Where Dying Costs Your Heirs
The federal estate tax is, for almost everyone, a non-issue. The exemption sits at $15 million per person in 2026 — $30 million for a married couple — and the One Big Beautiful Bill just made that permanent. Fewer than one estate in a thousand ever pays a dollar of federal estate tax.
So the story isn't Washington, D.C. It's the other Washington, and eleven states beside it, plus a handful more that skip the estate entirely and tax the people who inherit. In those places the line where the tax kicks in isn't $15 million. It's $1 million. Sometimes less. And most people who'll cross it have no idea it exists, because "estate tax" sounds like a billionaire's problem.
A paid-off house in a hot market, a decent retirement account, and a life insurance policy can clear $1 million without anyone feeling wealthy. In Oregon, that's a taxable estate. Here's the full 2026 map of where death still carries a state tax bill — starting with the state that just changed its rate today.
§ 01Washington's 35%-to-20% Whiplash
Washington spent the last year holding a record nobody wants: the highest estate tax rate in the country. And as of July 1, 2026, it just gave it back.
The sequence is dizzying. In May 2025, Senate Bill 5813 raised Washington's estate tax exemption from $2.193 million to $3 million and, at the same time, jacked the top marginal rate up to 35% on the largest estates — the steepest state estate tax rate in the nation, well past the 16%–20% that everyone else tops out at. Then the state reversed course. Senate Bill 6347 rolled that rate increase back to pre-July-2025 levels effective July 1, 2026, returning the top rate to 20%, and froze the $3 million exemption in place rather than letting it index up with inflation.
Two things stick after the dust settles. First, that $3 million exemption is frozen — no inflation adjustment — so it quietly captures more estates every year as home values and account balances drift upward. Second, and this catches people constantly: Washington has no portability between spouses. Federally, a surviving spouse inherits the deceased spouse's unused exemption automatically. In Washington, use it or lose it — which means a married couple needs proper trust planning to shelter both $3 million exemptions instead of just one.
§ 02Estate Tax vs. Inheritance Tax
These two get used interchangeably, and they're not the same tax. The difference decides who writes the check.
An estate tax is levied on the estate itself, before anything is handed out. The executor totals up everything the person owned, subtracts the exemption, and pays tax on the excess out of the estate. The heirs receive what's left. Twelve states and DC work this way.
An inheritance tax flips it. The estate distributes first, and then each recipient may owe tax on what they received — with the rate scaled to how closely related they were. Spouses are almost always exempt. Children usually are, or nearly so. A friend, a nephew, or an unrelated beneficiary pays the most. Five states work this way.
The federal government levies only an estate tax. A state can have one, the other, both, or neither — and Maryland, gloriously, has both, so the same dollars can get hit twice on the way down.
§ 03The 12 States + DC With an Estate Tax
Ranked by exemption, lowest first — because the lower the exemption, the more ordinary the estate that gets caught. Top rate is the marginal rate on the largest estates; most states ramp up through brackets starting around 10%.
| State | 2026 exemption | Top rate | Worth knowing |
|---|---|---|---|
| Oregon | $1,000,000 | 16% | Lowest in the nation; not indexed |
| Rhode Island | ~$1.8M | 16% | Indexed annually |
| Massachusetts | $2,000,000 | 16% | Taxes the whole estate once you cross the line |
| Minnesota | $3,000,000 | 16% | Not indexed |
| Washington | $3,000,000 | 20% | Was 35% until July 1, 2026; no portability |
| Illinois | $4,000,000 | 16% | Not indexed |
| District of Columbia | ~$4.9M | 16% | Indexed annually |
| Maryland | $5,000,000 | 16% | Also has a 10% inheritance tax |
| Vermont | $5,000,000 | 16% | Flat rate |
| Hawaii | ~$5.49M | 20% | Ties the top rate with Washington |
| New York | ~$6.94M | 16% | The "cliff" — see below |
| Maine | ~$7M | 12% | Indexed annually |
| Connecticut | ~$15M | 12% | Flat rate; only state with a gift tax |
Exemptions marked "~" are indexed annually — confirm the current-year figure with your state before relying on it.
Two of these deserve a warning label. Massachusetts uses a first-dollar structure: cross the $2 million line and the tax applies to the entire estate, not just the amount above $2 million — a quirk that can make a dollar of extra value cost tens of thousands. New York runs an even nastier "cliff": if your estate exceeds 105% of the exemption (about $7.29 million), the exemption vanishes completely and the whole estate is taxed from the first dollar. Land in that narrow zone just over the line and you can owe more tax than the amount that pushed you over.
§ 04The 5 Inheritance-Tax States
Here the heir is on the hook, and the closer the family tie, the smaller the bite. In every one of these states a surviving spouse pays nothing, and direct descendants are usually exempt or taxed lightly.
| State | Typically exempt | Top rate |
|---|---|---|
| Kentucky | Spouse, children, parents, siblings | 16% |
| Maryland | Spouse, children, lineal relatives | 10% |
| Nebraska | Spouse and immediate family | 15% |
| New Jersey | Spouse, children, parents, grandchildren | 16% |
| Pennsylvania | Spouse (0%); children taxed at 4.5% | 15% |
The pattern is the whole point of an inheritance tax: it's aimed less at the size of the estate and more at who's receiving it. Leave your house to your kids in Pennsylvania and they pay 4.5%. Leave it to a friend and they pay 15%. That relationship-based math is why estate planning in these states leans so heavily on who's named, not just how much is left. (Note that Iowa finished phasing out its inheritance tax at the start of 2025, which is why it's no longer on this list.)
§ 05The Federal Backdrop: $15M and the Step-Up
Zoom back out to the federal level and the picture flips to generous. The estate tax exemption is $15 million per person in 2026 — $30 million for a married couple who use portability — and the OBBBA made that permanent, ending years of "it might get cut in half" anxiety around the old sunset.
On top of the exemption sits the quiet giant of estate planning: the step-up in basis. Inherited assets have their cost basis reset to the value on the date of death, wiping out capital gains tax on a lifetime of appreciation. Inherit Grandma's stock that she bought for $20,000 and it's worth $500,000, sell it the next day, and the taxable gain is roughly zero. We break the whole mechanism down in the step-up in basis guide.
So for most families the federal estate tax is genuinely irrelevant — but the step-up matters to nearly everyone, and the state estate tax matters to a lot more people than assume it doesn't. The gap between a $15 million federal exemption and a $1 million Oregon one is where the real planning lives.
§ 06Planning Around It
If you live in — or own property in — one of these 17 jurisdictions, a few moves genuinely change the outcome:
- Know your state's number, not the federal one. Planning to the $15 million federal exemption while sitting on a $2.5 million estate in Oregon or Massachusetts is how families walk into a six-figure bill they never saw coming.
- Mind portability, or its absence. States like Washington offer no portability. A married couple there needs a credit-shelter or bypass trust to preserve both exemptions instead of wasting the first spouse's.
- Watch the cliffs. In Massachusetts and New York, being just over the line is disproportionately expensive. Charitable gifts or lifetime gifting that pull the estate back under the threshold can save far more than they cost.
- Remember property counts where it sits. A vacation home in a taxing state can pull a non-resident's estate into that state's tax on the value of the in-state property. Owning the beach house in Maine has a tax footprint even if you live in Florida.
- Coordinate with income-tax location. Several no-income-tax states also have no estate tax — see the 9 states with no income tax — though Washington is the notable exception that pairs no income tax with a real estate tax.
None of this is do-it-yourself territory once real money is involved. But knowing which of the 17 you're exposed to is the free part, and it's the part most people skip.
§ 07Key Takeaways
12 states + DC levy an estate tax; 5 states levy an inheritance tax. Maryland is the only one with both.
State exemptions start far below the federal $15M — $1M in Oregon, $2M in Massachusetts, $3M in Minnesota and Washington.
Washington rolled its nation-high 35% top rate back to 20% on July 1, 2026, kept the $3M exemption frozen, and still offers no spousal portability.
Massachusetts and New York have cliffs that tax the entire estate once you cross the line — being barely over is the worst place to be.
Federally, $15M per person is permanent and the step-up in basis survives — read the step-up guide, and if you're weighing a move, the Best Places explorer maps the income-tax side.
Sources: Washington SB 5813 and SB 6347 (2025 estate tax changes); state departments of revenue for 2026 exemptions and rates; IRC §2010 (federal exemption, made permanent at $15M by the One Big Beautiful Bill); IRC §1014 (step-up in basis). State exemptions marked approximate are indexed annually; verify the current figure with your state. This is general information, not tax advice.