Estate Tax Questions, Answered for New York Families

No. Estate tax is paid by your estate, not by your children out of their own pockets. Your executor files the return and pays any tax from estate assets before the rest is distributed.

The federal estate tax is a tax on the transfer of property at death. The person you name as executor adds up everything you owned, subtracts debts and allowed deductions, and figures out whether tax is due. If it is, the executor pays it from the estate within 9 months of death. Your children receive what is left. There is no separate federal tax that heirs pay simply for inheriting. In limited cases, a beneficiary who receives property before the tax is paid can be asked to cover it, up to the value of what they received. That is one reason executors usually settle taxes before distributing assets.

Planning ahead lets you decide which assets pay any tax, so the burden falls the way you intend.

For deaths in 2026, the federal exemption is $15,000,000 per person. Only the amount above that is taxed, at a top rate of 40 percent.

The IRS calls this the basic exclusion amount. It covers both what you give away during life (above the yearly gift limit) and what you leave at death. Congress set it at $15,000,000 for 2026, and it is scheduled to rise with inflation starting in 2027. The vast majority of New York families fall well below this level, so federal tax will not apply to them. New York has its own, much lower threshold, covered in the next section.

Illustration: Robert, a widower in Westchester, dies in 2026 with a $16,000,000 taxable estate and no prior large gifts. Only $1,000,000 is above the exemption. At 40 percent, his federal estate tax is about $400,000.

The exemption changes each year, so it is worth checking your plan when it does.

Yes, under federal law. This is called portability, and it only works if your spouse’s executor files a federal estate tax return (Form 706) on time and elects it.

Portability lets a surviving spouse add the deceased spouse’s unused federal exemption to their own. Most people who die leaving everything to a spouse use none of their exemption, because gifts to a US citizen spouse are not taxed. Without the election, that unused amount is lost. The catch is paperwork: the election must be made on a timely filed estate tax return, even if no tax is owed and the estate is well under the filing threshold.

Illustration: Maria dies in 2026 and leaves her $4,000,000 estate to her husband, David. Her executor files Form 706 and elects portability. David can later shelter up to his own exemption plus Maria’s unused $15,000,000.

New York note: New York does not allow portability. See “Can married couples in New York combine their exemptions?” below.

Small gifts do not. In 2026 you can give up to $19,000 to any number of people without touching your exemption. Gifts above that amount reduce your $15,000,000 lifetime exemption.

Federal law treats lifetime gifts and gifts at death as one system. Each year, a set amount per recipient is excluded entirely. For 2026 that amount is $19,000 per person. Anything you give one person above that in a year is reported to the IRS on a gift tax return (Form 709) and it is subtracted from the exemption you have left at death. Tax is owed only after your total lifetime taxable gifts pass the exemption. Gifts to a spouse who is a US citizen are not limited.

Illustration: In 2026, Linda gives each of her three grandchildren $19,000. Nothing is reported. She also gives her son $119,000. The $100,000 above the yearly limit is reported, and her remaining exemption drops by $100,000. She owes no gift tax.

A written gifting plan keeps these records clean for your executor.

For deaths in 2026, New York’s exemption is $7,350,000. It is less than half the federal amount, so many families owe New York tax but no federal tax.

New York calls this the basic exclusion amount. It is separate from the federal exemption and has its own rules. If a New York resident’s estate, plus certain recent gifts, is worth more than $7,350,000, the executor must file a New York estate tax return within 9 months of death. The amount goes up each year with inflation. In 2025 it was $7,160,000. Remember that a New York estate counts everything: your home, retirement accounts, life insurance you own, and your share of joint accounts.

Illustration: A retired couple in Brooklyn owns a $2,500,000 brownstone, $3,000,000 in retirement accounts and $2,000,000 in investments. Together they are near $7,500,000, which puts them in range of New York tax depending on how assets are titled and planned.

Knowing this number early gives you time to plan calmly.

The cliff means that if a New York taxable estate exceeds the exemption by more than 5 percent, the exemption disappears and the whole estate is taxed, not just the amount over the line.

New York gives estates a credit that wipes out tax up to the exemption. Between 100 and 105 percent of the exemption, that credit shrinks quickly. Above 105 percent, which is $7,717,500 in 2026, the credit is gone. At that point New York taxes the entire estate at rates from 3.06 percent up to 16 percent. This is very different from federal law, which only taxes the amount above the exemption.

Illustration: An estate of $7,350,000 owes no New York tax in 2026. An estate of $7,800,000 is above the cliff and owes roughly $746,000, because the full $7,800,000 is taxed.

Estates near the cliff often have simple options, such as charitable gifts, to stay below it.

No. New York does not allow portability. If the first spouse’s New York exemption is not used at death, it is lost for New York purposes.

Under federal law, a surviving spouse can pick up the deceased spouse’s unused exemption. New York chose not to follow that rule. Leaving everything outright to a spouse avoids New York tax at the first death, but the survivor then has only one New York exemption. Couples often address this with a credit shelter trust (also called a bypass trust), which holds up to the first spouse’s exemption so it is not taxed again at the second death.

Illustration: A couple in Queens has $10,000,000, all left outright to the surviving wife. When she dies in 2026, her single $7,350,000 exemption is not enough and her estate is above the cliff. New York tax would be about $1,070,000 [VERIFY]. With a credit shelter trust at the first death, much of that could have been avoided.

How your assets are titled and how your wills or trusts are written matters a great deal here.

Yes. New York adds back taxable gifts made within 3 years of death when it calculates the estate.

A gift is “taxable” here if it was above the federal yearly gift limit. New York adds that taxable part back into the estate of a resident who dies within 3 years of making it. Some gifts are excluded, such as gifts of real estate located outside New York and gifts made while the person was not a New York resident. Gifts made more than 3 years before death are not added back.

Illustration: In 2025, Helen, who lives in Manhattan, gives her daughter $1,019,000. The 2025 yearly limit was $19,000, so $1,000,000 is a taxable gift. Helen dies in 2026. New York adds that $1,000,000 back when deciding whether her estate is over the exemption or the cliff.

Gifting can still work well in New York; timing is what matters.

No. New York has an estate tax, which is charged to the estate of the person who died. It does not tax heirs for receiving an inheritance.

People often use “estate tax” and “inheritance tax” as if they mean the same thing. They do not. An estate tax is figured on the total estate and paid by the executor before assets are distributed. An inheritance tax is charged to each person who receives property, often at rates that depend on their relationship to the person who died. New York’s tax law imposes an estate tax only. Your children or other heirs do not file a New York return or pay New York tax simply because they inherited. If the person who died lived in or owned real estate in another state, ask about that state’s rules as well.

Not automatically. The unlimited marital deduction does not apply to a spouse who is not a US citizen, unless the assets pass into a special trust called a qualified domestic trust (QDOT).

Federal: Normally, anything left to a spouse passes free of federal estate tax. For a non-citizen spouse, federal law does not allow that deduction on its own. A QDOT restores it. It must have at least one US trustee, and principal paid out to the surviving spouse during life is generally subject to estate tax, as is what remains at the spouse’s death. Your own $15,000,000 exemption still applies, so many couples face no federal tax either way. During life, you can give a non-citizen spouse up to $194,000 a year (2026) without using your exemption.

New York: New York starts from the federal deductions, so a QDOT generally matters for New York too.

Illustration: Anna, a US citizen in Manhattan, is married to Kenji, a Japanese citizen. Her estate is $9,000,000. Without a QDOT, nothing passes under the marital deduction, which can trigger New York tax at her death.

Possibly both. The federal exemption for a non-US person who does not live here is effectively only $60,000 of US assets, and New York taxes non-residents’ New York real estate above its own exemption.

Federal: If you are neither a US citizen nor domiciled here, only your US assets are taxed, such as US real estate and US stocks. If they total more than $60,000, your executor must file a federal return (Form 706-NA). The tax credit for non-residents is $13,000, which is far smaller than the credit for citizens, and portability is not available. An estate tax treaty between the US and your home country may change these results.

New York: A non-resident’s estate must file a New York return if it includes New York real estate or tangible property and the estate is above the New York exemption ($7,350,000 in 2026).

Illustration: A resident of a country with no US estate tax treaty owns a $2,000,000 condo in Manhattan and nothing else in the US. Before any deductions, federal tax could be roughly $730,000.

How you hold US property (personally, through a company, or in a trust) can change the outcome, so this is worth planning before you buy or soon after.

Generally no. Estate tax and income tax are separate, and inheriting property is not income. Inherited property also usually gets a new tax value equal to its value at the date of death.

Estate tax is figured on what you own at death. Income tax is figured on income. Your heirs do not report an inheritance as income. When they later sell an inherited asset, such as a home or stock, their starting value for capital gains is usually its fair market value on the date of death, often called a “step-up in basis.” If they sell soon after, there is usually little or no gain to tax. Inherited traditional IRAs and 401(k)s are the main exception: withdrawals are generally taxed as income to the person who inherits.

Illustration: Your parents bought their Queens home for $150,000. It is worth $1,200,000 when the surviving parent dies. If you sell it for $1,200,000, there is usually little or no capital gains tax.

Sometimes, yes. A federal return is needed to claim portability for a surviving spouse, and a New York return is required whenever the estate is over the New York exemption, even if the tax works out to zero.

Federal: If the gross estate plus large lifetime gifts is under $15,000,000 (2026), no federal return is required. But if there is a surviving spouse, filing Form 706 is the only way to pass along the unused exemption.

New York: A resident’s estate must file if the estate plus includible gifts is over $7,350,000 (2026). New York also requires a copy of the federal Form 706 with its return, even when no federal return is otherwise required.

An executor who knows this early avoids missed deadlines and lost elections.