Health Basilisk™
Ruth and Dale, a fictional couple, did what a great many Midwestern retirees do: they moved to Arizona, kept the lake house in Minnesota for the summers, and stopped thinking about estate tax the year the federal exemption climbed past anything they would ever own. Their logic was sound as far as it went. With the federal exemption now permanently set at $15 million per person for 2026 — $30 million for a married couple, indexed in the years after — the federal estate tax has become a concern for a very small number of households. What Ruth and Dale did not know is that Minnesota taxes estates above $3 million, that the lake house is Minnesota property no matter where its owners spend the winter, and that the state would eventually ask their children for a return.
On the Retire REGAL® map, the Legacy Planning realm is the last stretch of road before the Grail, and the Health Basilisk™ lies across it. Legacy is often misunderstood as a legal exercise — a will drafted, a trust created, beneficiaries named. Those tools matter. But legacy is also about order: whether assets are positioned in a way that reflects your values, reduces unnecessary burden on others, and does not hand a state a claim your family never saw coming. The state estate tax map is one of the clearest examples of a rule that lives outside the binder.
Two Maps, Not One
The federal map is simple in 2026. Estates below $15 million per person owe nothing, a surviving spouse can generally inherit the unused portion of the first spouse’s exemption through portability, and the top rate above the exemption is 40 percent. For most readers of this blog, that map is clear.
The state map is not. As of 2026, twelve states and the District of Columbia impose their own estate tax, each with its own threshold and rate schedule, and five states impose an inheritance tax — a tax on what the heir receives, keyed to the heir’s relationship to the person who died. Maryland does both. The thresholds range from $15 million in Connecticut, which ties its figure to the federal one, down to $1 million in Oregon. Several of the states with the lowest thresholds are also among the most popular places to retire, or to keep a summer place.
The 2026 State Estate Tax Map — Threshold and Top Rate
- Oregon — $1,000,000 · top rate 16%
- Rhode Island — $1,838,056 · top rate 16%
- Massachusetts — $2,000,000 · top rate 16%
- Minnesota — $3,000,000 · top rate 16%
- Washington — $3,076,000 for deaths through June 30, 2026; $3,000,000 for deaths on or after July 1, 2026 · top rate 35% through June 30, 20% on or after July 1
- Illinois — $4,000,000 · top rate 16%
- District of Columbia — $4,988,400 · top rate 16%
- Maryland — $5,000,000 · top rate 16% (plus an inheritance tax)
- Vermont — $5,000,000 · flat 16%
- Hawaii — $5,490,000 · top rate 20%
- Maine — $7,160,000 · top rate 12%
- New York — $7,350,000 · top rate 16%
- Connecticut — $15,000,000 (tied to the federal exemption) · flat 12%
- Inheritance tax states — Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania. Spouses are exempt in all five; the treatment of children and other heirs varies by state.
Reading the Map
The threshold is only the first line of each entry, and the fine print is where families get surprised.
Some lines are cliffs. In most states, only the amount above the threshold is taxed. New York works differently: once a taxable estate exceeds the exemption by more than 5 percent, the entire estate becomes taxable, not just the excess — a cliff that can make a modest overage expensive. Illinois taxes the whole estate once it crosses $4 million as well. Massachusetts, which reformed its tax in 2023, now functions without a cliff: the first $2 million is sheltered by a credit regardless of the estate’s size.
Portability usually stops at the state line. The federal rule that lets a surviving spouse use the deceased spouse’s unused exemption is not automatic at the state level; most of these states do not offer it. A couple with $5 million in Minnesota who assume their combined exemptions total $6 million may find that the first death wasted one of them — which is why trust structures that preserve the first exemption still matter in state-tax states long after they stopped mattering federally.
Gifts are not always a clean exit. Connecticut is the only state with its own gift tax. New York pulls gifts made within three years of death back into the estate for its own calculation. Everywhere else, lifetime gifts generally leave the state estate — which makes the federal annual exclusion of $19,000 per recipient, per year, a quiet and effective tool in the states with low thresholds.
And the lines move. Washington is the year’s object lesson. In 2025 the state raised its top rate to 35 percent, the highest in the country, and lifted its exclusion to $3 million with indexing. In March of this year the legislature reversed course: for deaths on or after July 1, 2026, the top rate returns to 20 percent and the exclusion resets to $3 million. The same estate, in the same house, owed a different tax depending on which side of July 1 the death fell. That is the Legislative Leviathan™ in plain view. The Tax Kraken™ is what today’s rules cost you; the Leviathan is the rules themselves changing — and no plan built on the permanence of a state’s schedule is finished.
“The map follows the property as much as the person. A state can lose a resident and keep a claim on the house.”
The Map Follows the Property
Ruth and Dale’s mistake was assuming that moving their domicile moved their whole map. It did not. A state with an estate tax generally taxes real estate and tangible property located within its borders even when the owner died a resident of somewhere else. The Arizona couple with a Minnesota lake house, the Florida couple with a Vermont farm, the Texas couple with a Manhattan apartment: each has a non-resident estate tax exposure in a state they no longer live in, computed on the in-state property, and each may also face a second probate — ancillary probate — in that state unless the property is held in a trust or an entity that avoids it. The unfunded-trust problem and the state-map problem meet at the lake house.
Domicile itself is a drawbridge that states police carefully. Changing it is possible, and for a household near a low threshold it can be the single largest lever on the map. But states that lose high-net-worth residents audit the change: where the driver’s license, voter registration, physicians, and the days of the year actually are. A move made on paper is the kind of corrective measure that fails the audit. A move made in fact, documented from the first day, usually holds.
The Inheritance Tax States
The five inheritance tax states tax the heir, not the estate, and the rate depends on who the heir is. Surviving spouses are exempt in all five. Children and other direct descendants are exempt in Kentucky, Maryland, and New Jersey, but not in Pennsylvania, which taxes transfers to direct descendants at 4.5 percent, or in Nebraska, which taxes immediate relatives at 1 percent above a $100,000 exemption per heir. Nieces and nephews and unrelated heirs face higher rates in all five — 15 percent for an unrelated heir in Pennsylvania, for example. Siblings are exempt in Kentucky and Maryland, pay the 1 percent immediate-relative rate in Nebraska, and face higher rates in New Jersey and Pennsylvania. The name on the form is a tax decision in these states in a way it is not elsewhere.
Inheritance taxes also reach assets the estate tax map does not emphasize. A Pennsylvania resident’s IRA passing to a child is generally subject to the state’s inheritance tax, with limited exceptions, in addition to the income tax the child will owe as the account is drawn down under the ten-year rule. The two taxes stack. For a retiree in one of these states with charitable intent, a qualified charitable distribution or a charitable beneficiary designation removes dollars from both calculations at once — one of the clearer cases where the Legacy realm’s charitable tools and the state map point the same direction.
What the Map Asks of the Stronghold
Consider Henry, who sold his business at 68 and found that his net worth had grown past the point where his state’s threshold was comfortable. He chose to move a portion of his assets into an irrevocable trust designed to remove them from his taxable estate, accepting that he could no longer control how those assets were invested or distributed. In exchange, future growth occurred outside his estate and distributions to his children were structured intentionally over time. He retained flexibility elsewhere. The trust complemented the rest of his plan rather than replacing it.
Henry’s move is the advanced end of the toolkit, and it is not the place to start. The order that works for most households runs from least to most permanent. First, know which map you are on — for your domicile and for every piece of real property. Second, make sure titles and beneficiary forms are coordinated so that the first death does not waste an exemption and the lake house does not trigger a second probate. Third, use the annual exclusion deliberately where the threshold is low. Fourth, let the charitable tools — donor-advised funds in high-income years, qualified charitable distributions after 70½ — do double duty. Fifth, consider life insurance owned outside the estate where liquidity for the tax itself is the concern. Only then does an irrevocable trust belong in the conversation, because it is the step that cannot be undone.
The Legacy Realm Questions
Six Questions to Answer Before Assuming the Map Does Not Apply
- Where is your domicile, and could you prove it? License, voter registration, physicians, the days of the year, the address on the returns.
- Where is every piece of real property you own, and does that state have an estate tax, an inheritance tax, or a probate process that will run alongside the one at home?
- Which threshold applies, and is it a cliff? An $8 million estate is below the federal line, above New York’s, and past its 5 percent cliff — so the whole estate, not the excess, is taxed.
- Does your state recognize portability? If not, does the plan preserve the first spouse’s exemption through trust structure, or is it relying on a federal rule the state ignores?
- In an inheritance tax state, who inherits what? The same dollar can be taxed at 0, 4.5, or 15 percent depending on the name on the form.
- When was the map last checked? Thresholds index, legislatures amend, and one state redrew its lines in the middle of this year. A plan reviewed before a move, a sale, or a change in the law is a plan still on the right map.
At This Drawbridge
- Can you cross back? Partly. Domicile can be changed again, titles can be fixed, and beneficiary forms can be updated while you have capacity. Completed gifts and irrevocable transfers cannot be recalled.
- What does it change downstream? Which state’s rules govern, whether a second probate runs, how much of the first spouse’s exemption survives, and how much reaches heirs after two layers of tax instead of one.
- What must be true first? You know which map you are on — for the person and for every property — and the documents were drafted by someone who knew it too.
The Principle Underneath
Although Legacy is the final letter in REGAL, its questions belong in the preparation from the beginning. The state estate tax map is not a reason to fear a move or to keep the lake house out of the family. It is a reason to know which rules the house lives under, so the decision to keep it is made with the cost in view rather than discovered by the children afterward. That discovery is the Basilisk’s last move: it does not take the assets, it leaves a claim on them for the people least equipped, in that week, to answer it.
Ruth and Dale kept the lake house. They also retitled it into their trust, confirmed their Arizona domicile in fact rather than on paper, and started using the annual exclusion toward the grandchildren’s education, which brought the Minnesota exposure down over several summers to something their plan could carry on purpose. The map did not change. Their position on it did — by design, not default.
