Only six U.S. states levy inheritance tax — Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and (phasing out) Iowa. Spouses are always exempt. The closer the relationship, the lower the rate; unrelated heirs face the highest rates.
Related terms
Step-Up in Basis
A federal tax rule (IRC §1014) that resets an inherited asset's cost basis to its fair market value on the date of the original owner's death.
Probate
The court-supervised process of validating a will, paying the deceased's debts, and transferring remaining assets to heirs.
Estate Tax
A tax on the gross estate of a deceased person, paid by the estate before assets are distributed to heirs.