The federal estate tax rate is 40%, and that’s just the federal piece. Depending on where you live, your state can take a second bite, with its own exemption threshold and no credit for what you already paid the IRS. That combination catches a lot of people who don’t think of themselves as wealthy, especially homeowners sitting on decades of real estate appreciation.
Two Separate Tax Bills, No Coordination Between Them
Twelve states plus Washington, D.C. levy their own estate tax on top of the federal one: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Massachusetts charges 16%. Oregon runs 10% to 16%. These aren’t deductions against your federal bill, they’re entirely separate calculations, and you pay both. The federal exemption is $15 million per person for 2026, $30 million for a married couple once you account for portability, and legislation enacted in 2025 made that level permanent with annual inflation adjustments. State exemptions don’t track that number. Massachusetts exempts $2 million. Oregon exempts $1 million. Connecticut, at $13.6 million, is close to the federal level, but it’s the exception, not the rule.
Why Your House Alone Can Get You There
Many states count your primary residence toward your taxable estate. If you bought a home in a place like Boston for $500,000 in 2000 and it’s worth $2.5 million today, that appreciation is not cash in your pocket, but it counts. Add a million dollars in retirement accounts and modest savings, and a household that doesn’t feel wealthy by any everyday measure can already be past a $2 million state threshold. You don’t need $30 million to have an estate tax problem. You need to live in the wrong state with an appreciated house.
Probate Is the Second Problem
Without a trust or proper beneficiary designations, your estate goes through probate when you die. That’s a public court process: your assets, your debts, and who inherits what all become part of the public record, and it opens the door for anyone with a claim, real or opportunistic, to contest the distribution.
The Planning Tools That Address Both Problems
The good news is that the same tools generally solve the federal estate tax problem, the state estate tax problem, and probate at once, if they’re structured correctly. An irrevocable life insurance trust keeps death benefit proceeds outside your taxable estate entirely. Annual gifting under the federal exclusion amount reduces the size of your estate gradually, year over year, while you’re alive to see it work. And placing assets in trust removes them from probate, keeping the details private and reducing the chance of a dispute, while potentially lowering your taxable estate depending on how it’s structured.
None of this requires guessing at a $30 million number that doesn’t apply to your situation. It requires knowing your state’s actual threshold, checking whether your home’s value counts toward it, and putting a structure in place before it matters. If you own real estate in one of the states listed above, running the numbers now, while you have options, beats finding out the hard way. You can review the federal rules directly at USA.gov’s estate planning resources as a starting point, then work with a qualified estate attorney on the state-specific pieces.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
