I want to tell you about a woman in Pennsylvania. I’ll leave her name out of this because she’s already been through enough.
She and her partner had been together for more than ten years. They built a life together, bought a home together, and shared everything two people can share. They just never officially got married. They figured it didn’t really matter.
Then he got cancer. And when he passed away, he left everything to her.
That’s when she found out it mattered a lot. Pennsylvania charges an inheritance tax based on your relationship to the person who died. Spouses pay nothing. Children pay 4.5%. Siblings pay 12%.
But everyone else? Including an unmarried partner?
15%.
While she was grieving the person she loved, she was also writing a large check to the state.
A lot of people are terrified the federal government will take half of everything they leave behind. For most families, that’s simply not true. In 2026, the federal estate tax exemption is $15 million per person. That means most families will never owe federal estate tax. The real surprise usually comes from the state. And that’s the part almost nobody talks about until it’s too late.
People mix these up constantly, so let’s make this simple.
Estate Tax
The estate itself pays the tax before heirs receive anything.
Inheritance Tax
The person receiving the inheritance pays the tax. And the amount often depends on how closely related they were to the person who died. That second one is what hit the Pennsylvania woman.
Most states don’t have an estate or inheritance tax anymore. But some still do. And a few have surprisingly low limits.
For example:
- Oregon taxes estates over just $1 million
- Massachusetts starts at $2 million
- Washington has estate tax rates as high as 35%
Then there are the states with inheritance taxes:
- Pennsylvania
- New Jersey
- Nebraska
- Kentucky
- Maryland
And Maryland is the only state with both an estate tax and an inheritance tax.
That’s rough.
In Pennsylvania, inheritance tax can also apply to retirement accounts. So if a child inherits an IRA or 401(k), the state may take inheritance tax first, and then the child may still owe federal income tax when withdrawing the money later. That’s a painful surprise for families already going through enough.
Even if your state has no estate or inheritance tax, there’s another issue that can quietly drain money from families.
Probate.
That’s the legal process of transferring assets after someone dies. In some states it’s manageable. In others, it gets expensive fast.
California is one of the worst because probate fees are based on the gross value of the estate, not the equity. A $1 million estate can easily rack up more than $50,000 in probate costs. That’s money families thought they were leaving to loved ones. Most of these problems can be reduced or avoided with planning.
A few simple steps can make a huge difference:
- Review your beneficiary designations
- Understand your state’s rules
- Be careful owning property in multiple states
- Don’t assume “common law” relationships protect your partner
- Talk to someone before there’s a crisis
Because once someone passes away, many options disappear.
Nobody likes talking about death, taxes, wills, probate, or inheritance issues. I get it. But the families who plan ahead usually create far less stress, confusion, and financial damage for the people they love. That’s what this is really about. Protecting the people you care about.
If this topic feels overwhelming, take a breath. A little planning now can save the people you love a tremendous amount of stress later.
The biggest takeaway is this: Don’t assume things will automatically work out the way you intended. State laws, inheritance taxes, probate rules, and beneficiary designations can completely change what happens after someone passes away.
A few thoughtful decisions made now can protect your family later. And that’s worth paying attention to.
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