Guides
State estate and inheritance taxes and life insurance
Which states tax estates or inheritances in 2026, with thresholds, sources and as-of dates, and how life insurance you own can push an estate over a state line.
Thirteen jurisdictions levy their own estate tax in 2026 and five states levy an inheritance tax, and most of them kick in far below the $15,000,000 federal exemption. Life insurance you own on your own life counts toward a state estate tax threshold just as it does for the federal tax, so a family with a modest net worth plus a large policy can owe state tax while owing nothing federally. Inheritance taxes are different: several states exempt life insurance paid to a named beneficiary.
Estate tax versus inheritance tax
An estate tax is paid by the estate, based on the total value of what the person owned at death, before heirs receive anything. An inheritance tax is paid by each heir, with rates that depend on the relationship to the person who died; spouses and children are often exempt. A state can have one, both (Maryland), or neither. Residents of the other states generally owe no state death tax, but a nonresident who owns real estate in a taxing state may still owe there. For the federal rules, see life insurance and the federal estate tax.
The federal basic exclusion amount for 2026 is $15,000,000 per person, per the IRS. State thresholds are set separately and are usually lower.
State estate taxes: 2026 thresholds
Figures below are the thresholds published by each state, as of October 4, 2026. Thresholds change with legislation and inflation indexing, so confirm with the state agency before relying on one.
| State | Threshold | Source and note |
|---|---|---|
| Connecticut | $15,000,000 (matches the federal exclusion); 12% rate | Connecticut General Assembly, ch. 217 |
| District of Columbia | $4,873,200 for 2025 deaths; the 2026 figure was not yet posted when checked | DC Office of Tax and Revenue |
| Hawaii | $5,490,000 (tied to the 2017 federal figure); rates 10% to 20% | Hawaii Revised Statutes ch. 236E |
| Illinois | $4,000,000 | Illinois Attorney General fact sheet |
| Maine | $7,160,000 for 2026 deaths; rates 8% to 12% above it | Maine Revenue Services |
| Maryland | $5,000,000; top rate 16% | Maryland Comptroller |
| Massachusetts | Return required above $2,000,000 (deaths on or after Jan. 1, 2023) | Mass.gov estate tax guide |
| Minnesota | $3,000,000; rates 13% to 16% | Minnesota Department of Revenue |
| New York | $7,350,000 for dates of death in 2026 | NY Department of Taxation and Finance |
| Oregon | $1,000,000; rates 10% to 16% | ORS chapter 118 |
| Rhode Island | $1,838,056 for deaths on or after Jan. 1, 2026 | RI Division of Taxation |
| Vermont | $5,000,000 for filing and payment (filing threshold raised effective June 18, 2026) | Vermont Department of Taxes |
| Washington | $3,076,000 for deaths Jan. 1 to June 30, 2026; $3,000,000 from July 1, 2026 | Washington Department of Revenue |
Two quirks matter for planning. New York has a "cliff": an estate that exceeds its basic exclusion amount by more than 5% loses the benefit of the exclusion, so the tax can jump sharply just above the line. Washington's exclusion is adjusted for inflation and its rates changed in mid-2026, so the date of death matters.
State inheritance taxes
| State | Who pays | Source and note |
|---|---|---|
| Kentucky | Spouse, parents, children, grandchildren and siblings are exempt (Class A); other beneficiaries pay 4% to 16% (Class B) or 6% to 16% (Class C) | Kentucky Department of Revenue |
| Maryland | 10% on property passing to anyone other than close family; life insurance paid to a named beneficiary is exempt | Maryland Comptroller |
| Nebraska | Immediate relatives (Class 1) pay 1% above a $100,000 exemption; more distant relatives pay 11% above $40,000; unrelated heirs pay 15% above $25,000 | Nebraska Legislature, LB 310 summaries |
| New Jersey | Class A (spouse, children, parents, grandchildren) pay nothing; Class C pays 11% to 16% after $25,000; Class D pays 15% to 16% | NJ Division of Taxation |
| Pennsylvania | 0% to a spouse, 4.5% to direct descendants, 12% to siblings, 15% to others; life insurance proceeds are exempt | PA Department of Revenue |
Iowa repealed its inheritance tax for people who die on or after January 1, 2025 (Iowa Code chapter 450). New Jersey's estate tax ended for deaths on or after January 1, 2018, per the Division of Taxation page above; only the inheritance tax remains.
Treatment of life insurance varies and is not confirmed here for every state. Pennsylvania and Maryland exempt proceeds paid to a named beneficiary per their state guides (Pennsylvania, Maryland); for Kentucky, Nebraska and New Jersey, confirm with the state or an attorney before assuming proceeds are exempt.
How life insurance enters the picture
For estate taxes, the question is who owned the policy and who held "incidents of ownership" (the right to change the beneficiary, borrow, or cancel). If you owned it, the full death benefit is generally added to your taxable estate, whether or not a named beneficiary avoids probate. The federal government taxes the same way, and most states follow its definition of the gross estate. A policy owned by an irrevocable life insurance trusts set up more than three years before death (see the the three-year rule for transferring a policy) generally stays out of both. Beneficiary designations skip probate but not estate tax.
Worked example (hypothetical)
Say a Massachusetts widower has a house and investments worth $1,800,000 and owns a $1,000,000 life insurance policy on himself, payable to his two children. His gross estate is $2,800,000. That is far below the federal $15,000,000 exclusion but above Massachusetts's $2,000,000 return threshold, so his estate must file a state return and may owe tax. If the policy had been owned by a properly drafted trust, his taxable estate would be $1,800,000 and would fall under the line. (This is an illustration of the mechanism; the actual tax depends on credits, deductions and the law at the time.)
What you can do
- Total your estate: home equity, retirement accounts, brokerage, business interests, and any policies you own.
- Compare it to your state's threshold, not just the federal one. The estate tax exposure check helps.
- If you live in a taxing state, consider whether an ILIT, a different owner, or a married-couple strategy fits. using life insurance in an estate plan covers the options.
- Plan for cash. State estate tax is typically due nine to ten months after death in many states, and estate liquidity: paying taxes and debts without a fire sale explains how insurance can cover it.
- Hire an estate attorney licensed in your state; these rules differ in the details and change often.
Key takeaways
- Thirteen jurisdictions have a state estate tax and five states have an inheritance tax in 2026, with estate thresholds as low as $1,000,000 (Oregon) versus $15,000,000 federally.
- A policy you own on your own life counts in the state taxable estate; a trust-owned policy generally does not.
- Inheritance taxes depend on the heir's relationship; Pennsylvania and Maryland exempt life insurance paid to a named beneficiary.
- Thresholds are indexed or revised often; check the state agency's current page and date of death.
- Washington and New York have date-specific and cliff features that make the exact figures matter.