18 States With Scary Death Taxes
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18 States With Scary Death Taxes

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Most people shouldn't be afraid of federal "death taxes." For 2019, only estates worth $11.4 million or more ($22.8 million or more for a married couple) are slashed by federal estate taxes, and only a small percentage of Americans have accumulated that much wealth. Plus, there's no federal inheritance tax to spook your heirs. (Estate taxes are paid by the estate and based on the estate's overall value, while inheritance taxes are paid by an individual heir on whatever property they inherit.)

But don't feel too comfy if your assets are below the federal estate tax threshold—a tax bill from your state could be lurking in the shadows. While a growing number of states are reducing or eliminating their death taxes to dissuade well-off retirees from moving to more tax-friendly jurisdictions, 12 states and the District of Columbia still impose an estate tax and six states have an inheritance tax on the books. (Maryland has both!) So if you live in one of the states listed (alphabetically) below, beware. Your heirs could be haunted by a state tax collector.

SEE ALSO: State-by-State Guide to Taxes on Retirees

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18 States With Scary Death Taxes | Slide 2 of 19

Connecticut

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Estate tax: Yes

Estate tax exemption level: $3.6 million

Estate tax rates: 7.2% - 12%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Connecticut's full state tax profile

The Constitution State's current estate tax exemption amount is $3.6 million. It will creep up to $5.1 million on January 1, 2020. The tax due is limited to $15 million.

Connecticut is the only state with a gift tax on assets you give away while you're alive. If you made taxable gifts during the year, state law requires that you file a Connecticut gift tax return to identify such gifts. However, taxes (at rates ranging from 7.8% to 12%) are due only when the aggregate value of gifts made since 2005 exceeds $3.6 million.

SEE ALSO: What Do You Know About Wills and Trusts?

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18 States With Scary Death Taxes | Slide 3 of 19

District of Columbia

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Estate tax: Yes

Estate tax exemption level: $5,681,760

Estate tax rates: 12% - 16%

Inheritance tax: No

Inheritance tax rates: N/A

Go to the District of Columbia's full state tax profile

The District of Columbia has a trick-or-treat estate tax. The 2019 exclusion amount for the tax is $5,681,760, which is pretty high when compared to other places in the U.S. As a result, most estates don't have to pay the tax. That's the treat. But the lowest possible estate tax rate is on the high end. So, if the tax does apply, D.C. will take at least 12% of the estate's value. That's the trick.

SEE ALSO: 10 States with the Highest Gas Taxes

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18 States With Scary Death Taxes | Slide 4 of 19

Hawaii

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Estate tax: Yes

Estate tax exemption level: $5.49 million

Estate tax rates: 10% - 15.7%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Hawaii's full state tax profile

At $5.49 million, the Aloha State has one of the higher state estate tax exclusion amounts, and it isn't adjusted annually for inflation. That makes the tax less frightening for Hawaii residents.

The current Hawaii estate tax rates range from 10% to 15.7%. However, starting in 2020, the highest rate creeps up to 20% for estates worth more than $10 million.

SEE ALSO: Great Places to Retire Early Near the Beach

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18 States With Scary Death Taxes | Slide 5 of 19

Illinois

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Estate tax: Yes

Estate tax exemption level: $4 million

Estate tax rates: 0.8% - 16%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Illinois' full state tax profile

Since Illinois is the least taxpayer-friendly state in the country, you shouldn't be startled to hear that it has an estate tax. The exemption amount is $4 million (after inclusion of adjusted taxable gifts), which at least isn't too frightening. The exemption amount isn't adjusted annually for inflation, either.

SEE ALSO: 14 States That Won't Tax Your Pension

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18 States With Scary Death Taxes | Slide 6 of 19

Iowa

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Estate tax: No

Estate tax exemption level: N/A

Estate tax rates: N/A

Inheritance tax: Yes

Inheritance tax rates: 5% - 15%

Go to Iowa's full state tax profile

The Hawkeye State's inheritance tax does not apply if the estate as a whole is worth less than $25,000. In addition, no tax is due on property inherited by a spouse, parent, grandparent, great-grandparent, children, stepchild, grandchild, great-grandchild or other lineal ascendant or descendant.

The tax can be hair-raising for other heirs, though. Brothers, sisters, sons-in-law and daughters-in-law will be hit with a 5% to 10% tax, depending on the value of the property they inherit. Uncles, aunts, nieces, nephews and all other people inheriting property are taxed at rates ranging from 10% to 15%.

SEE ALSO: 12 Surprisingly Great Places to Retire in the Midwest

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18 States With Scary Death Taxes | Slide 7 of 19

Kentucky

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Estate tax: No

Estate tax exemption level: N/A

Estate tax rates: N/A

Inheritance tax: Yes

Inheritance tax rates: 4% - 16%

Go to Kentucky's full state tax profile

As with other inheritance tax structures, the amount of Kentucky inheritance tax owed depends on the heir's relationship to the person who died and the value of the inherited property.

The tax isn't scary at all for the decedent's spouse, parents, children, grandchildren and siblings. They don't have to pay the tax.

But it can be a nightmare for other heirs. Nieces, nephews, daughters-in-law, sons-in-law, aunts, uncles and great-grandchildren are taxed at rates ranging from 4% to 16%, depending on the value of the property inherited (the first $1,000 of property is exempt). All other heirs are taxed at rates ranging from 6% to 16% (their exemption is only for the first $500 of property).

SEE ALSO: 10 States with the Highest Beer Taxes

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18 States With Scary Death Taxes | Slide 8 of 19

Maine

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Estate tax: Yes

Estate tax exemption level: $5.7 million

Estate tax rates: 8% - 12%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Maine's full state tax profile

The Pine Tree State has one of the less-scary estate taxes, because it only applies to estates worth $5.7 million or more. Since most estates aren't that valuable, Maine's tax doesn't ensnare many estates.

Maine's estate tax rates are comparatively reasonable, too. The top rate is only 12%, which is tied with Connecticut for the lowest top rate in the nation.

SEE ALSO: 12 Smart Places to Retire (Waterville, Maine, is one of them)

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18 States With Scary Death Taxes | Slide 9 of 19

Maryland

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Estate tax: Yes

Estate tax exemption level: $5 million

Estate tax rate: 0.8% - 16%

Inheritance tax: Yes

Inheritance tax rates: 10% (flat rate)

Go to Maryland's full state tax profile

For 2019, the Free State's estate tax exemption is $5 million in 2019, plus any predeceased spouse's unused exclusion amount. The exemption amount is currently not scheduled to increase for 2020. Rates range from 0.8% to 16%.

While Maryland also has an inheritance tax (with a flat 10% rate), the list of heirs exempt from paying it includes the decedent's spouse, parents, grandparents, children, grandchildren, siblings, son-in-law, daughter-in-law and surviving spouse of a deceased child. In addition, property not exceeding $1,000 passing to any one person is not subject to the tax.

SEE ALSO: The 10 Least Tax-Friendly States in the U.S.

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18 States With Scary Death Taxes | Slide 10 of 19

Massachusetts

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Estate tax: Yes

Estate tax exemption level: $1 million

Estate tax rates: 0.8% - 16%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Massachusetts' full state tax profile

One of only two states with its exemption stuck at $1 million, the Bay State is less friendly to estates than most other states, including neighboring northeastern states that also made our list, such as Rhode Island and Connecticut.

SEE ALSO: 30 Cheapest Places Where You'll Really Want to Retire

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18 States With Scary Death Taxes | Slide 11 of 19

Minnesota

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Estate tax: Yes

Estate tax exemption level: $2.7 million

Estate tax rates: 13% - 16%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Minnesota's full state tax profile

The North Star State's exemption for 2019 is $2.7 million. It will rise to $3 million in 2020.

But Minnesota looks back to include as part of your estate any taxable gifts made within three years prior to death.

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18 States With Scary Death Taxes | Slide 12 of 19

Nebraska

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Estate tax: No

Estate tax exemption level: N/A

Estate tax rates: N/A

Inheritance tax: Yes

Inheritance tax rates: 1% - 18%

Go to Nebraska's full state tax profile

With Nebraska's inheritance tax, the closer the heir's relationship to the decedent, the smaller the tax rate and the greater the exemption. For example, the tax on heirs who are immediate relatives is only 1% and does not apply to property that is worth less than $40,000. For remote relatives, the tax rate is 13% and the exemption amount is $15,000. For all other heirs, the tax is imposed at an 18% rate on property worth $10,000 or more.

SEE ALSO: 10 States With the Lowest Gas Taxes

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18 States With Scary Death Taxes | Slide 13 of 19

New Jersey

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Estate tax: No

Estate tax exemption level: N/A

Estate tax rates: N/A

Inheritance tax: Yes

Inheritance tax rates: 11% - 16%

Go to New Jersey's full state tax profile

New Jersey imposes an inheritance tax ranging from 11% to 16% on inherited property with a value of $500 or more. The amount of tax due is based on who specifically receives the property and how much the property is worth.

The decedent's spouse; children, grandchildren, etc.; parents, grandparents, etc.; mutually acknowledged children; and stepchildren (but not step-grandchild or their descendants) do not have to pay the tax. The first $25,000 of property inherited by the decedent's sibling, son-in-law or daughter-in-law) is exempt as well. After that, they must pay the inheritance tax at rates ranging from 11% to 16%. All other individual heirs pay a 15% tax on the first $700,000 of inherited property and a 16% tax on everything over $700,000.

SEE ALSO: 15 States With a "Marriage Penalty" in Their Tax Brackets

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18 States With Scary Death Taxes | Slide 14 of 19

New York

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Estate tax: Yes

Estate tax exemption level: $5.74 million

Estate tax rates: 3.1% - 16%

Inheritance tax: No

Inheritance tax rates: N/A

Go to New York's full state tax profile

The Empire State has been gradually increasing its estate tax threshold. For 2019, it's $5.74 million. This amount is adjusted annually for inflation.

That's a pretty generous threshold, but New York's estate tax contains a very scary condition: If your estate totals more than 105% of the threshold, the entire estate will be taxed.

SEE ALSO: The Most Tax-Friendly States in the U.S.

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18 States With Scary Death Taxes | Slide 15 of 19

Oregon

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Estate tax: Yes

Estate tax exemption level: $1 million

Estate tax rates: 10% - 16%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Oregon's full state tax profile

The Beaver State is the most frightening place in the U.S. to die if you're concerned about estate taxes. Oregon has resisted the trend to raise its estate tax exemption (or even adjust it for inflation). The state's estate tax still kicks in for estates valued at as little as $1 million. In addition, it also imposes a relatively high 10% tax rate on even the smallest of qualifying estates.

SEE ALSO: Millionaires in America: All 50 States Ranked

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Pennsylvania

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Estate tax: No

Estate tax exemption level: N/A

Estate tax rates: N/A

Inheritance tax: Yes

Inheritance tax rates: 4.5% - 15%

Go to Pennsylvania's full state tax profile

The Keystone State's inheritance tax doesn't apply to heirs who inherit property from a spouse or child aged 21 or younger. The tax is imposed at a 4.5% rate on property inherited by direct descendants and lineal heirs. The Pennsylvania tax is imposed at a 12% rate for people who inherit property from a sibling and at a 15% rate for all other heirs.

A 5% discount is allowed if Pennsylvania inheritance taxes are paid within three months of the decedent's death.

SEE ALSO: 12 States That Won't Tax Your Retirement Income

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18 States With Scary Death Taxes | Slide 17 of 19

Rhode Island

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Estate tax: Yes

Estate tax exemption level: $1,561,719

Estate tax rates: 0.8% - 16%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Rhode Island's full state tax profile

The Ocean State adjusts its estate tax exemption annually for inflation. But the tax has a fiendishly low threshold: Rhode Island is one of only three states that tax your estate if it's worth less than $2 million.

SEE ALSO: 6 Great Places to Retire in New England

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18 States With Scary Death Taxes | Slide 18 of 19

Vermont

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Estate tax: Yes

Estate tax exemption level: $2.75 million

Estate tax rate: 16% (flat rate)

Inheritance tax: No

Inheritance tax rates: N/A

Go to Vermont's full state tax profile

Vermont's estate tax has an average exemption level, but be warned: The 16% tax is a flat rate due on every dollar above that threshold. That, coupled with high state income taxes while you're alive, makes the Green Mountain State a scary place for the wealthy.

SEE ALSO: 50 Best Places to Retire in the U.S.

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18 States With Scary Death Taxes | Slide 19 of 19

Washington

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Estate tax: Yes

Estate tax exemption level: $2.193 million

Estate tax rates: 10% - 20%

Inheritance tax: No

Inheritance tax rates: N/A

Go to Washington's full state tax profile

The Evergreen State's estate tax exemption for 2019 is $2,193,000. This amount is indexed to inflation, so it could rise next year.

In addition to its relatively low threshold, Washington's estate tax rates are unusually high. But Washington offers an additional $2.5 million deduction for family-owned businesses valued at less than $6 million.

SEE ALSO: 20 Great Places to Retire Near the Mountains

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