Estate plans may address a variety of different issues depending on an individual’s circumstances. People may need to make arrangements for the protection of their dependent children and the distribution of their property.
Many people draft wills, and others may create trusts. Some even use both different types of instruments to establish a very robust and personalized estate plan. There may be special circumstances that influence the terms included in an estate plan. For example, testators putting together or updating their documents might need to plan carefully to protect their loved ones from estate taxes.
When are estate taxes an important consideration for testators to integrate into their testamentary documents?
When the estate is worth millions
Estate taxes only apply to relatively sizable estates. If a person dies with $100,000 in retirement savings, then estate taxes won’t affect the inheritances passed to their beneficiaries or heirs. However, as the value of the estate increases, so does the risk of estate taxes.
In fact, the amount of estate taxes that the estate has to cover may increase with the overall value of the estate as well. Testators in New York have to consider both state and federal estate tax regulations. In 2025, anyone who dies with $7.16 million or more in property could be subject to estate taxes. The tax rate ranges from 3.06% up to 16%, depending on the size of the estate.
The estate has to be substantially larger to be at risk of federal estate taxes. The threshold for federal estate taxes is currently $13.99 million. That being said, the progressive tax rate assessed by the Internal Revenue Service (IRS) ranges from 18% to 40% of the total estate value.
There are a variety of tactics that people can use to reduce or eliminate estate tax liability. They may make strategic gifts in their golden years. They may transfer property to trusts. They may take on co-owners so that their interest in a property passes directly to that co-owner rather than becoming part of their estate when they die.
Reviewing personal holdings and testamentary goals with a skilled legal team can help people craft estate plans that adequately address the risk of federal and New York state estate taxes. With an appropriate plan, people can optimize how much their loved ones inherit.