Estate tax is a tax imposed on the transfer of your assets at death. Unlike income tax (which you pay on money you earn) or sales tax (which you pay on purchases), estate tax is a one-time tax levied on the total value of your estate when you die.
For Long Island families, estate tax planning is particularly important because New York has one of the lowest estate tax thresholds in the nation at $7.35 million (2026). Many families in Smithtown, St. James, Syosset, Plainview, Woodbury, and throughout Suffolk and Nassau Counties have estates that exceed this threshold when you count their home, retirement accounts, life insurance, and other assets.
Key points:
At Fratello Law, we’ve helped Long Island families navigate complex estate tax planning since 2012. Our attorneys work with you and your financial advisors to develop strategies that minimize taxes and preserve wealth for your family.
📞 Is your estate subject to NY estate tax? Find out.
Call our Smithtown office at (631) 406-5580 or Syosset office at (516) 321-4010
ESTATE TAX
INHERITANCE TAX
New York is one of only 12 states (plus DC) that impose a state-level estate tax. Understanding New York’s estate tax is critical for Long Island families with significant assets.
Current threshold: $7.35 million
If your estate is valued at $6.94 million or less at your death, your estate owes no New York estate tax. However, if your estate exceeds $6.94 million, New York’s estate tax applies.
Important: The threshold is not indexed for inflation in New York, unlike the federal exemption. It has been frozen at $6.58 million from 2021-2023, then adjusted to $6.94 million for 2024-2025.
New York estate tax rates are graduated, ranging from:
➤ Lowest rate: 3.06%
➤ Highest rate: 16%
The rate depends on your estate’s total value, with higher-value estates paying higher rates.
New York has what’s called a “cliff” provision that creates a particularly harsh tax consequence:
If your estate exceeds 105% of the exemption amount ($7.7175 million for 2026), the ENTIRE estate becomes taxable—not just the amount over the threshold.
Example demonstrating the cliff:
Estate valued at $7.7 million (under 105% threshold):
➤ Amount over exemption: $350,000
➤ Approximate NY estate tax: ~$35,000-$55,000
Estate valued at $8.0 million (over 105% threshold):
➤ The cliff kicks in—entire $8.0 million is now taxable (not just the $650,000 over)
➤ Approximate NY estate tax: ~$650,000+
Adding just $300,000 to your estate ($7.7M to $8.0M) increased the tax by ~$600,000!
This cliff provision makes careful planning essential for estates between $7.35 million and $8.0 million.
Example: Syosset family’s estate
Total estate: $7.7 million
This estate:
However, if this estate grows by just $50,000 to $7.75 million, it exceeds the cliff threshold, making the entire $7.75 million taxable, with estate tax jumping to approximately $600,000+.
With proper planning, this tax could be significantly reduced or eliminated.
In addition to New York estate tax, there’s also a federal estate tax—though far fewer estates are subject to it due to the much higher exemption.
Current federal exemption: $15 million per person
For married couples with proper planning, the exemption can effectively be doubled to $30 million through “portability” (explained below).
The federal estate tax rate is a flat 40% on the amount exceeding the exemption.
Example: Estate worth $17 million
➤ Amount over exemption: $2 million
➤ Federal estate tax: $800,000 (40% of $2M)
The federal estate tax exemption is adjusted annually for inflation. The 2026 exemption of $15 million represents an increase from prior years due to inflation adjustments.
Important: The exemption amount is set by federal tax law and can change based on Congressional action. While the current exemption is $15 million, this could be modified by future legislation.
Planning consideration: If you’re concerned about potential future decreases in the federal exemption, consider making gifts or other transfers now to lock in the current high exemption amount.
Portability allows a surviving spouse to use any unused portion of their deceased spouse’s federal estate tax exemption.
How it works:
➤ Husband dies in 2026 with $3 million estate
➤ He used $3 million of his $15 million exemption
➤ His unused exemption is $12 million
➤ Wife’s exemption is $15 million
➤ Through portability, wife’s total exemption becomes $27 million ($15M + $12M unused)
Critical requirement: You must file a federal estate tax return (Form 706) after the first spouse’s death to elect portability, even if no tax is owed. Deadline is 9 months from date of death (plus extensions).
⚠️ Many families miss this deadline and lose portability forever. ⚠️
Life insurance death benefits you own count toward your taxable estate. For many families, this is what pushes them over the $7.35 million threshold.
Estate valued at $7.5 million including $1 million life insurance. By moving life insurance to ILIT:
Every dollar you gift during your lifetime removes that dollar (plus future growth) from your taxable estate.
Example: Family with 3 adult children and 6 grandchildren
Various types of irrevocable trusts can remove assets from your taxable estate.
Also called a “Bypass Trust” or “Family Trust,” this is one of the most important estate tax planning tools for married couples, especially in New York.
How it works:
Why it’s critical in New York:
Example:
Married couple with $12 million estate, all left to surviving spouse:
Additional benefits:
Best for: Married couples with combined estates over $7.35 million (NY threshold) or blended families wanting to protect children’s inheritance.
Transfer appreciating assets to trust, receive annuity payments back for term of years, remainder passes to beneficiaries tax-free.
Transfer your home to trust, retain right to live there for specified years, home then passes to beneficiaries.
One spouse creates irrevocable trust for benefit of other spouse.
Every dollar you gift during your lifetime removes that dollar (plus future growth) from your taxable estate.
Example: Family with 3 adult children and 6 grandchildren
If you own a business, strategic succession planning can minimize estate taxes while ensuring business continuity.
Unlike general practice attorneys, estate planning is our primary focus. We stay current on New York estate tax law changes and federal tax developments.
We’ve helped Long Island families navigate complex estate tax planning since 2012, including:
Smithtown Office: 26 Landing Avenue, Smithtown, NY 11787 | (631) 406-5580
Serving Smithtown, Hauppauge, Commack, Nesconset, Kings Park, St. James, Stony Brook, Lake Grove, Centereach, Huntington, and all of Suffolk County
Syosset Office: 485 Underhill Boulevard, Suite 102, Syosset, NY 11791 | (516) 321-4010
Serving Syosset, Woodbury, Jericho, Plainview, Hicksville, Old Westbury, Oyster Bay, Manhasset, Great Neck, Roslyn, Glen Cove, and all of Nassau County
We work with your existing CPAs, financial advisors, and other professionals to create comprehensive, coordinated plans.
We explain complex tax concepts in plain language and focus on practical solutions that work for your family.
For 2026, New York's estate tax threshold is $7.35 million. If your estate exceeds this amount at death, your estate may owe New York estate tax. The tax rate ranges from 3.06% to 16%.
New York also has a "cliff" provision: if your estate exceeds 105% of the exemption ($7.7175 million), the entire estate becomes taxable from dollar one, not just the amount over the threshold. This creates a particularly harsh tax consequence for estates slightly over the threshold.
No. New York does not have an inheritance tax. New York has an estate tax, which is paid by the estate before distribution to beneficiaries.
The difference: An inheritance tax would be paid by the people who receive inheritances (the beneficiaries). An estate tax is paid by the estate itself before assets are distributed. New York only has the latter—an estate tax on estates valued over $7.35 million.
Estate tax and income tax are completely different:
Income Tax:
Estate Tax:
Usually yes—if you own the policy. The death benefit of any life insurance policy you own at death is included in your taxable estate, even though it's paid directly to your beneficiaries and doesn't go through probate.
Exception: If someone else owns the policy (like an Irrevocable Life Insurance Trust), the death benefit is NOT included in your estate.
This is a common oversight. Many Long Island families have $1-2 million in life insurance, which is often what pushes their estate over the $7.35 million New York threshold. An ILIT can remove life insurance from your estate and eliminate or reduce estate tax.
Common strategies to reduce New York estate tax include:
The most effective strategy depends on your specific assets, family situation, age, and goals. Consultation with an estate planning attorney is essential.
The federal estate tax exemption for 2026 is $15 million per person. This amount is indexed annually for inflation.
For married couples using portability, the combined exemption can reach $30 million, meaning a couple can shield up to $30 million from federal estate tax.
Important: The exemption amount can change based on Congressional action. While the current exemption is historically high, future legislation could modify this amount. Consider implementing estate tax planning strategies now to take advantage of the current exemption levels.
For federal estate tax: Yes, through "portability." When the first spouse dies, any unused federal exemption can be transferred to the surviving spouse. Combined, a married couple can shield up to $30 million (2026) from federal estate tax.
CRITICAL: You must file a federal estate tax return (Form 706) after the first spouse's death to elect portability, even if no tax is owed. Deadline is 9 months (with extensions). Missing this deadline means losing portability forever.
For New York estate tax: No portability. New York does not have portability. This is why Credit Shelter Trusts (Bypass Trusts) remain important in New York even for estates under $15M—to ensure both spouses' NY exemptions are used.
Your retirement accounts (IRAs, 401(k)s, etc.) are included in your taxable estate. However:
This creates "double taxation"—estate tax on the value, plus income tax on distributions. Strategic planning (like Roth conversions or charitable giving using retirement accounts) can help minimize this double tax.
Estate tax planning costs vary significantly based on complexity:
Cost-benefit perspective: If your estate is $8 million (over NY threshold by $1.06M), you could owe ~$200,000+ in estate tax. Spending $10,000 on planning that reduces tax by $150,000 provides a 15x return on investment—plus your family receives more of your wealth.
We provide clear fee estimates after your initial consultation based on your specific situation.
Start estate tax planning:
Many strategies (like irrevocable trusts, GRATs, and gifting) work best when implemented years before death, allowing time for appreciation to occur outside your estate.
You still need planning. Here's why:
Assets left to a surviving spouse qualify for the unlimited marital deduction—no estate tax when you die, regardless of amount. However:
Solution: Credit Shelter Trust (Bypass Trust)
By using a Credit Shelter Trust, you can:
Example: $12M estate, no planning = ~$600,000 NY estate tax. With Credit Shelter Trust = $0 tax.
See the detailed Credit Shelter Trust explanation in the planning strategies section above.
Strategic estate tax planning can preserve hundreds of thousands—or millions—of dollars for your family.
Act now. The sooner you plan, the more you can save.
📞 Call (631) 406-5580 (Smithtown) or (516) 321-4010 (Syosset)
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