In an article published in Financial Advisor on March 27, 2025, Paul Riekhof explains that when it comes to the full impact of death and taxes there are state taxes to consider, in addition to federal taxes – and there are sharp distinctions among various state laws.
Riekhof explains that 13 jurisdictions impose a state estate tax while five jurisdictions impose inheritance taxes based upon the relationship between the decedent and the beneficiaries. He adds that Maryland is the only state currently imposing both an estate tax and an inheritance tax.
Riekhof writes that the state-to-state exemption levels vary widely. In Oregon, the exemption level is $1 million, while in Connecticut it is $13.99 million, the same as it is under federal law. The differences between state and federal law create confusion regarding the impact of these taxes, which can lead to an otherwise avoidable tax payment.
For the five states that impose inheritance taxes, the exemption levels are typically very low ($100,000 or less) to nonexistent, Riekhof explains. The imposition of the tax and the applicable rates depends largely upon the degree of relationship of the beneficiary to the decedent.
Riekhof states that residents of any of the 17 states imposing state-based death taxes, as well as nonresidents with real or tangible property in those states, need to understand the taxes and take them into account during their estate planning process. “Through creative planning, there are often ways to minimize or even eliminate the tax burdens while still accomplishing the goals of the grantor.”
Read the full article “The Unfortunate Burden: Dealing With State Estate Taxes.” (PDF)
