ABA Family Legal Guide

Estate Planning

Death and Taxes

What about state death taxes?

Some states charge an additional estate tax similar to the tax imposed by the federal government; other states impose an inheritance tax. (Inheritance taxes are charged to beneficiaries; estate taxes are charged to the deceased person's estate.)

What is taxed and at what rate depends on state law, not only of the state in which you live but also of the state where the property is located. Unless your state has an inheritance tax, your beneficiaries don't pay tax when they receive money or other property from your estate. But they will have to pay income tax on any earnings after they invest the bequest. In addition, death itself may produce numerous tax consequences.