You’re sitting there, maybe with a coffee or something stronger, thinking about the future. Specifically, what happens to your house, that old brokerage account, or even the family business when you're gone. You’ve heard the horror stories. Uncle Sam or some state bureaucrat swooping in to take a massive bite out of your life’s work.
Honestly, the jargon is the worst part.
Most people use "inheritance tax" and "estate tax" like they’re the same thing. They aren't. Not even close. If you want to make sure your kids actually get what you’ve built, you need to know which states are going to leave them alone and which ones are going to send a bill to the funeral.
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The 44 States With No Inheritance Tax
Here’s the big news: Most of the country doesn't have an inheritance tax. As of 2026, there are 44 states (plus D.C.) where your heirs won't pay a dime in inheritance tax.
Basically, if you live in one of these places, your daughter doesn't have to cut a check to the state treasury just because she received your vintage Mustang.
The "Safe" States:
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Notice something?
Florida and Texas are on there. No surprise. But so are California and New York. People get shocked by that. They think "high tax state" means "inheritance tax." Nope. While California might tax your income until you wince, they actually don't have a state-level death tax.
Iowa used to be a problem, but they finally finished phasing theirs out on January 1, 2025. If you’re reading this in 2026, Iowa is officially in the "safe" column.
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Why This Isn't the Whole Story
Don't go popping the champagne just because you live in a "safe" state.
There’s a massive catch.
While 44 states have no inheritance tax, about a dozen of them still have an estate tax. This is where the confusion starts.
Think of it like this:
- Inheritance Tax: Paid by the person who receives the money.
- Estate Tax: Paid by the estate of the person who died before the money even reaches the kids.
If you live in Oregon or Massachusetts, for instance, you have no inheritance tax. Great! But both states have estate taxes that kick in at relatively low levels—around $1 million to $2 million. In the world of real estate and 401(k)s, $1 million is a "normal" house in a lot of neighborhoods.
If your estate is worth $2.5 million in Oregon, the state is going to take a piece of it before your heirs see a cent. So even though there's "no inheritance tax," your family still ends up with less.
The "Dirty Half-Dozen" That Still Tax Heirs
If you're in one of these six states, your heirs are likely going to owe the government:
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania
Wait, Maryland is the "special" one. They are the only state in the entire country that hits you with both an estate tax and an inheritance tax. It’s sort of a double-whammy that catches a lot of families off guard.
In these states, the rate usually depends on how closely related you are to the person who died. Spouses are almost always exempt. Children usually get a pass or a very low rate. But if you leave money to a niece, a best friend, or a cousin? They might get hit with a tax as high as 15% or 16%.
Pennsylvania is famously strict here. Even "Class A" beneficiaries (like adult children) can pay a 4.5% tax on what they inherit. It sounds small until you're talking about a $500,000 house. That’s a $22,500 bill due pretty much immediately.
The 2026 Federal Wildcard
We have to talk about the "One Big Beautiful Bill" (OBBB) Act.
For a long time, everyone was panicking that the federal estate tax exemption—the amount you can pass on for free—was going to "sunset" or drop by half in 2026. People thought it would go from $13 million down to $7 million.
Well, the 2026 rules actually ended up increasing the federal exemption to $15 million per person.
This means that for the vast majority of Americans, the federal government isn't the problem. The real "wealth tax" for the middle class and upper-middle class is happening at the state level.
If you have $5 million and live in Washington state, the feds won't touch you. But Washington state will. They have one of the highest estate taxes in the country, topping out at 20%.
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Moving to Avoid the Tax: Does It Work?
You see it all the time. Someone retires, sells their place in New Jersey, and buys a condo in Florida.
They say it's for the sunshine. Usually, it's for the 0% inheritance tax and 0% estate tax.
But you can't just buy a house in Naples and call it a day. States like New York and Pennsylvania are aggressive. If they think you’re just "pretending" to live in Florida to avoid death taxes, they will audit your estate after you're gone.
To actually "exit" a high-tax state, you’ve basically got to cut ties. New driver’s license. New voter registration. Moving your "near and dear" items—photos, jewelry, the dog. If you still keep a "summer home" in your old state, the tax authorities might argue you never really left.
Actionable Steps for 2026
If you're worried about your legacy being eaten by taxes, don't just sit there.
- Check the "Cliff": If you're in New York, look up the "tax cliff." If your estate is even 5% over the exemption limit, New York taxes the entire estate, not just the overage. It’s brutal.
- Gifting while living: In 2026, you can give away $19,000 per person per year without even reporting it. If you have two kids and they are both married, you and your spouse could technically move $152,000 out of your taxable estate every single year just by writing checks to them and their spouses.
- Trusts aren't just for billionaires: Irrevocable Life Insurance Trusts (ILITs) can keep life insurance payouts from being counted as part of your taxable estate. This is a game-changer in states with low exemption thresholds.
- The "Spousal" Move: If you live in a state like Maryland or Kentucky, make sure your assets are titled correctly. Transfers to spouses are almost always tax-free, but if you don't plan for what happens when the second spouse dies, that's when the tax man catches up.
Tax laws in 2026 are more favorable at the federal level than we expected, but state-level inheritance and estate taxes remain a minefield. Knowing the difference between "tax-free" and "tax-hidden" is the only way to make sure your family keeps what you've earned.
Double-check your state's current exemption threshold today. It changes more often than you'd think.