Receiving an inheritance in New York may raise immediate concerns about taxes. New York does not have an inheritance tax, but it does impose an estate tax on certain larger estates before assets are distributed. Understanding the difference can help families prepare for possible tax obligations and avoid surprises during estate administration.
What Is the Difference Between an Estate Tax and an Inheritance Tax?
An estate tax is charged against a deceased person’s estate. In most cases, the executor pays any tax due from estate funds before distributing the remaining property.
An inheritance tax is imposed on a beneficiary for receiving property. New York does not have this tax. A beneficiary therefore does not owe New York inheritance tax solely because property passes to them.
However, an inheritance can have other tax consequences. A beneficiary may owe income tax on withdrawals from an inherited traditional IRA. Selling inherited property may also produce a capital gain if its value increases after death.
When Does the New York Estate Tax Apply?
For a New York resident who dies in 2026, an estate tax return is generally required when the federal gross estate plus certain taxable gifts exceeds New York’s $7.35 million basic exclusion amount. For estate-tax purposes, the gross estate may include assets that pass under a will as well as assets transferred outside probate, such as jointly owned property, retirement accounts, life insurance proceeds, and certain trust assets.
New York may add back certain taxable gifts made during the three years before death. Qualifying transfers to a surviving spouse or charity may reduce the taxable estate. Because the calculation goes beyond probate assets, families should not rely on the will alone.
How Does New York’s Estate Tax Cliff Work?
New York’s estate tax contains a feature commonly called the “cliff.” When the taxable estate exceeds the basic exclusion amount, the available exclusion begins to phase out. Once the estate exceeds 105% of that amount, the exclusion is lost entirely.
For a death in 2026, 105% of the $7.35 million exclusion is $7,717,500. An estate above that figure may be taxed on its full taxable value, rather than only the amount above the exclusion. New York estate tax rates can reach 16%.
Updated asset values therefore matter. Growth in a Long Island home, retirement accounts, or a business can move an estate closer to the threshold.
Does the Federal Estate Tax Apply Too?
Federal estate tax is separate from New York estate tax. For deaths in 2026, the federal exclusion is $15 million per person, substantially higher than New York’s exclusion. An estate may therefore owe New York estate tax even when no federal estate tax is due.
The two systems also treat unused exclusions between spouses differently. Federal law allows a surviving spouse to use a deceased spouse’s unused federal exclusion when a timely estate tax return is filed and the portability election is made. New York does not offer comparable portability for its estate tax exclusion. Married couples should account for that difference when structuring their estate plans.
When Must a New York Estate Tax Return Be Filed?
The executor generally must file Form ET-706 and pay the tax within nine months after death. A filing extension may be available, but interest can still apply to tax paid late. Acting early allows time to identify assets, obtain appraisals, and reserve funds.
Review Your Plan Before Tax Exposure Grows
An estate does not need to exceed the current exclusion for tax planning to be worthwhile. Asset values and exclusion amounts can change, and decisions involving lifetime gifts, trusts, beneficiary designations, or life insurance should fit your broader goals.
Hedlind Law, PLLC helps individuals and families in Suffolk County understand how New York estate tax may affect their plans. We also assist executors with probate and estate administration obligations after a death. Contact us for a free consultation today to review your assets, identify possible tax concerns, and decide what steps make sense for your family.