The 2025 budget reconciliation legislation, better known as One Big Beautiful Bill, was signed into law by President Trump on July 4. It included many tax changes, one of which was to increase the gift/estate tax exemption to $15 million per taxpayer and index it for inflation.
That means that the vast majority of estates won’t pay federal estate taxes. However, that doesn’t mean there won’t be taxes to pay by many estates and inheritors. In fact, 12 states and the District of Columbia levy their own estate taxes with exemptions as low as $1 million. Five states have inheritance taxes that beneficiaries must pay, including two that have no exemptions at all. Only Maryland has both an estate tax and an inheritance tax.
With laws varying from state to state, Rethinking65 believes the following tables can help financial advisors understand the taxes their clients’ estates or beneficiaries may pay. Clients may not be aware of these taxes and look to you for the best possible strategies.
Table 1: States with Estate Taxes
| State | Exemption | Tax Rate | Official Tax Info URL |
|---|---|---|---|
| CT | $12.92M | Flat 12% | https://portal.ct.gov/DRS/Individuals/Individual-Tax-Page/Connecticut-Estate-and-Gift-Tax |
| HI | $5.49M | 10%–20% | https://tax.hawaii.gov/estate/ |
| IL | $4M | 0.8%–16% | https://www2.illinois.gov/rev/research/taxinformation/estate/Pages/default.aspx |
| ME | $6.8M | 8%–12% | https://www.maine.gov/revenue/taxes/income-estate-tax/estate-tax |
| MD | $5M | 0.8%–16% | https://marylandtaxes.gov/individuals/estate-tax/index.php |
| MA | $2M | 0.8%–16% | https://www.mass.gov/guides/estate-tax |
| MN | $3M | 13%–16% | https://www.revenue.state.mn.us/estate-tax |
| NY | $6.94M | 3.06%–16% | https://www.tax.ny.gov/pit/estate/estate_tax.htm |
| OR | $1M | 10%–16% | https://www.oregon.gov/dor/programs/estate/Pages/default.aspx |
| RI | $1.77M | 0.8%–16% | https://tax.ri.gov/tax-types/estate-tax |
| VT | $5M | Flat 16% | https://tax.vermont.gov/individuals/estate-and-gift-tax |
| WA | $2.193M | 10%–20% | https://dor.wa.gov/taxes-rates/other-taxes/estate-tax |
| DC | $4.71M | 11.2%–16% | https://otr.cfo.dc.gov/page/estate-tax |
Table 2: States with Inheritance Taxes
| State | Tax Rate | Who Pays | Exemption Before Tax | Official Tax Info URL |
|---|---|---|---|---|
| MD | 10% | Non-immediate family | None | https://marylandtaxes.gov/individuals/estate-tax/index.php |
| KY | 4%–16% | Non-lineal heirs | $1,000 for siblings/nieces/nephews (Class B), $500 for friends (Class C) | https://revenue.ky.gov/Individual/Inheritance-Estate-Tax/Pages/default.aspx |
| NE | 1%–18% | Everyone but spouse/children | $40,000 for siblings, $15,000 for nieces/nephews, $10,000 for others | https://supremecourt.nebraska.gov/self-help/estates/inheritance-tax |
| NJ | 11%–16% | Siblings, nieces/nephews, friends | $25,000 for siblings, $500 for cousins/friends | https://www.state.nj.us/treasury/taxation/inheritance.shtml |
| PA | 4.5%–15% | Children, siblings, others | None | https://www.revenue.pa.gov/FormsandPublications/FormsforIndividuals/Inheritance-Tax/Pages/default.aspx |
Table 3: Estate Planning Tips
| State | Estate Planning Tips |
|---|---|
| CT | Consider gifting during lifetime to reduce taxable estate. Trusts may help reduce exposure. |
| HI | Use marital and charitable deductions. Trusts can help shift wealth outside taxable estate. |
| IL | Careful use of credit shelter trusts recommended due to lower exemption than federal. |
| ME | Use state-specific bypass trusts and annual gift exclusions to minimize tax. |
| MD | Use exempt heirs and charitable gifts to reduce inheritance tax liability. |
| MA | Very low exemption: consider lifetime gifting and irrevocable trusts. |
| MN | Use family business exemptions and gifting strategies to stay below threshold. |
| NY | Avoid the ‘cliff’: ensure estate stays under 105% of exemption or use gifting. |
| OR | Very low exemption: use gifting and charitable planning. Consider irrevocable life insurance trusts. |
| RI | Monitor inflation-indexed exemption. Gifting and family trusts can help. |
| VT | Flat tax: reduce taxable estate with charitable bequests and gifting. |
| WA | High rate: leverage life insurance trusts and gifting strategies. |
| DC | Combine marital deduction with gifting to reduce estate size. |
| IA | No longer applicable (inheritance tax repealed in 2025). |
| KY | Consider bequests to Class A heirs (exempt), or use lifetime gifts to reduce exposure. |
| NE | Transfer assets to exempt heirs or below exemption limits. Consider family trusts. |
| NJ | Structure bequests to avoid taxable heirs. Lifetime gifts may help reduce tax. |
| PA | Use charitable and spousal transfers. Trusts may provide control and reduce taxes. |