This year, estate planning practitioners have significant opportunities for estate tax savings for our high-net-worth clients. Time is critical though, and there are some traps for the unwary in selecting strategies to adopt. Here are three major issues in our high net worth planning engagements this year:

1. New York’s estate tax does not regulate lifetime gifting.  This is a very good feature of our NY Law.  The trap, though, is most gifts made within three years of the date of death are brought back into the taxable estate of the client.  

2. New York State’s estate tax exemption appears very high.  The exemption in 2025 is $7.16MM.  However, if the estate exceeds this amount by more than 5%, the entire estate is taxed, not just the excess—this is known as the tax cliff.  Additionally, the New York exemption is not portable to a surviving spouse’s estate, causing clients to lose any unused exemption. 

3. The federal estate tax exemption will be halved, from just under $14MM down to $7MM, at the end of 2025.  Clients can use the full $14MM now or lose it and be left with only the $7MM.  They cannot gift $7MM only in 2025 and claim another $7MM when the exemption is lowered in 2026.  Any gifting is applied first against the new exemption amount in 2026. So the value of gifting in 2025 for federal estate tax savings comes from gifting above 7MM but less than 14 million, unless the client is willing to pay a gift tax.