Most of my clients are surprised to learn that New York taxes estates far more aggressively than the federal government does. While the federal estate tax exemption sits at $15 million per person in 2026, New York's exemption is only $7,350,000. Worse, New York has what practitioners call "the cliff." If an estate exceeds that exemption by more than 5%, meaning it crosses roughly $7,717,500, the exemption disappears entirely and the full value of the estate becomes taxable, not just the amount above the threshold. I have seen families lose hundreds of thousands of dollars simply because an estate landed a few thousand dollars into the cliff zone.
Charitable giving is one of the most effective tools I recommend to clients whose estates are approaching this danger zone. When a portion of an estate passes to a qualified charity, that portion is deducted from the taxable estate before New York calculates what is owed. For an estate hovering just above the exemption amount, a well-structured charitable bequest can pull the estate back under the threshold entirely, avoiding the cliff altogether rather than merely reducing the tax owed.
One strategy I often discuss with clients is what is sometimes called a "Santa Clause" provision. This is a clause added to a will or trust directing that any amount of the estate exceeding the exemption threshold be gifted to a charity of the client's choosing. Rather than handing that excess to the state in taxes, the money supports a cause the family cares about. I recommend this option to clients who are charitably inclined and whose estates sit close enough to the cliff that a modest adjustment makes a real difference.
Charitable remainder trusts are another option worth considering, particularly for clients who want to retain income from an asset during their lifetime while still reducing the taxable estate. As we discussed in a prior article on revocable living trusts, incorporating trusts into an estate plan often accomplishes more than a will alone, and charitable trusts extend that same logic to tax planning. Under New York's Estates, Powers and Trusts Law, these structures are well established and, when drafted properly, hold up reliably in Surrogate's Court.
Estate tax planning is not something to address after a loved one has passed. That is why I advise clients to review their estate plan well before the cliff becomes a problem, not after.
If your loved one's estate is approaching New York's estate tax threshold and charitable giving strategies need to be considered, contact us today at (347) 766-2685 for a free phone consultation.
Contributed by Dan Rose, a local business writer specializing in estate tax planning services in New York City.
