NYC’s Mamdani urges state to slash estate tax threshold from $7.3M to $750K. 3 ways you can avoid paying estate tax

Because estate taxes are set at the state level, the mayor cannot change the law himself. Instead, his office circulated the proposal to New York state lawmakers during budget negotiations as one possible way to raise revenue, as the city faces a $12.2 billion budget shortfall through 2027 (2). It’s unlikely to get to a vote anytime soon, however, as the state reportedly didn’t include it in any recently approved budget plans (1).

It also leads to questions about what exactly an estate tax covers, which states impose them and how proper estate planning can minimize the blow.

How state estate taxes work

Estate taxes are paid at death on the portion of the overall value of one’s estate that exceeds the set threshold in that state. For example, if your state has a $5 million threshold, and your estate at death is valued at $6 million, the estate tax would apply to the extra $1 million over the threshold. If your estate is valued below the threshold, you don’t pay the tax.

Estate taxes can apply to everything from property or real estate to jewelry, investments and retirement accounts, vehicles and even furniture, and differ from inheritance taxes in that the latter is paid by the benefactor based on the value of what they received from the estate (3).

Currently, only 12 states and the District of Columbia impose estate taxes to accompany the federal estate tax, which sits at $15 million for 2026. Maryland, meanwhile, holds the dubious distinction of being the only state that levies both estate and inheritance taxes (3).

Oregon’s threshold is the lowest, at $1 million, followed by Rhode Island ($1.8 million) and Massachusetts ($2 million). Connecticut maintains the highest threshold, matching the federal $15 million. New York’s $7.3 million is midway on the list, but would be the lowest in the nation if Mamdani’s proposal were accepted.

Multiple studies in recent years, including one from the Center on Budget and Policy Priorities, show high taxes aren’t a primary motivator driving people from the Empire State to lower or no-tax states. Still, lowering the estate tax threshold to $750,000 exponentially widens the net of those impacted — a move that might set the “empire state of mind” to one of financial anxiety (4).

Governor Kathy Hochul said in a recent interview with Politico that she wants to make sure that New York isn’t “taxing for the sake of taxing,” adding that “I need people who are high net worth to support the generous social programs that we want to have in our state” while noting competition from states with lower tax burdens (5).

Opponents of estate taxes, like the non-partisan Tax Foundation, argue that they “impose punitive tax burdens on generational transfers of wealth, which can hurt family farms and businesses” — especially when those affected hold more assets than cash to pay the taxes (3).

How to avoid estate taxes without moving to a new state

As New York shows, the quirks of estate taxes can vary from state to state. And with the ongoing Great Wealth Transfer moving $124 trillion between generations, it’s more important than ever to be aware of how you can (legally) soften the blow of state-level estate taxes (6).

From trusts to gifts, there are various ways to keep the taxman at bay when it comes to your estate. Each option comes with its pros and cons, so always consult a financial advisor first.

Trust the process: Experts often advise considering a variety of different trusts, depending on your financial plan. That’s because once you move assets into a trust, they’re no longer considered a part of your taxable estate. There are numerous options, from an irrevocable life insurance trust (ILIT) to irrevocable trusts, residence trusts, dynasty trusts, generation-skipping trusts (GST) and many others. A common theme among them is their irrevocable nature, but what you lose in control over the assets should be made up for by what your beneficiaries gain.