Most people assume estate tax happens to other families. In Westchester and Rockland that assumption is often wrong, and the reason is usually the house.
A couple in their early sixties with a home that has appreciated for thirty years, two retirement accounts, a brokerage account, and a pair of life insurance policies can sit north of $7 million without ever thinking of themselves as wealthy. They come in expecting to sign wills and powers of attorney. The arithmetic surprises them.
New York calls its exemption the basic exclusion amount. For 2026 it is $7,350,000. An estate at or below that figure generally owes no New York estate tax, and rates above it reach 16%.
The federal exemption is a separate number, and it is much higher: $15,000,000 per person. An estate can owe the IRS nothing and still owe Albany a substantial amount. Families who read the federal figure and conclude they are fine are reading the wrong one.
In most tax systems an exemption shelters the first dollars and you pay only on the amount above it. New York does not work that way.
Once an estate passes $7,717,500 in 2026, which is 105% of the exclusion, the exemption is gone entirely and the tax is figured on the whole estate from the first dollar.
An estate at the exclusion can owe nothing. An estate just past that second threshold can face a six-figure bill on the full amount. The difference in tax bears no relation to the few hundred thousand dollars separating the two. That is the part of the New York estate tax exemption most people have never heard, and it is why knowing roughly where you stand matters.
People underestimate their estate because they count what feels like wealth rather than what the state counts. The total generally includes:
Life insurance catches people most often, because it is counted at the death benefit rather than the cash value. A $2 million policy can move a family across the line on its own. Adding all of this up is part of any thorough estate planning review, and it is often the first time a couple sees the real number.
New York does not allow portability. Under federal rules a surviving spouse can carry over whatever exemption the first spouse did not use. New York does not permit that. Without planning, a couple can end up using one exemption where they might have used two. This is why a credit shelter trust still has a place in New York plans even though federal law has made it less necessary elsewhere.
New York has no gift tax, but gifts have a look back. The state does not tax lifetime gifts. However, gifts made in the three years before death are counted back into the estate. Giving assets away late in the hope of landing under the line may not accomplish what people expect, so timing matters as much as the gift.
If your household is anywhere near these figures, the first step is an accurate total rather than a strategy. Many families find they are closer to the line than they assumed, and it is one of the items worth reviewing before year end.
What to do about it, if anything, depends on your circumstances and your goals for your family. The exclusion also adjusts every year, so a plan drafted several years ago may no longer match where you stand.
Attorney David Parker works with families across Westchester and Rockland on this question. If you want to know where your estate sits relative to the New York estate tax exemption, we can walk through the numbers and tell you plainly whether it is something to think about. Schedule a consultation to learn more.
References: New York State Department of Taxation and Finance "Instructions for Form ET-706, New York State Estate Tax Return" and New York State Department of Taxation and Finance "Technical Memorandum: New York State Estate Tax Rates and the Basic Exclusion Amount"
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