Some states have an estate tax, some have an inheritance tax, and some, like Maryland, have both. For example, Washington State has an estate tax with an exemption threshold of $2.193 million as of 2024. It is important to check the specific estate and inheritance tax laws in your state to understand the applicable taxes and exemption thresholds. To further understand the difference between the two, an inheritance tax is an assessment made on the portion of an estate received by an individual. Eleven states still collect an inheritance tax including Connecticut, Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania, and Tennessee. California is one of the 38 states that does not have an estate tax, regardless of size. However, large estates in California may still be subject to the federal estate tax, so it’s important to understand how this levy works. Inheritance tax laws can be complex and vary from state to state. California does not have a state inheritance tax. However, there are other tax implications to consider when inheriting assets from a trust. An inheritance tax is different from an estate tax, which is a tax levied on an entire estate before it is distributed to individuals. If you were to inherit a home worth, say $3 million, the federal estate tax would be $450,000. If you decide to sell the inherited home, you will probably be required to pay capital gains tax on the difference between what you net from the sale and your basis, which is the purchase price plus improvements minus depreciation.
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