Estate taxes could reduce your kids' inheritance after you die. Here’s how to minimize those taxes and maximize what you leave to loved ones

And as USA Today warns, that can affect how much your beneficiaries inherit (1).

The federal estate tax threshold is quite high — $15 million in 2026 — so most people won't have to worry about it (2). But as USA Today notes, some states have much lower thresholds.

Currently, 12 states and the District of Columbia levy a state estate tax, including Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington.

Most states only charge estate taxes above a certain threshold. For example, if the state estate-tax threshold is $2 million and your estate is valued at $2.5 million, $500,000 of it would be taxed.

Other states have quirks that can dramatically increase estate taxes.

Here’s a closer look at what that means and how to plan your estate to minimize estate taxes.

Be careful in ‘cliff states’ or states with low estate-tax thresholds

You need to consider potential estate taxes if you own a paid-off home. A home worth $500,000 plus what is left in a retirement account could easily push an estate over the $1-million mark.

This could be a concern if you live in a state with a low estate-tax threshold like:

• Massachusetts ($2-million estate-tax threshold)
• Minnesota ($3-million estate-tax threshold)
• Washington ($3-million estate-tax threshold, effective as of July 1, 2025)

As USA Today notes, it’s wise to be particularly cautious if you live in either of the two so-called “cliff states”: Illinois and New York.

If so, your entire estate could be taxed if you cross their respective estate-tax threshold by even one dollar.

Illinois has a $4-million threshold. Above that, Illinois levies a 0.8% to 16% progressive tax on the entire estate.

New York has a $7.6-million threshold. Above that, New York State levies a progressive tax of 3.06% to 16%. But if an estate’s value hits 105% or more of the state threshold, taxes apply to the entire estate.

How to limit the impact of estate taxes

The most effective way to reduce your estate tax burden is to start planning now, while you have time to act. Here are several strategies to consider (3):

Set up a trust

Trusts are one of the most powerful tools for reducing estate taxes, though they come in different forms depending on your goals.

Make sure you understand the difference between a revocable trust (which can be changed) and an irrevocable trust (which cannot). Both allow you to transfer assets to beneficiaries outside of probate, but only an irrevocable trust removes assets from your taxable estate.

For homeowners, a qualified personal residence trust (QPRT) allows you to transfer your home into a trust while you continue living there for a set number of years. Any appreciation in value during that period isn’t counted against your estate.

Gift assets while you’re still alive

The IRS allows you to gift up to $19,000 per person per year without triggering gift tax. Married couples can combine that for a $38,000 annual gift to any single recipient (4).

Over many years, these gifts can reduce the size of your estate to avoid triggering estate taxes.

For grandchildren who might be too young to manage large gifts, consider funding a 529 college savings account on their behalf. Contributions qualify for the annual gift exclusion, and the funds grow tax-free as long as they’re used for education (5).

Make charitable donations

Gifts to qualified charities — whether made during your lifetime or through your estate plan, reduce the value of your taxable estate. Lifetime donations come with the added benefit of an income tax deduction now.