Reminder – New York Estate Tax Update for 2025
Effective January 1, 2025, the New York estate tax exclusion increased from $6.94 million to $7.16 million. Estates valued under $7.16 million will not owe New York estate tax, while estates valued over $7.16 million will be subject to New York estate tax at rates that range from 3.06% to 16%, depending on the value of the estate.
If your estate falls within the $7–$10 million range, now is the time to review your wills or revocable trusts to ensure you avoid the New York estate tax cliff by including a charitable savings clause.
Understanding New York’s Estate Tax “Cliff”
Unlike the federal estate tax, New York’s estate tax system includes a “cliff”—meaning estates that exceed the exclusion amount by just a small amount can be taxed on the entire value of the estate, not just the excess. Here’s how it works:
- Estates valued at or below $7,160,000 (the 2025 exclusion amount) owe no New York estate tax.
- Estates valued greater than $7,160,000 but less than $7,518,000, pay estate tax only on the portion exceeding the exemption.
- Estates valued over $7,518,000 “fall off the cliff” and are taxed on the entire estate value—not just the amount exceeding the exemption.
Avoiding the Cliff: The Charitable Savings Clause
One way to mitigate the cliff’s impact is to include a charitable savings clause in your estate plan. If you are single, the charitable savings clause will apply at the time of your death. If you are married, the charitable savings clause will apply at the time of the surviving spouse’s death.
Sometimes called the “Santa Clause”, the charitable savings clause ensures that, if necessary, a bequest to charity will be made to bring the taxable estate down to the exclusion threshold—thereby eliminating New York estate tax liability. For example:
- If an estate is valued at $7,518,000, it would owe approximately $707,648 of New York estate tax.
- However, by including a charitable bequest of $358,000 (the difference between the taxable estate and the exclusion amount), the estate avoids the tax entirely. Instead of owing $707,648 of New York estate tax, the decedent has made a meaningful charitable bequest of $358,001 and has left an additional $349,647 to the decedent’s beneficiaries.
Next Steps
With the new exclusion having taken effect on January 1, this is an ideal time to review your estate plan. If your estate is near the $7.16 million threshold, we recommend discussing charitable planning strategies, including the addition of a charitable savings clause, to ensure your wealth is preserved for your heirs and charitable causes rather than being spent on estate tax.
Contact:
Daniel Axman
Tax, Estates & Trusts Partner
daxman@golenbock.com
(212) 907-7379
Golenbock Eiseman Assor Bell & Peskoe LLP
Golenbock Eiseman Assor Bell & Peskoe LLP is a Manhattan-based business law firm with a broad-based practice that offers corporate, complex litigation, labor & employment, real estate, reorganization, intellectual property, tax, and trust & estate expertise. The firm provides high value, sophisticated counsel and representation for its domestic and international clients while maintaining a hands-on, personalized approach to all matters.
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