Inheritance Tax. Do you have to pay it?

 In some states, taxes are placed on the property and assets on the beneficiaries’ inheritance after a loved one passes.

The following states require an inheritance tax from their heirs:   

  • Pennsylvania
  • Maryland
  • Nebraska
  • New Jersey
  • Iowa
  • Kentucky

One thing to mention, just because you don't live in one of these states does not mean you won't be subject to pay a tax bill. If a decedent lived in one of these states, or simply owned some property there, the state will likely require you to pay taxes from your inheritance. For example, if you are currently live in Illinois now, but your grandmother's estate is being handled in state she resides in which is Georgia, you may be required to pay inheritance taxes to the state.

There are additional factors that will impact whether or not you have to pay the inheritance tax will be.  For example, how much property you were left, how closely related you were to the deceased and whether or not you are a charitable organization or not.  Even minors may be required to pay an inheritance tax in some states, though it may be at a much lower rate than other individuals.

Always keep in mind that if a state requires a tax return to be filed, only the executor will be responsible for this, even for multiple heirs. They will file just one document and all parties will be covered.  In many cases, a probate case cannot be closed until beneficiaries pay this inheritance tax.

What about estate tax?


You may still face additional taxes from the state if an estate value exceeds a certain dollar amount, even though you have paid the inheritance tax.  Estate tax will be owed from the whole estate and will be due before property is even distributed. What this means is that a portion of your assets will be taken to pay these taxes.

These states still enforce their own estate tax:

  • Maryland
  • Washington
  • Vermont
  • Delaware
  • Connecticut
  • New Jersey
  • Tennessee (until January 1, 2016)
  • Oregon
  • Hawaii
  • Illinois
  • Maine
  • Massachusetts
  • Minnesota
  • Rhode Island

For extremely large estates, such as those exceeding $5.43 million, federal estate tax may also be applied unless all the property is being passed to a surviving spouse.

Inheritance tax, however, will not depend on the amount and will be owed despite the value of property in some states. Typically, the less related or distant you are to the decedent, the more tax you will owe.  Probate attorneys will be able to advise and assist when it comes to matters like this, unlike Divorce counselors that practice family law.  

For the most comprehensive understanding on the specifics about taxes on estates, reach out to one of the probate lawyers in our directory today.

Disclaimer:  While every effort has been made to ensure the accuracy of this article, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.