States with Estate Taxes: Protect Your Inheritance

Are you aware that your loved ones might inherit less than you intend due to state estate taxes? While many people assume they’re done paying taxes after they pass, estate taxes can still bite into what you leave behind. The federal government does impose an estate tax, but it’s the state-level taxes that can catch many off guard, especially in states with lower exemption thresholds.

Currently, twelve states and the District of Columbia impose estate taxes, and their exemption limits are often significantly lower than the federal threshold of $13.99 million in 2025 and $15 million in 2026. For instance, Oregon has the lowest exemption at just $1 million. This means that if your estate’s value exceeds this amount—say you own a home and have some savings—you could be liable for taxes that diminish your heirs’ inheritance.

What’s even more alarming are the so-called ‘cliff states’, like Illinois and New York. In Illinois, if your estate surpasses $4 million, the entire estate is taxed at rates ranging from 0.8% to 16%. Similarly, New York imposes a tax of 3.06% to 16% on estates exceeding $7.16 million. If your estate value is just above 105% of that exemption, the tax applies to the entire estate, not just the excess.

Maryland stands out as the only state that imposes both an estate tax and an inheritance tax, creating a double whammy for those who pass on their assets. Estates over $5 million face taxes between 0.9% and 16%, and anyone receiving a gift of more than $1,000 from you could end up paying a 10% inheritance tax.

In light of these realities, it’s essential to assess your estate planning strategies. Are you prepared for potential state estate taxes that could diminish what you hoped to pass on? Consulting with an estate planning professional could help you navigate these waters and devise a plan that safeguards your legacy. Don’t let your heirs face the burden of unexpected taxes; take action now to ensure your intentions are honored.

Understanding state estate taxes may seem daunting, but with the right knowledge, you can protect your loved ones from an unwelcome surprise. Assess your estate’s value and consult with an expert to create a robust plan that keeps your estate intact for future generations.

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