Most families who own a Brooklyn building do not think of themselves as having an estate tax problem.

New York has a feature that makes that assumption dangerous, and it is worth understanding before any other planning question.

The cliff

New York's estate tax exemption for 2026 is $7,350,000.

Here is what makes it different from the federal system. New York does not simply tax the amount above the exemption. If the estate exceeds 105% of the exemption — $7,717,500 in 2026 — the exemption is lost entirely, and the whole estate is taxed from the first dollar, at graduated rates running up to 16%.

There is no phase-in and no partial relief. An estate just under the line pays nothing. An estate a modest amount over it pays tax on everything.

Confirm the current exemption, threshold and rates with an estate attorney or tax advisor. These figures change annually, and this states the 2026 position.

Why this reaches ordinary Brooklyn families

Take a family home, one or two Brooklyn buildings, retirement accounts and life insurance, and a household that never considered itself wealthy can find itself near $7.35 million.

Property appreciation does the work quietly. An estate comfortably under the line ten years ago may not be now. Nobody sends a notice when it crosses, and the crossing is discovered by whoever administers the estate — at which point the planning window has closed.

This is the single most common reason a New York estate tax bill surprises a family: not that anyone got rich, but that Brooklyn real estate appreciated and nobody re-checked the arithmetic.

Federal and New York are separate

Worth stating plainly because owners conflate them.

The federal and New York estate taxes are different systems with different thresholds and different rules, and the federal exemption has generally been far higher. It is entirely possible to owe nothing federally and a substantial amount to New York.

Do not reason from the federal position to the state one. Many owners have been reassured by a federal figure and drawn exactly the wrong conclusion.

The step-up in basis

Running in the other direction is one of the most consequential features of holding appreciated property until death.

When property passes at death, heirs generally take a basis equal to fair market value at that point, rather than the deceased owner's original cost. That can wipe out a large deferred capital gain — and the accumulated depreciation recapture that would have been owed on a lifetime sale.

For an owner who has held a Brooklyn building for decades, or who has accelerated depreciation through a cost segregation study, that is a very large number. It is also the reason the "just sell it and split the proceeds" instinct can be considerably more expensive than it looks.

Which is why gifting during life needs care

The obvious response to an estate tax problem — give the building to the children now — has a catch.

A lifetime gift generally carries over the donor's basis rather than stepping it up. So gifting appreciated property can hand the recipient a large embedded gain that would have disappeared had the property passed at death.

The estate tax and income tax consequences pull in opposite directions, and which one dominates depends on the specific numbers, the family, and the timeline. There is no general rule that resolves it, which is exactly why this is an estate attorney's question rather than an internet one.

Transfer on death deeds are a transfer tool, not a tax tool

New York now permits transfer on death deeds, and their simplicity is appealing.

They can streamline how property passes. They do not solve the tax problem. Property passing by a transfer on death deed is still included in the taxable estate, so it can contribute to pushing a family over the cliff.

The risk is not the instrument. It is the false comfort — an owner who believes the transfer question is settled may stop asking the tax question, and the two are separate.

The cost of doing nothing

If no planning happens, the building passes through whatever process applies, and that usually takes longer than families expect.

In the meantime the property has no clear owner of record, which produces three problems at once:

  • A management problem. Who authorizes repairs, signs leases, pays vendors, or deals with a compliance deadline?
  • A compliance problem. Filings and obligations do not pause for probate.
  • A deed theft exposure. A property where an owner has died and title was never transferred is among the most targeted profiles there is, as covered in deed theft.

That third one is the sharpest, and it is the least anticipated. An unsettled estate is precisely the situation in which nobody would notice a fraudulent transfer for months.

What to actually do

  • Value the estate honestly, including the property at current market value rather than what it was worth when you bought it.
  • Check it against the cliff, and re-check periodically. Appreciation moves the answer.
  • Take it to an estate attorney — not an accountant alone, and not a general practitioner. New York's cliff makes this a specialist question.
  • Decide who will actually run the building, and make sure they can. Ownership and capability are different things, and heirs who inherit a building they cannot manage face the problems set out in inheriting a rental property.
  • Do not leave title unsettled, for the reasons above.

Where a managing agent fits

Nowhere in the planning. We are property managers, not estate attorneys or tax advisers, and this is firmly outside what we do.

Where we do fit is afterwards, and during: a building that keeps running through a transition — rent collected, compliance current, vendors paid, records intact — is worth more and is far easier to transfer than one that stalled while an estate was administered. That continuity is what investment property management provides, and it is covered specifically in managing property during divorce or estate administration.

If you own Brooklyn property and nobody has checked the estate arithmetic recently, schedule a consultation or call 718-568-9278 — and then speak to an estate attorney, which is the more important call.

This article is general information, not legal, tax or estate planning advice. Exemption amounts, thresholds and rules change annually. Consult a qualified New York estate attorney about your own circumstances.