Does your state impose a death tax, separate from estate taxes?
 
All advisors to high net worth clients are aware that the US federal government imposes an estate tax on large estates. As of 2024, there is a lifetime exemption per person of $13.61 million.
 
But not everyone is aware that 17 states (and the District of Columbia) also impose some sort of death tax.
 
This post provides an overview of the state death tax rules, and gives a shorthand estimate of the rates, exemption amounts, and expected changes.
 
For a copy of our Advisor Guide, click here.
 
Death Taxes: “Estate” Tax and “Inheritance” Tax
Technically, an estate tax is a tax levied on the estate itself, while an inheritance tax is levied on the heirs who inherit from the estate.
 
The inheritance tax tends to be more complicated than the estate tax to explain and analyze, because it falls on the inheritor. So for example, if a person has 10 heirs, the inheritance tax might affect each one differently.
 
We’ll go over which states have estate and/or inheritance taxes below.
 

States with Estate Taxes

1. Connecticut
   • Exemption Amount: $13.61 million (2024), indexed for inflation.
   • Tax Rates: Flat 12%.
   • Expected Changes: None known.
2. District of Columbia
   • Exemption Amount: $4.71 million (2024).
   • Tax Rates: 11.2% to 16%.
   • Expected Changes: None announced.
3. Hawaii
   • Exemption Amount: $5.49 million (2024).
   • Tax Rates: 10% to 20%.
   • Expected Changes: None announced.
4. Illinois
   • Exemption Amount: $4 million.
   • Tax Rates: 0.8% to 16%.
   • Expected Changes: None announced.
5. Maine
   • Exemption Amount: $6.8 million (2024).
   • Tax Rates: 8% to 12%.
   • Expected Changes: None announced.
6. Maryland
   • Exemption Amount: $5 million.
   • Tax Rates: 0.8% to 16%.
   • Expected Changes: None announced.
7. Massachusetts
   • Exemption Amount: $2 million.
   • Tax Rates: 7.2% to 16%.
   • Expected Changes: None announced.
8. Minnesota
   • Exemption Amount: $3 million (2024).
   • Tax Rates: 13% to 16%.
   • Expected Changes: None announced.
9. New York
   • Exemption Amount: $6.94 million (2024).
   • Tax Rates: 3.06% to 16%.
   • Expected Changes: None announced. (“Cliff” system)
10. Oregon
    • Exemption Amount: $1 million.
    • Tax Rates: 10% to 16%.
    • Expected Changes: None announced.
11. Rhode Island
    • Exemption Amount: $40,000
    • Tax Rates: 0.8% to 16%. Top rate effective over 1.774 million (2024)
    • Expected Changes: None announced.
12. Vermont
    • Exemption Amount: $5 million (2024).
    • Tax Rates: 16%.
    • Expected Changes: None announced.
13. Washington
    • Exemption Amount: $2.193 million (2024).
    • Tax Rates: 10% to 20%.
    • Expected Changes: None announced.

 

States with Inheritance Taxes

1. Iowa
   • Exemption Amount: Varies based on the beneficiary’s relationship to the decedent.
   • Tax Rates: 5% to 15%.
   • Expected Changes: The tax is being phased out and will be fully repealed by 2025.
2. Kentucky
   • Exemption Amount: Varies based on the beneficiary’s relationship to the decedent.
   • Tax Rates: 4% to 16%.
   • Expected Changes: None announced.
3. Maryland
   • Exemption Amount: Varies based on the beneficiary’s relationship to the decedent.
   • Tax Rates: 10%.
   • Expected Changes: None announced.
4. Nebraska
   • Exemption Amount: Varies based on the beneficiary’s relationship to the decedent.
   • Tax Rates: 1% to 18%.
   • Expected Changes: None announced.
5. New Jersey
   • Exemption Amount: Varies based on the beneficiary’s relationship to the decedent.
   • Tax Rates: 11% to 16%.
   • Expected Changes: None announced.
6. Pennsylvania
   • Exemption Amount: Varies based on the beneficiary’s relationship to the decedent.
   • Tax Rates: 0% to 15%.
   • Expected Changes: None announced.

 

States with Both Estate and Inheritance Taxes

1. Maryland
   • Exemption Amount (Estate Tax): $5 million.
   • Tax Rates (Estate Tax): 0.8% to 16%.
   • Exemption Amount (Inheritance Tax): Varies based on the beneficiary’s relationship to the decedent.
   • Tax Rates (Inheritance Tax): 10%.
   • Expected Changes: None announced.

 

Easy Way to Avoid Estate and Inheritance Tax in All but Connecticut
Only Connecticut has a gift tax. So in each of the other states, you can avoid the death tax by making gifts during life.
 
Easy Way to Make a Gift
Gifts to avoid state estate taxes do not necessarily have to be made directly to an heir. The gifts can be to a trust.
 
Some of these trusts can be mainly for the goal of avoiding state death taxes. Others may avoid both state death taxes and home state income taxes. And yet others may allow the grantor to avoid state death taxes and income taxes, and also federal income taxes.
 
And in some cases, the gifts can be made in such a way that the giver can retain access and/or control over the assets gifted.