Most people believe one of two wrong things about the estate tax: that it will take a big bite out of whatever they leave behind, or that it only exists for billionaires and can be ignored entirely. In southern New England in 2026, both are wrong, and the reason is that three different tax systems are stacked on top of each other, each with its own threshold.
What is the federal number? $15 million and now permanent
Start at the top. Under the One Big Beautiful Bill Act, signed in July 2025, the federal estate and gift tax exemption is $15 million per person beginning in 2026, indexed for inflation going forward, and, unlike the prior regime, with no built-in sunset. A married couple, with basic planning, shields $30 million. Before the 2025 law, the exemption was scheduled to fall to roughly $7 million in 2026; instead Congress moved it up and made it permanent, in the sense that permanent ever means in tax law: until a future Congress changes it.
The practical consequence is that the federal estate tax now touches only a very small number of estates. For nearly everyone else, the federal system matters mainly for two other reasons: the gift and estate exemptions are unified, so large lifetime gifts draw down the same $15 million, and inherited assets generally receive a stepped-up income tax basis at death, which is quietly the more important federal rule for ordinary families.
What is the Massachusetts number? $2 million, no portability
Now the trap door. Massachusetts imposes its own estate tax, and its threshold is $2 million, where it has sat since the 2023 reform raised it from $1 million. Two million dollars sounds like wealth until you price a house in Greater Boston, add retirement accounts and life insurance, and notice that the estate tax base counts nearly everything. Plenty of households that would never describe themselves as rich are over the line.
The 2023 reform also fixed the old cliff, under which crossing the threshold made the entire estate taxable from the first dollar. The current structure uses a credit so that tax falls on value above $2 million rather than on the whole estate, with graduated rates that top out at 16 percent. The mechanics are worth a professional’s confirmation in any real case, but the design point stands: the threshold is now a threshold, not a cliff.
What Massachusetts does not have matters just as much. There is no portability of an unused exemption between spouses, unlike the federal system, which is why credit shelter trust planning still earns its keep here. And there is no Massachusetts gift tax, though lifetime gifts can still interact with the estate tax calculation in ways that reward doing the math before writing the check.
What is the Connecticut twist? The only state gift tax in America
Connecticut runs the third system, with two distinctions. Its estate tax exemption now matches the federal $15 million, a far friendlier number than Massachusetts offers. But Connecticut is also the only state in the country with its own gift tax, unified with its estate tax: taxable lifetime gifts and the estate at death draw on a single exemption, with a flat 12 percent rate above it. For most Connecticut families the high exemption makes this academic. For high-wealth families, it means the give-it-away-while-living strategies that work everywhere else need a Connecticut-specific review.
What does this mean in practice?
Three takeaways. First, if you live in Massachusetts, the estate tax planning conversation starts at $2 million of total assets, not $15 million, and the right response is usually structural: trust design, titling, sometimes lifetime giving, rather than panic. Second, state lines are tax lines: the same estate can owe six figures in one state and nothing next door, which is why domicile shows up in planning conversations. Third, numbers drift. Every figure in this post has changed within the last few years and can change again, which is why the numbers here carry a verification date and any real decision deserves current advice. How these taxes interact with the documents themselves is covered in the companion post on wills and trusts.
