889-7568 to schedule a consultation.