Married couples and state estate taxes in 2026

The first death: the marital deduction

Everything that passes to a surviving spouse who is a US citizen, outright or in a qualifying trust, is deducted from the federal taxable estate under 26 U.S.C. 2056. The states start from the federal taxable estate, so the same deduction applies to the state tax: a couple can leave any amount to each other without a state or federal estate tax at the first death. A spouse who is not a US citizen is the exception; the deduction then requires a qualified domestic trust (noncitizen spouse). Inheritance-tax states are simpler still: Pennsylvania, New Jersey, Kentucky, Nebraska and Maryland all exempt the surviving spouse.

The second death: who keeps the first exemption

Federal portability is written in 26 U.S.C. 2010(c): the survivor's applicable exclusion is the basic exclusion plus the unused amount of the last deceased spouse, provided the executor elected it on a timely estate tax return. A couple worth $25,000,000 who leave everything to each other owes $0 of federal tax at the second death with portability, $4,000,000 without it. Maryland follows the same logic for its own exclusion, under Tax-General section 7-309, with an election on a timely Maryland return of the first spouse and a cap of $5,000,000. Hawaii allows it too, capped at its $5,490,000 exclusion. New York, Illinois and Washington say expressly that a federal portability election does not carry into their tax; the other states publish no portability rule in the pages and forms read for this site.

What everything to the spouse costs, state by state

The table compares two plans for a couple whose estate is $10,000,000, and then $6,000,000, with no growth between the deaths. Plan A leaves everything to the survivor. Plan B has the first spouse to die leave an amount equal to the state exemption, or half the estate if that is less, in a credit shelter trust for the survivor; the trust is not part of the survivor's estate at the second death.

Three groups appear. In Maryland and Hawaii, portability already gives the survivor two exemptions, so the trust changes nothing at these amounts. In Connecticut the exemption equals the federal $15,000,000, so a $10,000,000 couple owes nothing either way. Everywhere else the trust saves real money, and the saving is largest where the exemption is high relative to the estate and the tax is steep around it: in New York the second estate drops under the $7,350,000 exclusion and the cliff never applies, and in Vermont the second estate falls back to the $5,000,000 line.

How a credit shelter trust works, and what it costs

A credit shelter trust, also called a bypass or family trust, is created by the will or the revocable trust of the first spouse to die. It receives an amount sized to the state exemption, often by a formula clause, and pays income to the survivor, sometimes principal for health and support, before passing to the children. Because the survivor does not own it, it is not in the survivor's estate, and any growth after the first death escapes state tax too. The calculator lets you add growth to see that effect. The trade-offs are practical: a separate trust with its own records and tax filings, and a plan fixed at the first death that may suit a later move to another state less well. Drafting belongs to an estate attorney in the state concerned; this page only shows the tax arithmetic.

Federal portability still matters in these states

Even where the state ignores it, the federal election is made on Form 706 filed for the first spouse, within nine months of death plus the six-month extension, and executors who were not required to file can still elect within five years under Rev. Proc. 2022-32 (the IRS procedure). An estate in Massachusetts or Oregon that files a state return at the first death can also file a federal return only to elect portability, so that the survivor keeps the unused federal amount in reserve.usd(FX)} in reserve. A New York couple with $10,000,000 can therefore owe $1,067,600 to the state at the second death and nothing to the federal government, as the table shows. The state pages give the forms: Maryland, Massachusetts, New York, Washington.