New proposal could significantly expand who pays estate taxes in New York

Life, death, and taxes

Death and taxes may be constants, but estate-tax rules depend on federal and state law. In New York, the state estate-tax exclusion is $7,350,000 in 2026, and Mayor Zohran Mamdani has proposed a much lower threshold.

Mamdani wants New York State lawmakers to cut the exclusion to $750,000 and raise the top estate-tax rate from 16% to 50%. The proposal is not current law, but it has intensified debate over estate planning and wealth transfer.

How estate taxes work

Estate taxes are levied on an estate before assets are distributed to heirs, but the exact rules vary by jurisdiction. In New York, estates above the state exclusion can owe estate tax, and certain taxable gifts made within 3 years of death must be added back to the estate.

Taxable estates can include cash, securities, real estate, business interests, insurance, trusts, annuities, and other property interests. Inheritance taxes, by contrast, are generally imposed on the person receiving property rather than on the estate itself.

States with estate taxes

Twelve states and Washington, D.C., impose estate taxes, and 5 states impose inheritance taxes. Maryland is the only state that imposes both an estate tax and an inheritance tax.

New York’s 2026 estate-tax exclusion is $7,350,000, while Oregon’s filing threshold remains $1 million. If Mamdani’s proposed $750,000 threshold were enacted, New York would have the lowest state estate-tax threshold in the country.

Why the proposal matters

Lowering the threshold to $750,000 would dramatically expand the number of estates subject to taxation. This could create new financial pressures for middle- and upper-middle-class families.

Supporters say it’s a way to raise revenue for social programs, while opponents argue it can hurt small businesses and farms that have more assets than cash to pay taxes.

Political views on estate taxes

Governor Kathy Hochul has generally resisted broad new tax hikes and has warned that higher taxes can drive top earners out of New York.

At the same time, she has acknowledged that New York depends heavily on high-income taxpayers to support public programs.

Groups such as the Tax Foundation argue that estate taxes can discourage investment and encourage out-migration. Supporters of higher taxes on wealth, meanwhile, argue that the revenue can help pay for public services and reduce inequality.

Planning ahead matters

Estate taxes don’t have to catch you off guard. Planning can reduce the financial burden on loved ones. Trusts, gifts, and charitable donations are common strategies families use to protect their wealth.

Consulting a financial advisor early helps ensure your estate plan reflects your goals, minimizes taxes, and keeps control of your assets during your lifetime.

Trusts can protect assets

Some trusts can reduce estate-tax exposure, but not every trust removes assets from a taxable estate.

Irrevocable strategies such as irrevocable life insurance trusts, qualified personal residence trusts, and generation-skipping trusts can help in the right circumstances, while revocable trusts generally do not remove assets from an estate for tax purposes.

In many cases, the tax benefit comes at the cost of reduced control over the assets. Choosing the right trust structure depends on the type of assets involved, your goals, and the applicable tax rules.

Gift your way forward

Lifetime gifting can reduce estate-tax exposure, but it does not automatically eliminate it. In 2026, the federal annual gift tax exclusion is $19,000 per recipient, and in New York, certain taxable gifts made within 3 years of death can be added back to the estate.

Charitable giving can also reduce a taxable estate when structured properly. A thoughtful gifting plan can help transfer wealth, support causes you value, and lower future tax exposure, but timing and state rules matter.

Education savings plans

529 plans let you save for a child’s or grandchild’s education tax-free. Contributions below the annual gift limit aren’t taxed and grow without penalty when used for qualified educational expenses.

Families can open multiple accounts for multiple children. It’s a smart way to pass along resources while avoiding estate taxes and supporting long-term goals.

Assets that matter

Estate taxes can apply to more than cash. Real estate, cars, investments, jewelry, and collectibles all count. Knowing what’s included helps you plan more effectively.

Families with high-value but illiquid assets may face challenges paying estate taxes. Careful planning ensures you don’t have to sell important items under pressure.

Wealth transfer trends

The Great Wealth Transfer is moving trillions between generations. Understanding estate taxes has never been more important to preserve family wealth.

Even small planning steps now, like setting up trusts or gifting, can have a big impact on how much your heirs receive. Knowledge is power when it comes to taxes.

Balancing fairness and strategy

Estate taxes spark strong opinions. Some see them as a way to fund public services, while others see them as unfair.

Smart planning helps families balance the need to pay taxes with the need to keep assets intact. Preparing early makes passing wealth easier and less stressful for everyone involved.

Why did Mamdani take a different approach during the NYC snowstorm? Discover what sets his response apart and why it’s drawing attention.

Take control of your legacy

Understanding estate taxes can help protect your family’s future. Planning early can help ensure your wealth goes where you intend and not toward avoidable tax exposure.

Could New York City really become the highest-paying city in the U.S.? Discover what’s driving this push.

What strategies are you considering to protect your legacy? Share your thoughts in the comments.

This slideshow was made with AI assistance and human editing.

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