State Estate Tax: A 2026 State-by-State Guide

The federal estate tax exemption is $15 million per individual after OBBBA — but 12 states and Washington DC run their own estate taxes with exemptions starting as low as $1 million. A family with a $6 million estate owes nothing federally yet faces a six-figure state estate tax bill in Oregon or Massachusetts. This guide covers every state's 2026 rules.

The 13 jurisdictions with estate taxes in 2026

Unlike the federal exemption ($15M per individual, portable to surviving spouse), most state exemptions are smaller, not portable between spouses, and not indexed for inflation. A married couple cannot simply double a state exemption without careful trust planning in most of these states.

Sources: state revenue departments, ACTEC State Death Tax Chart (2026), Kiplinger, Tax Foundation. Values verified April 2026 — confirm with your advisor before acting.¹

Key planning traps

The New York cliff rule

New York's estate tax has a provision that trips up advisors and clients alike: if your estate exceeds 105% of the New York exemption (~$7.16M in 2026), your entire estate is taxed — not just the excess over the threshold. This means an estate of $7.6M pays more NY estate tax than an estate of $7.15M, because at $7.6M the cliff kicks in and the full amount is subject to tax.

In practice: if your NY taxable estate is between $7.16M and ~$7.52M (the 105% ceiling), you're in a danger zone where careful gifting before death or spend-down strategies can produce dramatic tax savings. An estate at $7.4M might owe hundreds of thousands in NY estate tax; dropping it to $7.1M by making additional gifts eliminates the NY tax entirely.

Non-portability in most states

The federal "portability" election — which lets a surviving spouse claim a deceased spouse's unused exemption — does not exist in most states. States without portability: Minnesota, Illinois, Washington DC, Maryland, Oregon, and most others. The exceptions are Hawaii (portable) and a few others.

For married couples in non-portable states, this means the first spouse to die loses their exemption unless assets were intentionally structured into a bypass trust (also called a credit shelter trust or family trust). At $5M+ of combined assets and a $3M state exemption with no portability, the planning gap is real and significant. For a Minnesota couple with $6M, the surviving spouse has a $3M exemption — and the first $3M in the estate of the first spouse to die is wasted without a bypass trust.

Oregon and Massachusetts: low, un-indexed exemptions

Oregon's $1M exemption hasn't been updated in years and isn't indexed for inflation. A modest rental property portfolio — say, a $600K house plus a $600K investment property — combined with IRAs and brokerage accounts can push a retiree's estate well over $1M in Oregon. At 10-16% rates on amounts above $1M, an estate of $3M could owe $200K-$300K in Oregon estate tax.

Massachusetts similarly locks in a $2M threshold. For context, the median home value in the Boston metro is well above $600K — a retired professional with a paid-off home plus investments can easily exceed the Massachusetts threshold without feeling wealthy.

Inheritance taxes: a separate issue

Five states impose a separate inheritance tax — paid by the person receiving an inheritance, not by the estate itself. Rates depend on the beneficiary's relationship to the deceased: spouses are always exempt; children are often exempt or pay a lower rate; more distant relatives and non-relatives pay the most.

• Maryland — up to 16% for collateral heirs (siblings, nieces/nephews). Spouses and children exempt. Note: Maryland also has an estate tax, so large estates in Maryland face both taxes.³
• Nebraska — 1-18% depending on relationship and value. No exemption for unrelated beneficiaries.
• New Jersey — 0-16%. Children and spouses exempt. Siblings, non-relatives pay up to 16%.
• Kentucky — 0-16%. Spouses and children exempt. Class B beneficiaries (siblings, half-siblings, daughters-in-law, sons-in-law) now exempt effective January 1, 2026. More distant relatives and unrelated beneficiaries still owe tax.
• Pennsylvania — 0% spouse; 4.5% lineal descendants (children, grandchildren); 12% siblings; 15% others. This is often a surprise: PA charges the heir, not the estate, and children pay 4.5% even on moderate inheritances.

Iowa had an inheritance tax that was fully eliminated effective January 1, 2025.

Planning strategies for state estate tax exposure

Domicile change

Moving from a high-estate-tax state (Oregon, Massachusetts, New York) to a no-estate-tax state (Florida, Texas, Nevada, Wyoming, Colorado, Arizona) eliminates state estate tax exposure. The key is genuine domicile change — not a part-time residence. To establish Florida domicile from New York, for example: register to vote in FL, update driver's license, change banking and brokerage account addresses, execute new estate planning documents in FL, spend more than half the year there. A "Florida condo + NY apartment" is scrutinized by NY state; the audit risk is real.

Bypass / credit shelter trusts

For married couples in non-portable states, a bypass trust (credit shelter trust or family trust) at the first death shelters assets equal to the state exemption from the surviving spouse's taxable estate. Without this structure, the first spouse's exemption is lost, and the survivor's estate may eventually owe state estate tax on amounts that could have been sheltered.

Example: Illinois couple with $8M combined assets. State exemption is $4M, not portable. Without a bypass trust, the surviving spouse's estate is $8M, of which $4M is taxable under IL rules (~$400K in state estate tax). With a bypass trust funded with $4M at the first death, the survivor has a $4M estate ($0 state estate tax) and the bypass trust holds $4M outside the survivor's estate for eventual distribution to heirs.

Gifting below state exemption thresholds

The annual gift tax exclusion ($19,000 per donor per recipient in 2026) reduces both federal and state taxable estates. For OR, RI, and MA residents with estates modestly above the state threshold, sustained annual gifting ($19K × 4 recipients = $76K/year per couple) may push the estate below the exemption over time. No state estate tax on the gifts themselves — they're below the federal annual exclusion and states generally follow federal gift-exclusion rules.

Irrevocable trusts and state situs

Some states tax estates based on the decedent's domicile AND where certain property is located. Real estate is taxable where it sits, regardless of where you live. A Maine resident who owns Vermont vacation property may face both ME and VT estate taxes on that property. Planning options: hold real estate in an LLC or trust to convert real property to intangible personal property (which generally follows the owner's domicile for estate tax purposes).

Sources

1. ACTEC — State Death Tax Chart (2026). American College of Trust and Estate Counsel; updated annually.
2. Kiplinger — Washington State Slashes Estate Tax (2026 Changes): top rate drops from 35% to 20% starting July 1, 2026.
3. Tax Foundation — Estate and Inheritance Taxes by State (2025). Rates and exemptions by state; Maryland dual-tax structure.
4. Minnesota Department of Revenue — Estate Tax: $3M exemption; $5M for qualifying farms and businesses; not portable.
5. Massachusetts DOR — Guide to the Massachusetts Estate Tax: $2M threshold (2023 reform); rates 0.8%–16%.

State estate tax law changes frequently. Values verified April 2026. Confirm current figures with a licensed advisor or your state's department of revenue before acting.