Most people know death comes with paperwork. What they don’t realize is that in some states, it also comes with a very large bill, one that lands on their family long before the grief has had any chance to settle. The federal government gives estates a generous pass in 2026, so the vast majority of American families won’t owe a dime at the federal level. State governments are a different story.
Here’s the thing that catches people off guard: the state bill can hit estates that would look solidly middle-class to most of us. A paid-off house, some retirement savings, maybe a small investment account built up over decades of careful work. In several states, that’s enough to trigger a tax that most families simply weren’t expecting, often while they’re still sorting through the sympathy cards.
There are two different death taxes to understand before diving in. An estate tax is paid by the estate itself before anything gets distributed to heirs – think of it as the government taking its cut from the pile before the family touches it. An inheritance tax works differently: it’s paid by the person receiving the inheritance, based on how much they got and sometimes on their relationship to the deceased. Most states have neither. A handful have one. And one state, extraordinary in the worst possible way, has both.
1. Oregon
Oregon has the lowest estate tax exemption in the entire country, set at just $1 million. To understand why that number is genuinely alarming in 2026, consider what $1 million actually represents. A married couple’s home equity alone can trigger this tax, and with Portland-area median home prices above $500,000, many middle-class families find themselves caught in it.
Oregon has an estate tax ranging from 10% to 16%, applying to estates worth more than $1 million. So a family that owns a modest home, has a few hundred thousand in a 401(k), and maybe some savings, could easily cross that line without ever considering themselves wealthy. With a federal estate tax exemption of about $15 million in 2026, most estates are not subject to federal estate tax at all, meaning the gap between what Oregon taxes and what the federal government taxes is enormous. You can have an estate that owes nothing to Washington D.C. and still owe Oregon a significant check.
Because these taxes encourage wealthy individuals to move out of state, depriving the state of tax revenue that would have been generated during their lifetimes, many states eliminated their estate taxes following federal law changes in the 2000s. Oregon has not. For families with roots there, that decision matters.
2. Massachusetts
Massachusetts has long been a state where real estate appreciation has quietly turned ordinary homeowners into people with estate tax problems they never planned for. The Massachusetts estate tax exemption remains at $2 million, after the state passed legislation in October 2023 to increase it to that level, retroactive to January 1, 2023. That might sound reasonably protective until you consider what $2 million looks like in the Boston suburbs, where a three-bedroom house can cost more than that on its own.
Massachusetts currently holds the third-lowest estate tax exemption in the country, surpassed only by Oregon at $1 million and Rhode Island. The tax rate varies from 5.6% to 16% depending on the overall value of the estate.
The practical reality is that a couple who bought a home outside Boston twenty years ago, both worked steadily, and contributed to their retirement accounts may now have an estate that crosses that $2 million line, even though their lived experience feels nothing like wealthy. Their children inherit a tax bill alongside the house. In these low-exemption states, many middle-class estates, including just the value of a home, can trigger estate tax liability. That’s not an edge case. That’s a lot of families.
3. Rhode Island
Rhode Island is small but its estate tax punches above its weight. The state has the second-lowest exemption in the country for 2026, set at $1,838,056, up slightly from $1,802,431 in 2025. Rhode Island’s estate tax rates run from 0.8% to 16%, depending on the taxable estate’s value.
What makes Rhode Island particularly worth noting is a specific and somewhat cruel quirk: once an estate exceeds the $1,802,431 threshold, Rhode Island utilizes a graduated tax rate that only applies to the portion of the estate’s value that exceeds the exemption threshold. That means crossing the threshold can result in a higher total tax than you might expect – the whole estate gets reassessed, not just the excess.
Rhode Island’s estate tax exemption is adjusted annually for inflation, which provides at least some protection over time. But the base number is still low enough to catch families who haven’t done estate planning, and in a state where property values have climbed sharply, that’s a meaningful portion of homeowners.
4. Washington State
Washington has what is arguably the most aggressive estate tax structure in the country. For the first half of 2026, estates in Washington are subject to estate tax if they’re worth more than $3.076 million, the fifth-lowest exemption in the nation. That amount falls to $3 million on July 1, 2026, which ties Minnesota for the fourth-lowest exemption amount in the country.
The rates are where Washington really distinguishes itself. Washington’s estate tax rates are adjusted halfway through 2026. During the first half of the year, they run from 10% to 35%, depending on the value of the taxable estate. The 35% rate is the highest state estate tax rate in the U.S. However, beginning on July 1, 2026, the top rate drops to 20%, tied with Hawaii for the country’s highest state estate tax rate. That rollback provides some relief for larger estates, but Washington still sits at the extreme end of the spectrum.
How much you actually need saved in order to retire is something residents with any meaningful assets, a home in Seattle, business interests, retirement accounts, genuinely need to address proactively. For Washington residents with assets over $15 million, combined federal and state estate taxes can push the marginal rate above 50%. That’s a number that tends to focus the mind.
5. Maryland
Maryland earns a special place on this list because it is, as of 2026, the only state in the country that imposes both an estate tax and an inheritance tax on the same assets. No adjustments to Maryland’s setup are planned for 2026. The state’s maximum estate tax rates range from 0.8% to 16%, and the inheritance tax sits at 10%. It is the only state to impose both “death” taxes.
Here is how that double tax actually works in practice: an estate in Maryland can be taxed twice, once when the estate is settled, and again when beneficiaries receive their share. Maryland does allow a credit that partially offsets the double hit. The estate first pays estate tax on the value above the $5 million exemption. Then, when the heirs receive their shares, they may owe inheritance tax on top of that, depending on their relationship to the deceased.
In practice, most Maryland family inheritances are exempt from inheritance tax, but spouses, children, grandchildren, parents, siblings, and charitable organizations are exempt from the inheritance tax. That means bequests to anyone outside that circle, such as a cousin, unmarried partner, or friend, will incur the full 10% tax. For blended families, unmarried partners, and anyone leaving assets to people outside the immediate family tree, that’s a real exposure.
6. Pennsylvania
Pennsylvania doesn’t have an estate tax, but its inheritance tax is one of the most far-reaching in the country in a specific and underappreciated way: it taxes children on what they inherit from their parents. Pennsylvania has an inheritance tax ranging from 4.5% to 15%. Inheritance tax rates depend on the beneficiary’s relationship to the decedent. Surviving spouses and parents of children aged 21 or younger are exempt from paying inheritance taxes.
So an adult child who inherits their parent’s home, their savings account, and a 401(k) will pay 4.5% on the value of each. That might not sound dramatic, but it adds up fast when real estate is involved. The inheritance tax is assessed on the account value at date of death and is due within nine months, separate from and in addition to any federal income tax owed on withdrawals. This double layer, Pennsylvania inheritance tax at death plus federal income tax on every distribution afterward, is one of the most costly outcomes for Pennsylvania families with large traditional retirement accounts.
The retirement account issue is worth sitting with. A parent who saved diligently for 35 years in a traditional IRA will leave their children an account that gets hit twice: once by the Pennsylvania inheritance tax at death, and again by federal income tax every time the child takes a distribution. It’s one of the quieter financial surprises in estate planning. If you’re thinking through how to talk to your family about what they might face, these conversations are often harder to start than people expect, but not starting them is usually more expensive.
7. Nebraska
Nebraska rounds out this list not for its estate tax – it doesn’t have one – but because of its inheritance tax structure, which can hit non-family beneficiaries with rates most people don’t see coming. Nebraska does have an inheritance tax. The rate depends on your relationship to your benefactor. If you leave money to your spouse, there is no inheritance tax. For other relationships: parents, siblings, children, grandparents and their relatives pay 1% on any value over $100,000. Aunts, uncles, nieces, nephews and their relatives pay 11% on any value over $40,000. All other heirs pay 15% on any value over $25,000.
The practical implication: Nebraska is a state where who you’re leaving your assets to matters enormously. Leaving money to a sibling carries a very different tax outcome than leaving it to a nephew, and leaving it to a close friend or unmarried partner at 15% is a significant loss. Estate planning for Nebraska residents really does need to account for the full family tree, not just the nuclear unit.
What This Actually Means
With a federal estate tax exemption of about $15 million in 2026, most estates are not subject to federal estate tax. The tax applies only when an estate’s value exceeds that threshold at death. That’s reassuring at the federal level. But as every state on this list demonstrates, the state-level picture is an entirely different calculation, and it’s one that affects far more families than most people assume.
The real takeaway isn’t to panic about death taxes or to start moving across state lines. It’s to stop treating this as something that only matters to rich people. Seventeen states plus D.C. impose their own estate or inheritance taxes with much lower thresholds, and those state-level taxes catch far more families than most people realize. If you own a home in Massachusetts, Oregon, or Washington state, an estate worth just $1 to $2 million could trigger a state tax bill your heirs didn’t see coming.
What you do with that information is up to you. Irrevocable trusts, annual gifting, beneficiary designations on retirement accounts, and simply reviewing what you’ve actually accumulated – these aren’t exotic strategies reserved for estate lawyers on retainer. They’re things a reasonably organized person can put in place with some professional guidance. The states on this list aren’t going to change their tax codes on your timeline. But you can plan around them, and the earlier you do, the more of your own work you actually get to pass on.
AI Disclaimer: This article was created with the assistance of AI tools and reviewed by a human editor.