Inheritance tax in the US: Complete guide for expats

Inheritance tax applies in 5 states in the US, and is paid by the beneficiaries of deceased individuals who lived in that state, or held assets there. There are also federal estate taxes on high value estates. Because these taxes can apply to expats and international residents who inherit, it’s useful to get an overview of how the taxes apply and are calculated. This guide walks through the basics – although you’ll also require professional support to navigate any tax questions you may have about your own unique situation.

Read on to learn about inheritance and estate tax in the US, with a quick look at how providers like Wise could help you repatriate your money if you inherit there – or pay taxes from abroad if you need to do so.

Large internaional payments with Wise with automatic fee discounts

Pay your US taxes, and then repatriate your funds to your home country with Wise, for low overall costs and secure digital transfers. Wise payments can be sent to  140+ countries with low, transparent fees and the mid-market rate without any hidden mark-up. There are high limits (the equivalent of 1 million GBP usually), and fee discounts for transfers over 20k GBP, or equivalent. Plus you’ll get help from a dedicated support team for large transfers if you need it.

Go to website

How does inheritance tax work in the US?

If someone dies in the US and leaves behind assets, there may be a tax liability. This can be either an estate tax or an inheritance tax. In many cases, neither of these taxes need to be paid as the eligibility criteria include how much the estate or assets are worth, and who the beneficiaries are.

Here’s a quick roundup:

• Estate tax – estate tax in the US is a federal tax which applies on high value estates. In 2025, to be liable for this tax, the estate value must be $13,990,000 or more.
• Inheritance tax – inheritance tax is not a federal tax in the US and is only used in 5 states. Exemptions apply depending on the relationship of the beneficiary to the decedent.

The difference between estate tax and inheritance tax can be confusing. The key difference is when the tax is assessed, and who has to pay it – here’s what you need to know:

• Estate tax – estate tax is paid by the executor of the estate, before any of the assets can be distributed to beneficiaries.
• Inheritance tax – inheritance tax is paid by beneficiaries of specific inheritances given after someone dies.

Because of the localised nature of US inheritance taxes, and the exceptions given for family members, it’s estimated that only about 2% of people ever have to pay any inheritance tax.

Tax can be complicated – and even more so if there are different countries involved or if you’re navigating a new system in a different country. The information in this article does not constitute advice. Tax requirements can change and are highly personal – get advice from a tax professional to understand your own obligations.

American inheritance laws and succession rules

If someone who resides in one of the 5 states that have an inheritance tax dies, there may be a tax to pay. The US states this applies to are Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.

As this tax is locally administered, the process for this can depend on the state the individual lived in. The rates of tax you might pay, and the exceptions that might apply also depend on the state in which the individuals lived, or where their assets were located.

Although inheritance tax is paid by the beneficiary, the state the beneficiary lives in doesn’t matter for the assessment of this tax. The only thing that matters is where the decedent lived or owned property. If that was in a state with inheritance tax, you may be liable to pay the inheritance tax even if you live in a different state which does not use this tax.

Who pays inheritance tax in the US?

Inheritance tax, where it applies, is paid by the individual beneficiary. If you’re not a resident of a state with inheritance tax, but inherit from someone who was, you still need to pay the tax. Exceptions do apply. 

Here’s a summary of the inheritance tax treatment of different individuals in the US states which use this form of tax:

As inheritance tax rules and exceptions can change and may be complicated to navigate, get personal advice if you’re unsure of your obligations.

If you inherit in the US and need to pay inheritance tax – or if you’ve inherited and need to repatriate your inherited funds to your home country, providers like Wise, OFX or Xe Money Transfer may be able to help. 

Wise offers high value transfers with the mid-market rate and automatic fee discounts for larger transfers, OFX has no transfer cap and a 24/7 phone service if you like to talk through your transactions, while Xe Money Transfer uses variable fees and rates on transfers all around the world.

International inheritance tax considerations 

If you’re an expat in the US and inherit money, you may be liable for inheritance tax in your home country. This can apply even if there’s no tax to pay in the US, depending on the policies in place in your country of citizenship.

If you’re liable for tax in your home country and have also needed to pay tax in the US, double taxation treaties may be able to help you offset the tax paid in one country against your dues in the other. Most major countries have a double taxation treaty with the US – get professional advice to see if this applies in your case.

It’s also important to remember that if you come into money overseas, while living in the US, you may need to report under FATCA – the Foreign Account Tax Compliance Act. This states that US taxpayers living in the US who have assets of 50,000 USD or more overseas must declare it. If you’re a US person living outside the US you may still have to report foreign assets if you hold over 200,000 USD.

Remember – if you need to repatriate funds you’ve inherited abroad, a low cost payment service like Wise can help.

Wise has high limits (the equivalent of 1 million GBP usually), and uses the mid-market exchange rate with no markup to keep the transfer costs low. There are fee discounts for transfers over 20k GBP, or equivalent, plus you’ll get help from a dedicated support team for large transfers if you need it.

How much is inheritance tax in the US?

The rate of inheritance tax in the US depends on the state, and in many cases your relationship with the individual who left you the inheritance. Here’s a summary to give an idea:

How to calculate inheritance tax

The process to calculate inheritance tax will depend on the rules in the state the decedent lived in. The first step would be for the executor of the estate to value it in full and distribute assets.

After assets are distributed, either according to the will or law if the decedent died intestate, the beneficiaries need to calculate what tax – if any – they owe. Tax exemptions and rates depend on their relationship with the deceased in most cases, and there may also be tax deductions for swift payment. Get professional advice here as the calculations can be tricky to navigate.

Paying inheritance tax in the US

Payment deadlines and procedures for inheritance tax in the US depend on the state in which the deceased person lived and held assets. To give an example, in Kentucky, taxes must be filed and paid within 18 months of the death, but lower rates of tax apply if you pay within 9 months. Installment payment options are available.

Payment methods accepted can vary – check with your local authorities to understand the rules in your specific location.

US inheritance tax for non-residents

If you’re a US non-resident and inherit assets from someone who lived in a state which uses inheritance tax, you may need to pay your tax even though you’re not living in the same location. Get professional advice to check your obligations as they’ll vary based on the state and also your relationship with the individual who died.

It’s helpful to note that estate tax – which we’ll explore later – may apply on non-residents who hold any US assets. If you’re trying to calculate if estate tax is due, it’s also well worth getting prompt advice to understand your obligations.

Assets subject to inheritance tax

In general you’ll need to value all applicable assets, including things like:

• Real estate
• Cash including money held out of state in some cases
• Certificates of deposit and other assets like stocks and bonds
• Life insurance payable to the insured or to the estate
• Annuities
• Household goods, jewelry and other assets

Estate tax in the US

Estate tax in the US is a federal tax which applies on high value estates. In 2025, to be liable for this tax, the estate value must be $13,990,000 or more. This tax is 18% – 40% depending on the value of the assets.

Estate taxes must be filed and managed through the IRS. Non US residents may be subject to US estate taxes if their assets are based in the US, so in the case of a high value estate it’s important to investigate this even if the deceased person wasn’t living in the US at the time of their death.

Estate taxes are settled by the executor of an estate, prior to any distributions to beneficiaries. There’s usually no liability to the beneficiary in the US as this is settled centrally. Once you have received any inheritance you can then choose to hold it in the US or repatriate it with a provider like Wise to your home country if you’d like to.

Inheritance tax rates and thresholds in the US

Here are the current inheritance tax rates and thresholds in the US:

Inheritance law and pensions in the US

If the person who dies is in receipt of a pension, the pension scheme rules will apply to whether or how remaining funds may be passed to a beneficiary.

The distribution rules which apply can vary a lot depending on the situation. Often the named beneficiary may be able to opt to take some or all of the amount as a lump sum. In some cases a spouse or other beneficiary may be able to take the money as an annuity which is calculated based on their own personal circumstances.

As this is a complex area, getting professional advice is essential.

Inheritance tax planning 

In the states in which inheritance tax applies, a common method of tax planning is for an individual to buy a life insurance policy which pays out up to the value of the inheritance they wish to pass to a specific individual. They can then name that individual as the beneficiary of the policy, which is then passed to them upon the death of the policy owner, and not subject to the inheritance tax process. 

Gifting money while you’re still alive is another option as long as you stay within the legal limits to avoid gift tax, and within your lifetime gifting limits.

As there are many exemptions from paying inheritance tax, these tactics may not be required – and you should certainly take professional advice if you need help with your tax planning in the US.

Inheritance tax exemptions and reliefs in the US

Most states which use inheritance tax offer some full exemption for close family members. This may include only the surviving spouse and children, but can also often cover the decedent’s, parents, grandchildren and siblings. Charities are also often exempt from inheritance tax.

Even where full exemptions don’t apply, states may have partial exemptions on payment.

Gift tax and lifetime transfers

In the US there may be a gift tax to pay depending on the value of gifts of money or assets you give to any particular individual, or over the course of your lifetime. In 2025 you can give up to 19,000 USD per donee over the course of the year without attracting gift tax.

Lifetime limits apply on the amount you can give, but these are set in the millions making them more applicable to high wealth individuals. Gifts may need to be reported, which can depend on the residence status of both the person giving and receiving the gift. Get professional advice here if your situation is unusual or complex.

Inheritance procedures and probate 

When someone dies, it’s usual for their estate to enter a period called probate. During this period, the executor of the will or estate will work through the legal requirements of settling the estate, paying any due estate taxes and making distributions of the remaining assets either according to the will if there is one, or the law if not.

Depending on the complexity of the estate this process can take some time, and should be administered alongside legal advisors, tax support and other professionals to make sure everything goes smoothly.

Common mistakes and pitfalls to avoid

If you’ve inherited in the US, you’ll need to get professional help with your tax affairs and the practical management of the estate. Here are a few tips.

• Have assets professionally valued if you’re unsure – professionals can help navigate which should be included in the estate value and what may be excluded
• If any tax filing or payment is required, be sure to check the deadlines as there may be penalties for late payments
• Check your obligations both in the US and your home country – in some cases you may need to report or pay tax in both
• If you’re repatriating funds or paying US taxes from abroad, use a provider like Wise to get the mid-market rate on your currency conversion, and keep the costs of your transaction low 

Recent changes and updates in the US

When it comes to inheritance tax, up until 2025 there was one other state which used this tax – Iowa. Iowa moved away from using this tax on 1 January 2025, and some other states are reported to be contemplating doing the same to come in line with the majority of US states.

Getting professional help for taxes in the US

It’s important to seek professional advice when dealing with estate or inheritance tax in the US – depending on your situation you may need to talk to tax advisors, lawyers, and estate planners. You may also need advice in your home country to make sure you’re covering all your duties.

While there are fees to pay for professional support, it’s important to note that mistakes could be costly – and navigating an unfamiliar tax landscape without help can be extremely stressful. Get the help you need promptly to make things as simple as possible for yourself, and to give you peace of mind that you’ve got everything in order.

Conclusion

While inheritance tax isn’t used in all US states, there are some places where it applies, and there are also federal estate taxes on high value estates which may need to be considered. If you’ve inherited in the US, or if you’re involved in managing the estate of a deceased person there, you’ll need professional advice to navigate what can be a very complicated process.

This guide covers many of the important points to know about – and remember, if you need to repatriate funds from the US, or pay tax in the US from elsewhere in the world, you could save money on fees if you use Wise.

Wise is well set up for large international transfers offering high limits, mid-market rate currency exchange, and fee discounts when sending larger amounts. Spend less on administration, and get a smooth international payment with Wise.

Useful resources

• Kentucky inheritance tax – Kentucky inheritance tax PDF guide
• Maryland inheritance tax – Maryland inheritance tax landing page, with link to find county level information
• Nebraska inheritance tax – Nebraska inheritance tax landing page
• New Jersey inheritance tax – New Jersey inheritance tax landing page
• Pennsylvania inheritance tax – Pennsylvania inheritance tax information   
• IRS estate tax – IRS estate tax landing page
• IRS life events – IRS information in the case of a deceased person
• IRS estate tax FAQ – common questions answered by IRS experts
• FATCA – IRS reporting requirements for foreign assets in the US 
• IRS tax on pensions – learn about how pensions are treated after an individual dies
• IRS gift tax – IRS limits and levels of gift tax, with links to relevant forms and resources