One of the last hurdles in closing an estate in New York is obtaining tax releases from the Department of Taxation and Finance. Before you can fully distribute an estate's assets, the New York Department of Taxation and Finance must certify that all estate taxes have been paid and that the estate owes no further taxes to the state. This certification comes in the form of tax releases—either an ET-85 form for estates that owe no New York State estate tax, or an ET-117 form (tax release) for estates where estate taxes have been paid. Understanding these forms, how to obtain them, and what they mean is critical for executors and administrators seeking to close estates.
This guide explains what the ET-85 and ET-117 forms are, when you need each one, how to apply for them, and how they affect the estate closing process.
New York State Estate Taxes and the Need for Tax Releases
New York State imposes an estate tax on estates exceeding a certain threshold. As of 2024, the New York State estate tax exemption is substantial, but estates above that exemption owe state estate taxes. In addition, estates may owe federal estate taxes if they exceed the federal exemption. Regardless of whether an estate owes taxes, the Department of Taxation and Finance must issue a tax release before the estate can be closed and distributions made to heirs.
A tax release is the state's certification that it has reviewed the estate and determined that either no taxes are owed or that all taxes owed have been paid. Without a tax release, the surrogate's court will not issue final orders closing the estate, and fiduciaries cannot distribute the remaining assets to heirs and beneficiaries. This is why obtaining the appropriate tax release is one of the final steps in estate administration.
Understanding the ET-85 Form
The ET-85 is the "Notice of Estate Tax Determination" or exemption certificate issued by the New York Department of Taxation and Finance. An executor or administrator files Form ET-85 when the estate is small enough to be exempt from New York State estate tax, meaning its value falls below the state's exemption threshold. As of 2024, the New York State estate tax exemption is $6.94 million (adjusted annually for inflation).
To file the ET-85, you submit the form to the Department of Taxation and Finance along with the required supporting documentation, which typically includes the federal Form 706 (if filed) or an affidavit describing the estate's value and composition if no federal return was required. The department reviews the submission and issues an ET-85 determining that no New York State estate tax is due. The ET-85 is relatively straightforward when the estate genuinely falls below the exemption threshold and there are no complicating factors.
Understanding the ET-117 Form: Estate Tax Release
The ET-117 is the "Estate Tax Release," issued by the Department of Taxation and Finance to certify that an estate that owes or owed New York State estate taxes has paid all amounts due and no additional taxes are owed. If your estate's value exceeds the New York State exemption, you must file a federal Form 706 (U.S. Estate Tax Return) and determine whether you owe federal estate taxes. You must also file a New York State estate tax return (Form ET-1) if the estate is required to file federally.
Once you've filed the required returns and paid any New York State estate taxes due, you submit the ET-117 form to the Department of Taxation and Finance. The department reviews the returns, confirms that all taxes have been paid, and issues the ET-117 release. This release certifies that the estate is clear from a New York State tax perspective and can now be closed. Some estates owe no state tax (even though the federal estate is substantial) because of the state exemption, in which case an ET-85 or ET-117 noting zero tax due is issued.
When You Need ET-85 vs. ET-117
You need an ET-85 when the estate is below the New York State exemption threshold and owes no state estate tax. You need an ET-117 when the estate is above the exemption threshold and estate tax returns have been filed and taxes paid, or when the estate is above the threshold but no tax was ultimately owed (sometimes due to available credits).
In some cases, an estate might be below the state exemption but above the federal exemption, requiring a federal return but only an ET-85 from New York. In other cases, both federal and state returns are required, and you'll seek an ET-117 from the state. Your accountant or attorney can determine which form is needed based on the estate's size and the applicable exemptions at the time of the decedent's death.
The Application Process and Timeline
To obtain a tax release, you typically file the completed ET-85 or ET-117 form (depending on which applies) with the New York Department of Taxation and Finance's Estate Bureau. For an ET-85, you submit the form and supporting documentation showing that the estate is below the exemption threshold. For an ET-117, you submit the form along with copies of the filed federal Form 706 and New York State Form ET-1, along with proof of payment of taxes, if any are due.
The Department of Taxation and Finance takes several weeks to several months to process these requests, depending on the complexity of the estate and the department's current workload. You should not delay filing for the tax release. In fact, it's prudent to begin the process as soon as federal returns are filed (these must typically be filed within nine months of death, though extensions can be obtained). The sooner you apply for the tax release, the sooner you can close the estate.
Using the Tax Release to Close the Estate
Once you receive the ET-85 or ET-117 from the Department of Taxation and Finance, you file it with the surrogate's court as part of your petition for a final order closing the estate. The tax release demonstrates that all tax obligations have been satisfied or that none are owed. The surrogate's court uses this information to confirm that there are no outstanding obligations before issuing a final order.
Your petition for final order should attach the tax release and any other outstanding documentation (final accounting, proof of debts paid, etc.). Once the court is satisfied that all requirements have been met, it issues a final order admitting the will to probate or granting letters of administration, closing the estate. At that point, you can distribute the remaining assets to heirs and beneficiaries and close out the estate's bank account and other accounts.
Special Considerations and Common Issues
Some estates face complications in obtaining tax releases. For example, if you filed an incomplete or incorrect federal or state return, the Department of Taxation and Finance may request amended returns before issuing a release. If there was a prolonged dispute with the IRS over the estate's value or tax liability, state release may be delayed until the federal matter is resolved. If there are unpaid property taxes or other state obligations, they must be addressed before the estate's tax release is issued.
Additionally, if the estate has substantial assets or unusual circumstances, the Department of Taxation and Finance may request additional information or clarification. Working with an experienced team of advisors and accountants can help you navigate these issues and ensure the tax release is obtained as efficiently as possible.
How Keystone Pinnacle Can Help
Whether you're navigating an estate property sale, exploring investment opportunities, or need guidance through a complex real estate transaction, Keystone Pinnacle Property Advisors is here to help. Our team specializes in guiding families through the real estate aspects of estate settlement throughout Brooklyn, Queens, Nassau County, and the greater New York area.
Contact us today for a free consultation, or call (516) 703-6942 to speak with an advisor.
