Most people know the federal government can tax your estate. What many don’t realize is that your state might too and the exemptions can be much lower than you’d expect.
Understanding how state estate taxes work, and whether you live in one of the states that imposes them, is an important part of protecting the legacy you’ve worked hard to build.
The Federal Exemption vs. State Exemptions
On the federal level, the estate tax exemption is relatively high. For 2026, the IRS has set the basic exclusion amount at $15M per individual. That means most people won’t owe federal estate tax. But “most people” isn’t everyone and for those with major assets, failing to plan for it can take a meaningful bite out of what you leave behind.
On the state level, it gets more complicated. Many states have set their own exemption thresholds and some are lower than the federal level. That means residents with far more modest estates can still find themselves subject to state estate tax, often without realizing it until it’s too late to plan.
State-by-State Breakdown
The table below outlines current estate and inheritance tax exemptions and rates by state. Note that estate tax and inheritance tax are two different things. Estate tax is levied on the estate itself before distribution, while inheritance tax is paid by the beneficiary receiving the assets. Unlike estate tax rates, inheritance tax rates usually vary depending on what the beneficiary’s relationship was to the deceased.
State | Estate Tax Exemption | Estate Tax Rate | Inheritance Tax Exemption | Inheritance Tax Rate |
Connecticut | $15,000,000 | 12% | n/a | n/a |
Hawaii | $5,490,000 | 10%–20% | n/a | n/a |
Illinois | $4,000,000 | 0.8%–16% | n/a | n/a |
Kentucky | n/a | n/a | $1,000 | 0%–16% |
Maine | $7,160,000 | 8%–12% | n/a | n/a |
Maryland | $5,000,000 | 0.8%–16% | $1,000 | 0%–10% |
Massachusetts | $2,000,000 | 0.8%–16% | n/a | n/a |
Minnesota | $3,000,000 | 13%–16% | n/a | n/a |
Nebraska | n/a | n/a | $100,000 | 0%–15% |
New Jersey | n/a | n/a | $25,000 | 0%–16% |
New York | $7,350,000 | 3.06%–16% | n/a | n/a |
Oregon | $1,000,000 | 10%–16% | n/a | n/a |
Pennsylvania | n/a | n/a | No exemption | 0%–15% |
Rhode Island | $1,838,056 | 0.8%–16% | n/a | n/a |
Vermont | $5,000,000 | 16% | n/a | n/a |
Washington | $3,076,000 | 10%–35% | n/a | n/a |
District of Columbia | $4,988,400 | 11.2%–16% | n/a | n/a |
Sources: IRS Estate Tax Overview | Tax Foundation: State Estate and Inheritance Taxes. Rates and exemptions subject to change.
Why Where You Live Matters
This is why where you live matters as much as what you have. Oregon, for example, has one of the lowest estate tax exemptions in the country at just $1M, meaning a far broader group of residents can be subject to state estate tax. Massachusetts sits at $2M. Two people with identical estates can face very different tax outcomes simply based on their state of residence.
It’s also important to understand that real estate and tangible personal property, such as collectibles, jewelry, and art, is generally subject to estate tax in the state where it’s located, even if the owner lives out of state. You may need to consider the locations of second homes or investment properties as well as your state or residence.
Planning Strategies That Can Help
The good news is that with the right planning, state estate tax doesn’t have to be a burden on the people you’re leaving behind. Strategies that can help reduce or eliminate exposure include:
· Lifetime Gifting | Gradually transferring assets to heirs while you’re alive
· Charitable Giving | Reducing the taxable estate through donations
· Life Insurance | Providing liquidity to cover estate tax obligations
· Trust Planning | Structuring assets to minimize estate tax exposure
These strategies work best when put in place well before they’re needed. Proactive planning is what protects a legacy.
The Bottom Line
Estate planning isn’t only for the ultra-wealthy. If you live in one of these states and have worked hard to build something meaningful, this is a conversation worth having sooner rather than later.
The SKG Team helps clients navigate exactly these kinds of decisions. If you’d like to understand where you stand and what steps make sense for your situation, contact us today! We’re here to help.
Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
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