You might look at the $13.61 million federal exemption and think you are safe from the 'death tax.' But if you live in one of the 17 states that levy their own estate or inheritance taxes, your heirs could be in for a nasty surprise.
Estate Tax vs. Inheritance Tax
An estate tax is levied on the total value of the deceased person's estate before it is distributed. An inheritance tax is levied on the person receiving the money. The rate often depends on the heir's relationship to the deceased (spouses and children usually pay less or nothing; distant relatives or friends pay more).
Note
The Double Whammy
Maryland is the only state that levies both an estate tax and an inheritance tax.
The Low Exemption Trap
States like Massachusetts and Oregon have estate tax exemptions as low as $1 million or $2 million. If you own a house and a decent 401(k) in these states, you are likely subject to state estate taxes, even though you are nowhere near the federal limit.
Notable State Exemption Limits (2024)
| State | Tax Type | Exemption Limit |
|---|---|---|
| Massachusetts | Estate Tax | $2,000,000 |
| Oregon | Estate Tax | $1,000,000 |
| New York | Estate Tax | $6,940,000 |
| Pennsylvania | Inheritance Tax | $0 (varies by heir) |