While every estate in the United States is subjected to Federal Estate Tax Liability, only thirteen (13) states in the entire nation have what is called a State Estate Tax, with New York being one of them.  Any NY estate lawyer will tell you, estate tax whether at the federal or state levels, is a tax on the proceeds of an individual’s estate after they pass away.   But before you work yourself into a panic you should also know the exorbitant exclusionary amounts of estate assets at both the Federal and NY State levels which can pass to heirs free of both NYS and Federal Estate Taxes.  Therefore, both the NYS and Federal estate taxes will apply to less than 1% of all estates.

At the Federal Level the Unified Credit, also known as the Federal Estate Tax Exemption for 2025 is $13,990,000.00 per individual and $27, 980,000.00 for married couples through something called portability.  Portability means that a surviving spouse automatically inherits their spouse’s unused exemption amount making it easier to transfer the entire exemption at the time of death.  The bad news for estates in this stratosphere is that if your estate is above the exempted $27,980,000.00 amount as a married couple by $1,000,000.00 or more, it will trigger Federal Estate Tax liability at the nauseating 40% tax rate on any and all estate assets above and beyond the exempted sums.  As such, if the surviving spouse of a married couple passed with a NY estate of $30 million, the NY estate would owe approximately $80,000.00 in estate tax liability at the Federal level.  Most NY estate lawyers will admit these are good problems but problems nonetheless.

As for the NYS Estate Tax , the exempted amounts of inheritance are more modest than at the Federal Level.  Moreover, unlike at the Federal Estate Level, NYS does not afford New York Estates the benefit of portability between spouses.  In New York the exempted amount of inheritance that can be passed tax free to heirs and beneficiaries is $7,160,000.00 per individual.  Distinctive from the Federal Estate Tax which only taxes any and all amounts above the allotted exemption, The New York State Estate Tax implements something called a fiscal cliff which effectively taxes the entire New York Estate at a 16% tax rate of the net estate proceeds exceeding $7,518,000.00, or 105% of the exempted amount for 2025.  For example in 2025, if you pass away with $7,160,000.00 in your NY estate, your NY estate owes $0 in NYS Estate Tax liability.  However, pass away with a probatable net estate of $7,520,000.00 in New York State and your NY estate will owe approximately $1,203,200.00 in estate tax liability. Hence the fiscal cliff.

As an experienced NY estate lawyer, one of the biggest challenges I encounter with the NY Estate Tax is our lack of portability.  This has been an issue with the NYS estate law for decades.  The question becomes, while NYS permits $7,160,000.00 to pass tax free to beneficiaries for each individual, how do you create portability so that a married couple could potentially pass up to $14,320,000.00 together. While NYS’s lower exemption amounts do not pose a problem in of itself, as most NY estates are still within the NYS limits, it’s the lack of portability between spouses that becomes problematic for any NY estate lawyer probating NY estates exceeding $7,518,000.00. 

The issue arises when Spouse A predeceases their husband or wife with only $2 million in their name, while their surviving spouse, Spouse B, passes with $14 million. How do beneficiaries take advantage of the full $14,320,000.00 estate tax exemption at the NYS Level without portability?  

The answer lies, as most experienced NY estate lawyers will tell you, in preparation.  If you invest in some NY estate tax prevention ahead of time, you can pass these and even amounts in excess of $15 million, free of the NY Estate Tax all together.  One strategy is to utilize Federal Gift Tax Exemptions.  By making gifts during your lifetime, you can gift up to the federal exemption levels of $27,980,000.00 for gifts made as a married couple.  This removes estate assets from your NY estate so that your estate does not exceed the NYS estate tax exemptions.  There is one caveat in that all gifts must be made more than (36) months prior to the grantor’s death as to avoid the NYS claw-back clause. 

Another NYS Estate Tax strategy most often utilized is the Credit Shelter Trust.  If your NY estate lawyer drafts your will with the proper Credit Shelter Trust language, your NY Will can preserve the NYS Estate Tax Exemption in an estate after the first Spouse passes.  This allows the second spouse, Spouse B as indicated in the example above, to leave their own exempted amount plus their spouse’s exempted amount for assets left in the Credit Shelter.  While not a perfect solution this is unfortunately the closest New Yorker’s can get to portability without placing all of their assets into complex irrevocable trusts which can detonate capital gains tax liability issues later on. 

By and large most New York Estates are well within the exempted New York State amounts permitted at both the State and Federal levels.  However with a little foresight and a good NY estate lawyer, estate planning strategies can fit almost any scenario. 

Estate of Philip Seymour Hoffman

I cannot think of a single actor more talented than Philip Seymour Hoffman.  Personally he was one of my favorite actors, appearing in films such as “Scent of a Woman” and “Charlie Wilson’s War”, for which Hoffman received an Oscar Nomination.  A New York City native, Hoffman attended NYU where he graduated from their Tisch School of Arts.   

Hoffman lived in NYC with his girlfriend of fourteen years whom he had a son Cooper and two daughters with.  Unfortunately the two separated in 2013 as Hoffman was fighting with a relapse in substance abuse at the time.  Soon after Hoffman’s separation, he was found dead of a drug overdose in his apartment only blocks away from his family’s residence.  If this tragedy was not bad enough, Hoffman had created a NY will before his death leaving his entire $35 million NY estate to his estranged girlfriend and mother of his children,  Mimi O’Donnell.  The problem being that no NY estate tax planning or considerations were made when drafting Hoffman’s will.  Obviously the talented actor loved his girlfriend and children, to shield his NY estate from both Federal and NYS Estate liability, testamentary trusts should have been created.  Additionally, had Hoffman married his longtime girlfriend, as a spouse she would have received the one time spousal exemption on any and all proceeds of the $35 million estate, shielding almost all of the Hoffman Estate from estate tax liability.  You read that correctly, any amount of inheritance left to a spouse receives the spousal exemption, exempting the entire amount from both Federal and State Estate Tax liability.  This does not make the estate tax liability disappear but it defers it until the surviving spouse passes, in this case Ms. O’Donnell.

In the end Hoffman’s $35 million NY estate incurred more than $12 million of Federal and NYS Estate Tax liability which could have easily been avoided with some assistance from an experienced NY estate lawyer. 

If you are thinking about preparing a NY will or that a loved one may have been taken advantage of by an opportunistic relative or friend it never hurts to ask the opinion of an experienced NY will contest lawyer.  Feel free to call the NYC estate lawyers at The Law Offices of Jason W. Stern & Associates for a free consultation at (718) 261-2444. Our NYC estate lawyers have more than 75 years of combined NY estate law experience drafting and probating the wills for families like yours in the counties of Queens, New York, Kings, Bronx, Westchester, Rockland, Nassau, Orange, and Dutchess.