NY State Estate Planning

Background

New York’s estate tax rules catch many families off guard. Unlike the federal exemption, over $13 million per person, the New York State exemption is roughly $7 million in 2025, and it comes with a harsh “cliff.” Once your taxable estate exceeds 105% of the exemption (around $7.35 million), you lose the exemption entirely. That means an estate just slightly above the limit could owe tax on every dollar.

The top rate? Up to 16%.

Meet the Millers

John and Susan Miller, longtime New York residents, built a comfortable life. Between their home, retirement accounts, and investments, their combined estate totaled about $10 million. They assumed, like many people, that since their estate wasn’t “huge,” taxes wouldn’t be a major issue.

When John passed away unexpectedly, Susan learned that because their estate exceeded the NY exemption by just a few million dollars, the entire $10 million could be subject to state estate tax, roughly $1.67 million owed to New York State.

Scenario 1: No Planning

If the Millers had done nothing, their estate would have faced:

• Estate value: $10,000,000
• NY exemption: $7,000,000
• Because it’s over the 105% cliff ($7.35M), the entire amount becomes taxable.
• Approximate NY estate tax bill: $1.67 million

Result:
Susan and the children would have inherited about $8.33 million after taxes, a painful loss given how close they were to the exemption threshold.

Scenario 2: With Proper Estate Planning

Fortunately, before John’s passing, their advisor had helped them implement a Credit Shelter Trust (also called a Bypass or Family Trust).

They structured their assets so that upon John’s death, $7 million transferred into the trust, using his full NY exemption, and the remaining $3 million passed through other strategies, including lifetime gifting and a small charitable bequest.

Result:
Because the taxable estate was kept below the exemption limit, the Millers completely avoided NY estate tax.

Their heirs received the full $10 million, preserving an additional $1.67 million in family wealth.

Key Takeaways

• New York’s “cliff” means even slightly exceeding the exemption can trigger a full estate tax bill.
• With proactive planning, like using Credit Shelter Trusts, lifetime gifting, and charitable strategies, families can legally avoid unnecessary taxes.
• Anyone with an estate near or above $7 million should seek professional guidance to safeguard their legacy

If your assets are approaching the NY exemption threshold, now is the time to act. A few smart steps today could mean millions saved for your loved ones tomorrow.  Call us to schedule a meeting with us to discuss your situation in more detail and the strategies to implement.

Disclosures: 
This case study is provided for illustrative purposes only to provide an example of the firm’s process and methodology. The results portrayed in this case study are not representative of all client situations or experiences. An individual’s experience may vary based on his or her individual circumstances and there can be no assurance that the firm will be able to achieve similar results in comparable situations. No portion of this case study is to be interpreted as a testimonial or endorsement of the firm’s investment advisory services. The information contained herein should not be construed as personalized investment advice.

No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. 

All investments include a risk of loss that clients should be prepared to bear. The principal risks of The Pitti Group strategies are disclosed in the publicly available Form ADV Part 2A.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

This information is general in nature and should not be considered tax advice.  Investors should consult with a qualified tax consultant as to their particular situation.

The Pitti Group Wealth Management, LLC (“The Pitti Group”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where The Pitti Group and its representatives are properly licensed or exempt from licensure.