Even though estates are taxed by the federal government when an estate is worth more than $5.25 million for individuals and $10.5 million for couples, New York State has additional taxes and considerations that must be taken into account when estate planning.
New York is unique in its treatment of estate taxes. If you are a resident of the state, the first $1,000,000 of your estate is exempt from taxes. After that, the state imposes a progressive estate tax, ranging from 5.6% all the way up to 16% for estates valued at more than $10,000,000. If you do not live in New York, you still may be required to pay taxes if you have more than $1,000,000 in tangible assets, such as real estate, within the state.
All property is exempt from federal estate taxes, as well as New York's estate tax, so long as you leave it to your surviving spouse. This is called a marital deduction, and it is the reason why most couples don’t owe any estate tax when the first spouse dies. As New York recognizes same-sex marriages, same-sex couples can use this marital deduction — though they likely will still have to pay federal taxes, as the federal government does not recognize same-sex marriages.
If you leave assets with a total estimated gross value of more than $1 million and you are a New York resident at your death, your estate's executor will need to file a New York estate tax return and a federal estate tax return with the state in a timely manner. Even if the estate does not actually owe tax due to the allowed deductions reducing the value of the taxable estate below $1 million, the estate tax return should still be filed. All taxes or payments are due within nine months after the death, although the estate's executor may file for an extension.
New York can make estate planning more complex as it is one of the few states to tax an estate in addition to the federal government.