Smart Gifting Strategies to Reduce New York Estate Tax

Many New York City families ask the same question: can giving assets away during life lower the estate tax bill later? The short answer is often yes, but the details matter a great deal in New York. This Q&A covers the gifting questions we hear most from clients in Manhattan and the surrounding boroughs.

Does New York have a gift tax?

No. Unlike the federal system, New York does not impose a separate gift tax. That is good news for New York City families, because it means lifetime gifts can shrink your taxable estate without triggering a state gift tax. This is one of the most useful planning facts for anyone whose estate is near the New York exclusion of $7,350,000 for 2026.

Is there a catch to gifting in New York?

Yes, and it is the one many people miss. New York adds back into your taxable estate any gifts you made within three years before death, if those gifts were made while you were a New York resident. So deathbed gifting will not work. The three-year clock rewards planning ahead. Gifts made and survived by three years generally stay out of the New York taxable estate.

How does gifting interact with the estate tax cliff?

Because New York has a cliff at $7,717,500 for 2026, where an estate that exceeds the exclusion by more than five percent loses the exclusion entirely, gifting can be especially powerful for New York City residents near that line. Moving an estate from just above the cliff to comfortably below the exclusion can save a disproportionate amount of tax. For families on the edge, even modest, well-timed gifts can make a meaningful difference.

What about the federal annual exclusion?

For federal purposes, you can give a certain amount per recipient each year without using your federal lifetime exemption or filing a gift tax return. Because New York has no gift tax, these annual gifts also reduce your New York taxable estate when made more than three years before death. New York City families often use annual gifts to children and grandchildren as a steady, low-friction way to bring an estate under the threshold over time.

Are there smarter gifts than simply writing checks?

Often, yes. Paying tuition or medical bills directly to the institution or provider does not count as a taxable gift at all under federal rules, which can be attractive for New York City families supporting children in college or relatives with health needs. Gifting appreciating assets, such as a share of a family business or investment property, removes future growth from your estate. For larger estates, irrevocable trusts can hold gifted assets while providing control and protection.

Will gifting hurt my heirs’ tax basis?

This is an important trade-off. Assets you keep until death generally receive a stepped-up cost basis, which can reduce capital gains tax for your heirs. Gifted assets usually carry over your original basis. So for highly appreciated property, the income tax cost of gifting may outweigh the estate tax savings. The right balance depends on the asset and your overall estate, which is why gifting should be coordinated with the rest of your plan.

A note before you act

Gifting decisions are hard to reverse and interact with both New York estate tax and federal income tax rules. Before making substantial gifts, consult a licensed New York attorney who can model the three-year rule, the cliff, and basis consequences for your specific situation.