State estate and inheritance taxes work similarly to the federal estate tax, but with different exemption amounts and tax rates set by each state. An estate tax is paid by the deceased’s estate before assets are distributed to heirs. An inheritance tax is paid by the recipients on the value of assets they inherit. State estate tax exemptions range from $1 million to around $12 million in 2025. Tax rates typically range from a few percent up to 20% for estates/inheritances exceeding the exemption.
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