Stay Ahead of Estate Tax Changes in 2026

Don’t Forget About New York Estate Taxes

While we’re all watching the federal landscape, don’t lose sight of New York estate taxes. Unlike Florida, which has no state estate tax, New York imposes a separate state estate tax on estates exceeding $7.16 million per person. Even more concerning, New York has a “cliff” system. If your estate exceeds the exemption by more than 5 percent, the entire exemption is lost, and the estate is taxed from dollar one. If your taxable estate, including all assets is near or close to $7.16 million, it is time to review your estate plan.

Also, remember that unlike the federal estate tax code, New York does not offer portability between spouses. So, if the first spouse dies without planning, the second spouse cannot use the deceased spouse’s unused exemption. To address this, planners often recommend credit shelter trusts to preserve the exemption and reduce the family’s total estate tax burden.

Strategies to Reduce Your Estate Tax

In all reality, the exemption will most likely remain high given the current majority in both the House and Senate. Nevertheless, waiting until the law changes could mean missing your opportunity to make annual gifts. It is important to remember that any annual gift not made is lost. Currently, you can gift $19,000 per year to any number of individuals.

In addition, payments made directly to educational institutions for tuition or to medical providers for qualifying expenses are unlimited and do not count toward the annual exclusion, making them an effective tool for reducing your taxable estate while supporting loved ones.

Even for families who don’t consider themselves ultra-wealthy, rising property values, retirement accounts, and business interests can easily push an estate into taxable territory. Most people don’t realize that retirement funds and life insurance proceeds where the decedent is the owner or maintains certain “control” over the policies, are includable in the taxable estate.

Stay Prepared for 2026 and Beyond

No one knows exactly what tax policy will look like in 2026. Whether it’s updating your existing plan, transferring real estate into trust, or making gifts to children and grandchildren, having a strategy in place ensures you’re not caught off guard. Work with your trusts and estates attorney, accountant, and financial advisor to craft a plan that reflects your goals.