There are any number of taxes that can turn an inheritance into a burden for beneficiaries. The federal estate tax exemption sits at $5.43 million for individuals and $10.86 million for couples, placing those paying estate taxes firmly in the upper echelons of the Top 1%. But what Uncle Sam doesn't look for, 16 states and the District of Columbia certainly will. Connecticut, Delaware, D.C., Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont and Washington all impose state estate taxes of up to 20% for those worth more than a specified amount. That ceiling is as high as the fed-matching $5.4 million in Hawaii, but dips as low as $675,000 in New Jersey.
That's just what gets taxed before filing time. If an heir happens to have the distinction of living in Iowa, Kentucky, Maryland, Nebraska, New Jersey or Pennsylvania, there's an extra inheritance tax tacked on once the inheritance is received. Wives of heirs are exempt from all of these taxes, as are life insurance payouts, but that's about as kind as each of these plans gets. Descendants are taxed anywhere from 10% to 26% after coming into some money or property. Domestic partners in all of the above states excluding New Jersey are on the hook for inheritance taxes at those rates as well.