The 3 Worst Estate Planning Mistakes in New York City (2025-2026 Guide)
As a New York estate planning attorney with many years of experience, I have sat across the table from hundreds of grieving families. In those moments, the tragedy is not just the loss of a loved one; it is the discovery that the “plan” their loved one left behind was fatally flawed.
I am Russel Morgan, and my firm, Morgan Legal Group, has handled over 1,000 successful cases. Our 900+ positive online reviews often come from clients who realized—just in time—that they were walking into a trap. In New York City, estate planning is unforgiving. The laws here are unique, the taxes are punitive, and the court system is overwhelmed.
In 2025 and 2026, the stakes are higher than ever before. We are facing a “perfect storm” of legal changes: the 2026 Federal Estate Tax “Sunset” and the implementation of the NY Medicaid 30-Month Look-Back. Making a mistake now isn’t just an inconvenience; it is a multi-million dollar catastrophe. This guide will expose the three absolute worst mistakes New Yorkers are making right now and show you exactly how to avoid them.
Mistake #1: The “Simple Will” Trap (Believing a Will Avoids Court)
This is the single most pervasive myth in estate planning, and it is the cause of endless heartache.
The Mistake: “I have a Will, so my family won’t have to deal with the courts.”
The Reality: A Will guarantees that your family *will* go to court. A Will is a formal letter of instruction to the Surrogate’s Court. It has no legal power until a judge validates it.
The NYC Probate Nightmare
In our experience handling estates in Brooklyn, Queens, and Manhattan, the probate process is a disaster you must avoid.
- It is Public: Your Will becomes a public record. Anyone can see the value of your assets, who you owed money to, and exactly who is inheriting what.
- It is Slow: In New York City, a “simple” probate can take 9 months to 2 years. During this time, your assets are frozen. Your family cannot sell your co-op. They cannot access your bank accounts to pay the mortgage.
- It is Expensive: The costs are staggering. Between court filing fees, legal fees, and the executor’s statutory commission (which is 3.4% on the first $500,000 alone), probate can consume 3-7% of your estate.
- It Invites Conflict: Probate requires notifying all next-of-kin. This gives estranged relatives a formal invitation to contest the Will and hold your estate hostage for a settlement.
Case Study: The Frozen Brownstone
We recently consulted with a family in Harlem. The father passed away with a Will leaving his $2.5M brownstone to his three children. However, one child was estranged. Because of the probate requirement, that estranged child had to be notified. He refused to sign the waivers. The estate was frozen in litigation for three years. The legal fees exceeded $150,000. The family nearly lost the home to foreclosure because they couldn’t access funds to pay the taxes.
The Solution: Had the father used a Revocable Living Trust, the home would have passed privately and immediately to the children, bypassing the court and the estranged son entirely.
Mistake #2: The “Do Nothing” Trap (Ignoring the 2026 Tax Cliff)
This is the specific mistake for high-net-worth New Yorkers in 2025.
The Mistake: “My estate is under $13 million, so I don’t need to worry about estate taxes.”
The Reality: You are planning for 2025 rules, but you are likely to die under post-2026 rules. On January 1, 2026, the federal estate tax exemption is scheduled to be cut in half.
The Math of Inaction
Currently, you can leave ~$13.61 million tax-free. In 2026, that drops to ~$7 million.
If you have a $10 million estate (common for NYC property owners with life insurance and retirement accounts), doing nothing today will cost your family over $1.2 million in federal taxes in 2026.
The New York “Double Whammy”
New York adds its own punishment. We have a separate estate tax exemption of $6.94 million. But unlike the federal tax, NY has a “Cliff.” If your estate exceeds the exemption by just 5% (approx. $7.3M), you lose the entire exemption. You pay tax on the *entire* value of the estate, not just the overage.
The 2025 Solution: “Use It or Lose It”
The IRS has confirmed that if you use your high exemption *now* (in 2025) by making gifts to irrevocable trusts, they will not “claw it back” later. You must act now.
- Spousal Lifetime Access Trust (SLAT): Move millions out of your estate tax-free while your spouse retains access.
- Irrevocable Life Insurance Trust (ILIT): Remove your life insurance death benefit from your taxable estate.
Waiting until 2026 is a mistake that will cost your heirs 40% of your legacy.
Mistake #3: The “Kitchen Table” Transfer (The Medicaid & Tax Disaster)
This is the most common mistake made by middle-class families trying to protect their homes.
The Mistake: “I’ll just sign the deed of my house over to my kids now. It saves probate and protects it from the nursing home.”
The Reality: This “simple” transfer creates three separate financial disasters.
Disaster A: The Capital Gains Tax Bomb
When you “gift” your home to your children while you are alive, they receive your “cost basis.”
Example: You bought your Queens home in 1980 for $50,000. It is now worth $1,050,000.
- If they Inherit it (via Trust/Will): They get a “step-up in basis” to $1.05M. They sell it for $1.05M. Tax = $0.
- If you Gift it (Deed transfer): Their basis is $50,000. They sell it for $1.05M. They have a $1 Million capital gain. They owe approx. $250,000 – $300,000 in taxes.
You tried to save a few thousand in probate fees and cost them $300,000.
Disaster B: The Loss of Control & Creditor Risk
Once you sign that deed, the house is *theirs*.
- If your child gets divorced, their spouse can claim a share of *your* home.
- If your child gets sued or files for bankruptcy, the court can seize *your* home.
- If you have a falling out, they can legally evict you.
Disaster C: The Medicaid 2025 “Look-Back” Trap
This transfer is a “gift.” Under New York’s new rules, this triggers a penalty period.
- Nursing Home Care: It triggers a 5-year look-back.
- Home Care: It triggers the new 30-month look-back (effective 2025).
By gifting the house, you have made yourself ineligible for the care you might need next year. You have stripped yourself of assets and coverage simultaneously.
The Real Solution: The Medicaid Asset Protection Trust (MAPT)
The only correct way to achieve these goals is an Irrevocable Trust (MAPT).
- We transfer the home to the trust. This starts the look-back clock.
- You retain the right to live there for life (Life Estate).
- You keep your STAR exemptions.
- After the look-back, the home is 100% protected from Medicaid.
- When you pass, the home goes to your heirs probate-free AND with a full step-up in basis (saving the capital gains tax).
This is the “Gold Standard” strategy that solves all three problems at once.
How to Avoid These Mistakes: The Morgan Legal Group Approach
Estate planning in New York City is not a DIY project. The laws are too complex, and the cost of failure is too high. As our 1,000+ cases demonstrate, the difference between a “simple plan” and a “smart plan” is often millions of dollars.
At Morgan Legal Group, we don’t just draft documents. We build fortresses.
- We use Revocable Trusts to bypass the broken probate system.
- We use Advanced Tax Strategies to defuse the 2026 tax bomb.
- We use Medicaid Trusts to protect your home without triggering tax disasters.
Do not let a simple mistake destroy a lifetime of hard work. Schedule a consultation with us today. We serve clients across all five boroughs of NYC, Long Island, and Westchester. Let us help you get it right.
For more information on New York’s estate tax laws, you can visit the New York State Department of Taxation and Finance website.
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