Inheritance taxes are typically paid by the executor from the estate's assets, not directly by beneficiaries, and are usually due within several months of death. While the federal government does not impose an inheritance tax, several U.S. states do. It is recommended to use a tax professional to file necessary returns.
How Does Inheritance Work? When you receive an inheritance, you must go through a process called probate to get the cash and other assets. During this process, the court will review the will, decide each asset's value and pay bills and taxes. After these steps, the court will distribute the inheritance to loved ones.
In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate. It's a progressive tax, just like the federal income tax system. This means that the larger the estate, the higher the tax rate it is subject to.
How does the IRS learn about inherited assets? Inherited assets may appear through estate filings, financial institution reporting, probate documents, property title transfers or tax reporting by executors and trustees.
Paying Inheritance Tax should be completed by the end of the sixth month after the deceased has passed. If this is not done, HMRC will begin charging interest on the amount due. If there are assets which may take longer to sell, such as property, payments can be made in instalments over a period of 10 years.
Charity exemption
Like the spousal exemption, assets passing to charity on death are exempt from inheritance tax. As such, if an entire estate passes to charity, there will be no inheritance tax due.
Yes, you can give your son $100,000 tax-free in 2025 by utilizing the annual gift tax exclusion and your lifetime exemption, but you'll need to report the gift to the IRS on Form 709 since it exceeds the $19,000 annual limit, though you won't pay tax unless you exceed your much larger $13.99 million lifetime gift/estate tax exemption. The gift is considered yours (the giver) for tax purposes, not your son's.
If you disclaim your inheritance, it will usually go to the next person who's entitled under the intestacy rules. If you claim benefits, your inheritance might change what benefits you're entitled to. You can check how your benefits might change using a benefits calculator. You can also talk to an adviser.
Yes, your parents can gift you $100,000 for a house — but they'll have to file a gift tax return to disclose the gift since it exceeds the IRS exclusion amount of $18,000. Filing a return doesn't necessarily mean they'll automatically have to pay taxes.
You can typically inherit a very large amount from your parents before hitting federal estate tax thresholds, which are around $15 million per individual in 2026, meaning most heirs receive tax-free inheritances because estates rarely exceed this limit; however, some states have their own estate or inheritance taxes, and income from inherited assets (like IRAs or rental income) is usually taxable, according to this U.S. Bank article, this Fidelity article, this Domain Money article, and this Tax Foundation article.
You can deposit a large cash inheritance into a savings account, either by check or by wire transfer to your bank.
You can pay Inheritance Tax from your own bank account or a joint bank account if you held one in joint names with the deceased. You can claim it back from the deceased's estate.
Types of inheritance
if you dispose of the inherited property within 2 years (or the within an extension period) of the deceased person's death. Note: The 2-year limit is extended if disposal of the property is delayed by exceptional circumstances outside your control.
You can typically inherit a large amount without federal taxes because the tax applies to the deceased's estate, not the recipient, and the exemption is very high: $13.99 million in 2025 and $15 million in 2026 per person, meaning most inheritances fall below this threshold. The key is that the estate's total value must exceed these limits for any tax to be owed by the estate. Inheritances themselves (cash, property) are generally not income, but earnings on them (like interest/dividends) or pre-tax retirement funds (like IRAs) are taxable.
You can typically inherit a very large amount from your parents without paying federal tax, as the federal estate tax exemption is around $15 million per person for 2026, meaning only estates larger than that pay tax, not you directly. While you generally don't pay income tax on inheritances (except for pre-tax retirement funds like IRAs/401(k)s, which are taxed as income when withdrawn), some states have their own estate or inheritance taxes with much lower thresholds, affecting a smaller portion of wealth.
Ideas for what to do with your inheritance
Give more money away
Lifetime gifting is a straightforward way to begin reducing your IHT bill. By gifting money during lifetime, that would have been part of an inheritance anyway, you reduce the size of your estate so that there is smaller amount subject to IHT on your death.
This is usually a cash endowment given to children or grandchildren, but an inheritance may also include assets like stocks and real estate. Asset distribution is determined during the estate planning process when wills are written and heirs or beneficiaries are designated. The will specifies who will receive what.
This means that if you inherit a property any time between 1st September and 31st August, you must pay Inheritance or Capital Acquisitions Tax by the 31st October. For example, if you inherited a property on 3rd September 2023, you would have had to pay CAT by 31st October 2024.
Check registers, bank account statements, retirement account statements, credit card statements, medical statements, and utility bills for the year of death (and for any prior year for which the decedent has not filed an income tax return) Retirement plan documents (e.g., pension paperwork, annuity contracts, etc.)