By Roman Aminov, Esq. — Law Offices of Roman Aminov
Most people who ask me about estate tax have heard a number somewhere in the region of fifteen million dollars, and they conclude the subject has nothing to do with them. The number they heard is the federal one. New York has its own, it is a great deal lower, and it is built so that going over it by a small margin costs far more than the margin itself.
This article explains the New York estate tax cliff: what it is, who falls off it, and what can be done about it. It matters here more than almost anywhere else in the state, because in Brooklyn the thing that pushes a family over the line is usually a house somebody bought decades ago and never thought of as a taxable asset.
For deaths occurring in 2026, the federal estate and gift tax exclusion is $15,000,000 per person. New York's basic exclusion amount for the same year is $7,350,000. The figure is published by the Department of Taxation and Finance and it rises each year with inflation; it was $7,160,000 in 2025 and $6,940,000 in 2024.
So there is a wide band — roughly seven and a half million dollars of it — in which an estate owes New York estate tax and owes nothing at all to the federal government. A great many Brooklyn estates sit inside that band without anyone having noticed.
The New York estate tax return, Form ET-706, is due nine months after the date of death. A return is required whenever the federal gross estate plus any includible taxable gifts exceeds the basic exclusion amount, which means the duty to file arrives before the question of whether anything is owed is settled.
In most tax systems, going over a threshold means the excess is taxed. New York does not work that way at the top of its estate tax.
Up to the basic exclusion amount, a credit wipes out the tax entirely. Between the exclusion and 105 percent of it — in 2026, between $7,350,000 and $7,717,500 — that credit is withdrawn on a sliding scale, and it is withdrawn fast. The state's own worksheet does it like this: take the amount by which the estate exceeds the exclusion, divide it by five percent of the exclusion, subtract the result from one, multiply the exclusion by what is left, and look that figure up in the tax table. That is your credit.
Once the estate passes 105 percent of the exclusion, the instructions are shorter. The credit is zero. The entire estate is taxed from the first dollar, at graduated rates reaching 16 percent.
Nothing about that is an accident or a drafting error. It is the design.
Here is what the design does in practice. Assume a single person who dies in 2026, a New York resident, with no deductible debts and no charitable gifts. Only the size of the estate changes.
| New York taxable estate | New York estate tax | What the family receives |
|---|---|---|
| $7,350,000 | $0 | $7,350,000 |
| $7,500,000 | $386,400 | $7,113,600 |
| $7,717,500 | $734,780 | $6,982,720 |
| $7,800,000 | $746,000 | $7,054,000 |
Read the second row first. That estate is $150,000 over the exclusion, and it pays $386,400 in tax. The effective rate on that last $150,000 is about 258 percent.
Then read the third. At exactly 105 percent of the exclusion the credit is gone, the whole $7,717,500 is taxed, and the bill is $734,780. The family receives $6,982,720 — which is $367,280 less than the family in the first row, whose estate was $367,500 smaller. The larger estate leaves the children materially poorer. That is what the word cliff is doing in the name.
The fourth row is the one I see. Consider a widowed Brooklyn homeowner:
That is $7,800,000, and the New York estate tax on it is $746,000. She was not wealthy in any sense she would have recognised. She was a schoolteacher who bought a house in Brooklyn in 1991 and kept it.
Note what the insurance did. A policy the decedent owns is part of her taxable estate, death benefit and all. That million dollars — bought precisely so the family would have something — is most of what carried this estate over the line, and it brought $746,000 of tax with it.
An estate that is going to be over the cliff can be brought back under it by a bequest to charity, because charitable bequests are deducted before the taxable estate is computed. Practitioners sometimes call this a cliff clause or a Santa Claus clause, and it is written into the will in advance so nobody has to improvise after a death.
Take the $7,800,000 estate above. Leave $450,000 to charity and the taxable estate is $7,350,000 — exactly at the exclusion. The tax falls from $746,000 to nothing.
Run the two outcomes side by side. Without the bequest, the family receives $7,054,000 and Albany receives $746,000. With it, the family receives $7,350,000 and a charity receives $450,000. The family is $296,000 better off for having given away $450,000, and the money went somewhere the family chose.
Drafted properly, the clause is written as a formula rather than a fixed figure, so that it gives away only as much as is needed to reach the exclusion amount in whatever year the death happens to occur. A fixed dollar bequest written in 2026 will be the wrong number by 2034.
Covered above, and it is the most common surprise in this area. If the decedent owned the policy or held any incident of ownership in it, the proceeds are in the estate. The usual answer is for the policy to be owned by an irrevocable life insurance trust instead, set up and funded well in advance — not something that can be arranged once someone is ill.
Transfers to a surviving spouse qualify for the marital deduction, so there is no tax at the first death. The trap is what comes next. New York does not allow portability. The federal system lets a surviving spouse carry over the unused exclusion of the first to die; New York does not. If everything passes outright to the spouse, the first spouse's $7,350,000 of exclusion is simply gone, and the whole combined estate is measured against one exclusion at the second death.
A couple with $11,000,000 between them who leave everything to each other will very likely face a cliff problem on the second death that credit shelter trust planning would have avoided entirely. This is the single most expensive omission in New York estate planning, and it costs nothing to avoid while both spouses are alive.
Giving assets away shortly before death does not solve a cliff problem. Under Tax Law § 954(a)(3), taxable gifts made within three years of death are added back to the New York gross estate. That provision has been extended to estates of decedents dying before 1 January 2032, and a 2025 amendment recharacterised the additional tax those add-backs produce as an obligation of the estate.
Lifetime gifting is a legitimate strategy. It is a strategy that has to be started while there is time for it to work.
A will written in 2012 was written against 2012 Brooklyn property values. The house has since done what Brooklyn houses have done, and a plan that was comfortably clear of the threshold when it was signed may now be over it. Any plan involving New York real estate needs looking at every few years, for no reason other than that the asset keeps moving.
The family looks at the federal figure, concludes the estate is nowhere near it, and does not file. The return was due nine months after the death, interest runs, and the first anyone hears of it is later and worse. The filing obligation is tied to the New York exclusion, not the federal one.
Estate tax is a separate question from how the estate is actually administered, and the two get conflated constantly. Whether a will exists determines who is in charge and who inherits; it does not change the tax. An estate with a will goes through the probate process in Brooklyn, and an estate without one goes through administration instead, where the shares are fixed by statute rather than by the family. Either way, if the estate is over $7,350,000, the ET-706 is due in nine months.
It is also separate from Medicaid planning, which works on different timelines and often pulls in the opposite direction. A trust built to protect assets from the cost of care is not necessarily a trust that helps with estate tax, and vice versa. Which problem a particular family actually has is worth settling before anybody drafts anything.
No. New York has an estate tax, paid by the estate before anything is distributed. There is no separate tax on the person who inherits, and beneficiaries do not report an inheritance as income.
Yes, at its fair market value on the date of death, with no deduction for sentiment or for the fact that somebody still lives in it. A mortgage reduces the figure; nothing else does. This is why Brooklyn real estate drives so many of these cases.
Not at the first death, because of the marital deduction. The cost appears at the second death, when the first spouse's exclusion is no longer available because New York has no portability.
You can, and there are three reasons to think hard first: the three-year add-back if the timing is wrong, the loss of the step-up in cost basis that would have applied at death, and the effect on Medicaid eligibility if care is needed within the look-back period. A lifetime transfer solves one problem and frequently creates two.
Both the Form ET-706 and the payment. An extension of time to file can be requested, but it is not an extension of time to pay, and interest runs on what is unpaid from the original date.
If you own a house in Brooklyn and anything else of substance — a second property, a business, retirement accounts, a life insurance policy in your own name — add them up at today's values rather than what you paid. If the total is anywhere near seven million dollars, the cliff is a live question for your family, and it is one of the few problems in this area that is both expensive and entirely avoidable with a clause in a document.
Our Brooklyn estate planning and probate practice looks at this calculation as a matter of routine, and the answer is usually clear in a single meeting.
Speak with a Brooklyn estate attorney. The consultation is free, and you will speak with an attorney. Call (347) 766-2685.
Law Offices of Roman Aminov
1600 Avenue M, 2nd Floor, Brooklyn, NY 11230
(347) 766-2685
This article is general information about New York law and tax rules and is not legal or tax advice. The exclusion amount changes annually and the figures here are for deaths occurring in 2026. Every estate turns on its own facts. Prior results do not guarantee a similar outcome.
