Many people worry about "death taxes"—the informal term for taxes that the federal or state governments might impose on the transfer of your property when you die. Currently, only the very rich will owe federal estate taxes, so unless your estate (the sum of the property you leave behind when you die) is larger than $12.92 million, your estate won't need to pay the federal estate tax. (This threshold amount is subject to change with the political climate, though, and has changed rather dramatically over recent years.) However, some state governments also impose a state estate tax or inheritance tax, which might apply even if your estate does not owe the federal estate tax.
The threshold amount that triggers a state estate tax varies by state, but is typically lower than the federal threshold; in other words, you might owe state estate tax even if you don't owe federal estate tax. Below are the states that currently impose a state estate tax. Select your state to learn more about its estate tax laws, including the threshold amounts that trigger the tax. The lowest state threshold is $1 million.
Connecticut
District of Columbia
Hawaii
Illinois
Maine
Maryland
Massachusetts
Minnesota
New York
Oregon
Rhode Island
Vermont
Washington
In the recent past, the following states had a state estate tax in place, but they have since done away with their estate tax laws.
Separately, a few states still impose a state inheritance tax. Each state's rules vary, but whether your inheritors will owe inheritance tax will usually depend on how much you own at your death and each inheritor's relationship to you. (Your close family members pay lower or no inheritance tax, compared to more distant family members or friends.) Check below to see if your state has an inheritance tax and, if so, learn how it works.
In the recent past, the following states imposed a state inheritance tax, but they have since repealed their inheritance tax laws.
The Tax Cuts and Jobs Act of 2017 doubled the federal estate tax exemption, making federal estate taxes an issue for only the very rich.
Inheritance Tax: Which States Have It and How It Works
Only six (soon to be five) states still impose an inheritance tax.
Very few people ever need to pay federal gift tax.
Quick answers to basic questions about estate and gift tax.
With the "annuity" variety of this trust, you may be able make a donation and have tax-free money left over for your family.
If I name a trust as beneficiary of my retirement plan, when is income tax due?
If my IRA or 401(k) tax-deferred money is transferred upon my death to a marital bypass trust -- a trust to decrease the estate tax that eventually has to be paid by my children -- does income tax on the amount transferred become due immediately or can the money continue to accumulate, tax deferred, until withdrawn from the trust?
Even an estate that doesn't owe a federal death tax might still owe a state death tax.
Estate Tax: Will Your Estate Have to Pay?
Very few estates—only those larger than $12.92 million—might owe federal estate tax.
Keep the proceeds of your life insurance policy out of your taxable estate.
Reduce Estate Tax by Making Gifts
Making gifts during your life can provide you with tax savings and more.
Look Out for the Kiddie Tax When Leaving an IRA to a Minor
Naming a minor as the beneficiary of an IRA might not be the best choice.
529 Plans for Estate Planning and Retirement
The 529 savings account can be used for retirement and estate planning, too.
The Charitable Remainder Trust: Do Good and Get Tax Breaks
Give to charity and get a tax benefit.
Using QDOTs to Plan for Noncitizen Spouses
This kind of trust can defer estate taxes for wealthy couples.
If I name a trust as beneficiary of my retirement plan, when is income tax due?
If my IRA or 401(k) tax-deferred money is transferred upon my death to a marital bypass trust -- a trust to decrease the estate tax that eventually has to be paid by my children -- does income tax on the amount transferred become due immediately or can the money continue to accumulate, tax deferred, until withdrawn from the trust?