New York Levies an Estate Tax
New York state levies an estate tax on estates that exceed a certain threshold. This amount is currently $5.25 million.
New York's estate tax rate is lower than the federal estate tax rate of forty percent (40%). New York's rate starts at 5% and increases to 16%. Even though the rate is lower, it is applied to the entire estate, if that estate exceeds the exclusion amount by 105%, not just on the portion that exceeds the exemption for that year.
This tax applies to estates that own property in New York state, so a resident of another state that inherits property located in New York will have to pay this tax if the estate exceeds the limit. Click here for a link to the New York Department of Taxation and Finance's summary of the estate tax requirements.
This state-specific estate tax is in addtion to the federal estate tax, and that tax also falls on the estate of the person who died, not on the people who inherit that property. There is an exemption of $10 million, which is indexed to inflation and is currently $11,580,000, and only people who die with an estate larger than that exemption will have to pay estate tax, which means that it is estimated that only the richest .14% of Americans will be subject to the estate tax at all, or only 2 out of every 1,000 people who die.
If someone dies in New York with less than the exemption amount (currently $5.25 million), their estate doesn't owe any federal estate tax. The heirs and beneficiaries inherit the property free of tax, and don't pay income tax on it, either, because inherited property is not ordinary income. The only exception to this are inherited retirement accounts, which are subject to income tax as the assets are withdrawn.