Money or property you inherit may be subject to estate taxes and inheritance taxes, but it’s not likely. Most estates are not rich enough to qualify for the federal estate tax. The federal estate tax as of the 2025 tax year applies only to the value of an estate that exceeds $13.99 million, up from $13.61 million in 2024. Surviving spouses are exempt.

Moreover, most states have neither an estate tax, which is levied on the estate, nor an 澳洲幸运5官方开奖结果体彩网:inheritance tax, which is assessed against the recipient 🍬of the inheritance.

A dozen states do levy estate taxes, and six have inheritance taxes. All set their limits lower than the federal thresholds. The lowest thresholds are $1 million. The highest estate tax rate is 20%.

Estate Taxes: An Overview

Estate taxes, whether federal or state, are assessed on the estate’s 澳洲幸运5官方开奖结果体彩网:fair market value (FMV), not on the price that the deceased paid.

This means that any 澳洲幸运5官方开奖结果体彩网:appreciation in the estate’s assets over time will be taxed, but it protects those who inherit assets that have dropped in value. For example, if a house was bought at ♋$5 million, but its current market value is $4 million, the latter ꦇamount will be used for tax purposes.

Any part of the estate that is bequeathed to a surviving spouse is not counted in the total amount and isn’t subject to estate tax. The right of spouses to leave any amount to each other is known as the 澳洲幸运5官方开奖结果体彩网:unlimited marital deduction.

When the surviving spouse who inherited an estate dies, the beneficiaries may then owe estate taxes if the estate’s value exceeds the exclusion limit. Other 澳洲幸运5官方开奖结果体彩网:deductions, including charitable donations or any debts or fees that come with the estate, are excluded from the final calculation.

Declining an Inheritance

An heir due to receive money or other assets can choose to decline the inheritance through the use of 澳洲幸𒐪运5官方开奖结果体彩网𓂃:an inheritance or estate waiver. The waiver is a legal documenꦜt declining the rights to🔯 the inheritance.

In such an instance, the executor of the will would then name a new 澳洲幸运5官方开奖结果体彩网:beneficiary of the inheritance.

An heir might choose to waive their inheritance to avoid paying taxes or to avoid having to maintain a house or other structure. A person in a 澳洲幸运5官方开奖结果体彩网:bankruptcy proceeꦑding might choose to sign a waiver so that the property can’t be seized by cr🅷editors.

State laws determine how the waivers work.

State Estate and Inheritance Taxes

The number of jurisdictions that have estate or inheritance taxes is declining, as opposition has risen to what some call 澳洲幸运5官方开奖结果体彩网:death taxes.

That said, a dozen states plus the District of Columbia continue to tax estates, and a half dozen impose inheritance taxes. Maryland collects both.

As with federal estate tax, these state taxes are collected only above certain thresholds. Even at or above those levels, your relationship to the deceased may spare you from some or all 澳洲幸运5官方开奖结果体彩网:inheritance tax.

Notably, surviving spouses and descendants of the deceased rarely, if ever, have to pay this tax.

Federal Estate Taxes

As noted above, the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) requires estates with combined gross assets and prior taxable gifts exceeding $13.61 million to file a federal estate tax return and pay the relevant estate tax for the 2024 tax year. In 2025, the threshold or exemption is $13.99 million.

The portion of the estate that’s above the limit is taxed at a rate from 18% to 40%, depending on the amounꦇt of the excess. In practice, various discounts, deductions, and loopholes allow skilled tax accountants to reduce the effective rate of taxation to well below that level.

Among those techniques is to take advantage of 澳洲🔥幸运5官方开奖结果体彩网:flexibility over the valuation date of the estate in order to minimize the estate’s value or 澳洲幸运5官方开奖结果体彩网:cost basis.

The rates of the tax are graduated, but the 澳洲幸运5官方开奖结果体彩网:exemption is applied in the form of a credit and offsets taxes applied at the lower rates. The taxable estates are therefore effectively subject to a flat 40% rate.

State Estate Taxes

If you live in a state that has an estate tax, you’re more likely to feel its pinch than you are to pay federal estate tax. The exemptions for state and district estate taxes are all less than half those of the federal assessment. Some go as low, relatively speaking, as $1 million.

An estate tax is assessed by the state where the decedent was living a𝄹t th𝄹e time of death.

🌟Here are the jurisdictions that have estate taxes. Click on the state🔯’s name for further information from the state government on its estate tax.

Tax is usually assessed on a sliding basis above these thresholds, much like the income tax brackets. The tax rate is typically about 10% for amounts just over the threshold, and it then rises in steps to about 16%.

The top estate tax rate is lowest in Connecticut, at 12%, and the highest is in Hawaii and Washington state, where it tops out at 20% each.

State Inheritance Taxes

There is no federal inheritance tax, but six states—Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania—still tax some assets inherited from the estates of deceased persons. Iowa repealed its inheritance tax for deaths occurring on or after Jan. 1, 2025.

Whether your inheritance will be taxed (and at what rate) depends on its value, your relationship to the person who passed away, and the prevailing rules and rates where you live.

澳洲幸运5官方开奖结果体彩网:Life insurance payable to a named beneficiary is not typically subject to an inheritance tax, although life insurance payable to the deceased person or their estate is usually subject to an estate tax.

As with estate tax, an inheritance tax, if due, is applied only to the sum that exceeds the 澳洲幸运5官方开奖结果体彩网:exemption. Tax is usually assessed on♒ a sliding basis aboꦍve those thresholds. Rates typically begin in the single digits and rise to 15%–18%.

Both the exemption you receive and the rate you’re charged may vary by your relationship to the deceased—more so than with the value of assets you are inheriting.

Inheritance Tax Exemptions

As a rule, the closer yܫour relationship with the decedent, the lower the rate you’ll♍ pay.

Surviving spouses are exempt from inheritance tax in all six states. Domestic partners, too, are exempt in New Jersey. Descendants pay no inheritance tax except in Nebraska and Pennsylvania.

Inheritance tax is assessed by the state where the person who inherits is living.

Spousal Benefits

Some states offer 澳洲幸运5官方开奖结果体彩网:tax reductions for widows and widowers, such as a reduction in property taxes for a certain period of time. For example, in Florida, surviving spouses are entitled to receive a reduction in the taxable value of a property they own by $500 each year, in perpetuity or until they remarry.

Here are the jurisdictions that have inheritance 🧸taxes. Click on the𒐪 state’s name for further information on its inheritance tax from the state government:

How to Minimize Estate Taxes

Keep the planning simple and the total amount of the estate below the threshold to minimize estate taxes. For most families, that’s easy. For those with estates and inheritances above the threshold, 澳洲幸运5官方开奖结果体彩网:setting up trusts that facilitate the transfer of wealth can help ease the tꦕax burden.

One way to reduce estate tax exposure is to use an 澳洲幸🦋运5官方开奖结果体彩网:intentionally defective grantor trust (IDGT), which is a type of irrevocable trust that allows a trustor to isolate certain trust assets to separate income tax from estate tax treatment on those assets. The grantor pays income taxes on any revenue generated by the assets, but the assets can grow tax free. This way, the grantor’s beneficiaries can avoid 澳洲幸运5官方开奖结果体彩网:gift taxation.

You can reduce your estate taxes 澳洲幸运5官方开奖结果体彩网:if you own a life insurance policy as well. On their own, life insurance proceeds are free of income tax at the federal level when they are paid to your beneficiary. But when the proceeds are included as part of your taxable estate fo♔r estate tax purposes, that might push your𓃲 estate over the cutoff.

One way to make sure that doesn’t happen is to transfer ownership of your policy to another person or entity, including the beneficiary. Another possibility is to set up an 澳洲幸运5官方开奖结果体彩网:ir🔴revocable life insurance trust (ILIT).

The Bottom Line

Inheritance taxes are complex and change frequently. Most of us engage with them during a stressful and busy period of our lives. It’s wise to prepare for the inevitable by 澳洲幸运5官方开奖结果体彩网:doing some homework in advance.

As long as the estate in question does not exceed $13.99 million as of the 2025 tax year (or $13.61 million in 2024), you will not owe federal estate or inheritance taxes. However, keep an eye on your state for its current rules since some charge estate taxes or inheritance taxes with lower thresholds.

Consider meeting with a lawyer, CPA, or CFP to begin planning your estate and minimizing th♏e 🀅tax your beneficiaries will have to pay when they inherit.