9 States Where a $4M Estate Still Owes Death Taxes in 2026
Madison Partners | April 2026 | 8 min Read
The federal estate tax exemption just climbed to $15 million per person in 2026, a historic high. So if you have a $4 million estate, you’re safe, right?
Not necessarily. Twelve states and the District of Columbia run their own estate taxes, and five more charge inheritance taxes. The thresholds in these states can be dramatically lower than the federal number. In Oregon, the bar is $1 million. In Rhode Island, it’s under $2 million. And inheritance taxes don’t care about the size of your estate at all, they care about who inherits.
Here are the nine states where a $4 million estate can still owe a surprising amount in death taxes in 2026, and what you can do about it.
In 2026, a $4 million estate can still owe state-level death taxes in Oregon, Rhode Island, Massachusetts, Minnesota, Washington, Kentucky, Nebraska, New Jersey, and Pennsylvania. Five of these states levy an estate tax with exemptions below $4 million. The other four levy inheritance taxes that can hit heirs regardless of estate size, depending on their relationship to the deceased. Maryland, uniquely, imposes both — though its estate tax exemption is $5 million.
1
Oregon: The Lowest Threshold in the Country
Oregon has the most aggressive estate tax exemption of any state. The exemption sits at just $1 million and isn’t adjusted for inflation, meaning it hasn’t moved in years while home values and retirement accounts have climbed.
A $4 million estate in Oregon would face state estate tax on the $3 million above that threshold. Rates run from 10% to 16% depending on the size of the taxable estate. Using Oregon’s graduated structure, that can mean a state tax bill well into the low six figures, before any federal tax even enters the picture.
Here’s the wrinkle most people miss: Oregon’s tax can hit non-residents too. If you live in Florida but own a vacation home in Bend, that property can pull your estate into Oregon’s system. The tax follows the property, not the person.
If you own Oregon real estate, this belongs on your estate planning checklist even if you live elsewhere.
Source: AARP — 16 States With Estate or Inheritance Taxes
2
Rhode Island: A Quietly Low Bar
Rhode Island’s estate tax exemption is adjusted annually for inflation, but it still starts lower than most. For 2026, the exemption is $1,838,056, the second-lowest in the country.
A $4 million Rhode Island estate would be taxed on roughly $2.16 million of value. Rates run from 0.8% to 16%, and the top rate kicks in quickly. Unlike the federal system, Rhode Island’s exemption is not portable between spouses, meaning if the first spouse doesn’t use the exemption, it disappears. That’s a common and expensive oversight for couples who assume their plans mirror federal rules.
Many Rhode Island estates get unexpectedly pulled in because a primary residence, a second home on the coast, and a retirement account together clear $2 million without much effort.
Source: AARP — 16 States With Estate or Inheritance Taxes
3
Massachusetts: $2 Million and Not Adjusting
Massachusetts raised its exemption from $1 million to $2 million in late 2023, an improvement, but still the third-lowest in the country. The $2 million threshold does not adjust for inflation, so it effectively shrinks every year in real terms.
A $4 million Massachusetts estate would owe tax on $2 million of value, with rates ranging from 0.8% to 16%. And here’s the part that catches people: Massachusetts’ exemption is also not portable between spouses. A couple with $4 million combined needs deliberate planning, typically using a credit shelter trust structure, to preserve both spouses’ $2 million exemptions. Skip that planning, and the second spouse’s estate could owe tax that was entirely avoidable.
If you’re a Massachusetts resident with combined assets between $2M and $4M, the difference between thoughtful planning and none can easily be $100,000 or more in state tax.
Source: AARP — 16 States With Estate or Inheritance Taxes
4
Minnesota: $3 Million, Frozen in Time
Minnesota’s estate tax exemption is $3 million, and like Massachusetts, it doesn’t adjust for inflation. A $4 million Minnesota estate would be taxed on $1 million of value, with rates starting at 13% and topping out at 16%.
Minnesota also has an unusual three-year lookback on gifts. Any federally taxable gifts made within three years of death get pulled back into your Minnesota taxable estate, so deathbed gifting strategies don’t work here the way they might in other states. Minnesota also doesn’t offer portability between spouses.
For families with a mix of real estate, retirement accounts, and life insurance, the $3 million line is easier to cross than it seems. A paid-off house in a Twin Cities suburb, a 401(k) built over 30 years, and a life insurance policy can hit $3 million on their own.
Source: Faegre Drinker — 2026 Estate Tax Exemption and Planning Considerations
5
Washington: The Highest Rate in the Nation
Washington is the only state that changed its estate tax significantly for 2026, and not in a taxpayer-friendly direction. For the first half of 2026, the exemption is $3.076 million. On July 1, 2026, it drops to $3 million. Washington also raised its top rate to 35%, the highest estate tax rate of any state.
A $4 million Washington estate would be taxed on roughly $924,000 to $1 million of value, depending on when the death occurs in 2026. The graduated rates make the math complex, but the top 35% bracket means large estates in Washington can face a bigger state tax bite than almost anywhere else in the country.
Washington also doesn’t allow portability, so spousal planning matters. And the state has no income tax, a benefit many retirees value, but its estate tax regime is among the most aggressive in the country.
Source: AARP — 16 States With Estate or Inheritance Taxes
Washington’s estate tax rates run from 10 percent to 35 percent. With its 35 percent rate, Washington has the highest possible state estate tax rate in the U.S.
— AARP, March 2026
6
Kentucky: An Inheritance Tax That Depends on Who Gets What
Kentucky doesn’t have an estate tax. It has an inheritance tax, which is different and the distinction matters.
Estate taxes are paid by the estate, before assets pass to heirs. Inheritance taxes are paid by each heir, based on what they receive and how closely they’re related to you. In Kentucky, spouses, parents, children, grandchildren, and siblings pay nothing.
But leave assets to a niece, nephew, in-law, aunt, uncle, or great-grandchild, and the tax ranges from 4% to 16% on amounts over $1,000. Leave assets to a friend, an unmarried partner, or a more distant relative, and the rate jumps to 6% to 16% on amounts over $500. A $4 million bequest to a favorite nephew could easily trigger a six-figure Kentucky tax bill.
If you’re leaving meaningful amounts to anyone who isn’t a spouse, child, or sibling, Kentucky’s rules deserve careful review.
Source: AARP — 16 States With Estate or Inheritance Taxes
7
Nebraska: Even Close Family Can Pay
Nebraska’s inheritance tax is unusual because it applies even to some close family members. Spouses and anyone 21 or younger pay nothing. But after that, the exemptions get small fast.
Parents, grandparents, siblings, children, and grandchildren pay 1% on inherited property over $100,000. Aunts, uncles, nieces, and nephews pay 11% on amounts over $40,000. Everyone else pays 15% on amounts over $25,000.
For a $4 million estate divided among adult children and grandchildren, the 1% tier might sound modest, but it applies before the federal estate tax and on top of any other state taxes. And the lower exemption thresholds for more distant heirs can create real costs for blended families or estates that include charitable or non-family beneficiaries.
Nebraska is one of the few states where even a modest estate left to immediate family can generate an inheritance tax bill.
Source: AARP — 16 States With Estate or Inheritance Taxes
8
New Jersey: No Estate Tax, But the Inheritance Tax Lingers
New Jersey eliminated its estate tax in 2018, but kept the inheritance tax and that’s what matters for a $4 million estate.
Spouses, civil union and domestic partners, parents, grandparents, children, grandchildren, and great-grandchildren pay nothing. Siblings, sons-in-law, and daughters-in-law get the first $25,000 tax-free, then pay 11% to 16% on amounts above that. Everyone else, nieces, nephews, friends, unmarried partners, pays 15% on the first $700,000 and 16% on anything above.
A $4 million estate passed to a sibling could face roughly $600,000 in New Jersey inheritance tax. Left to a friend or unmarried partner, the number climbs higher. The tax also applies to gifts made within three years of death, which closes a common planning loophole.
Source: AARP — 16 States With Estate or Inheritance Taxes
9
Pennsylvania: A Tax Even Children Can’t Escape
Pennsylvania’s inheritance tax is the one most residents underestimate. There’s no estate tax, and the rates sound modest, but they apply to almost every heir, with few exemptions and no meaningful thresholds.
Surviving spouses pay nothing. Children under 21 inheriting from a parent pay nothing. Active-duty military deaths are exempt. Beyond that, the rates kick in from the first dollar:
- 4.5% for adult children, parents, grandparents, and grandchildren
- 12% for siblings
- 15% for nieces, nephews, friends, and everyone else
On a $4 million estate passed to adult children, the Pennsylvania inheritance tax alone would run roughly $180,000, paid by the heirs within nine months of death, typically in cash. Unlike the federal estate tax, Pennsylvania’s tax starts at dollar one. There’s no six-figure buffer.
If you’re a Pennsylvania resident, your adult children will pay state tax on essentially everything you leave them — so liquidity planning matters.
Source: AARP — 16 States With Estate or Inheritance Taxes
Common Questions
Does Maryland tax a $4 million estate in 2026?
Maryland’s estate tax exemption is $5 million, so a $4 million estate wouldn’t owe Maryland estate tax. But Maryland also has an inheritance tax, the only state with both. The inheritance tax is a flat 10% on bequests to anyone outside a defined group of close relatives (spouses, children, parents, siblings, grandchildren, and in-laws are exempt). So a $4 million estate left to a niece or friend in Maryland could face a $400,000 state tax bill.
Can I avoid state estate tax by moving to a state that doesn’t have one?
Sometimes, but not always. Changing your domicile requires actually moving, selling or substantially reducing ties to your old state. And even if you move, assets physically located in an estate tax state (like a vacation home in Oregon or rental property in Massachusetts) can still be pulled into that state’s tax system. Domicile changes also take time to hold up under scrutiny; states with aggressive audit practices often challenge moves made late in life.
What’s the difference between an estate tax and an inheritance tax?
The estate tax is paid by the estate itself, out of assets, before anything passes to heirs. The inheritance tax is paid by each individual heir, based on what they receive and how they’re related to you. Estate taxes have a single exemption covering the whole estate. Inheritance taxes have different exemptions and rates for different heirs, so the same gift to a spouse, a child, and a friend can be taxed three different ways.
Do any of these states tax retirement accounts or life insurance differently?
Generally, state estate and inheritance taxes apply to the value of your assets at death, including retirement accounts, life insurance proceeds payable to the estate, real estate, and investments. Life insurance paid directly to a named beneficiary often sits outside the estate for tax purposes, which is one reason irrevocable life insurance trusts (ILITs) remain a common planning tool in high-tax states. Rules vary by state, so specifics matter.
How often do these state exemptions change?
Several don’t change at all. Massachusetts ($2M), Minnesota ($3M), Oregon ($1M), Vermont ($5M), and Hawaii ($5.49M) all have fixed exemptions that aren’t indexed for inflation. Others, like Rhode Island and the District of Columbia, adjust annually. Connecticut matches the federal exemption. Washington’s exemption dropped mid-year in 2026. Keeping current on the state you live in and any state where you own property, is part of ongoing estate planning.
Where Madison Partners Fits In
Estate planning rules vary wildly by state, and the interaction between federal and state law can turn a “simple” estate into a complex one fast. Rules of thumb help, but the moves that actually save money, credit shelter trusts, ILITs, domicile planning, strategic gifting, depend on the specifics of your situation, your family, and where your assets sit.
If you’d like to talk through how any of this applies to you, the team at Madison Partners is happy to have that conversation. We coordinate with estate planning attorneys and tax professionals to help clients build plans that hold up under the rules that actually apply to them, not the ones they assumed applied.
This content is for educational purposes only and should not be considered financial, tax, legal, or investment advice. Individual circumstances vary, and readers should consult with a qualified financial advisor, tax professional, or attorney before making decisions based on this information. Madison Partners does not guarantee the accuracy of third-party data cited herein.
