Families settling estates in Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania face a cost that heirs in the other 45 states do not: a state-level inheritance tax applied directly to the people who receive assets from a deceased person. Each of these five states maintains its own rate structure, beneficiary classifications, and filing requirements, creating a patchwork of obligations that can reduce what surviving relatives actually keep. The persistence of these taxes, even as the federal estate-tax exemption has climbed well above most family estates, puts real dollars at stake for heirs right now.
Why these five inheritance taxes still hit heirs in 2026
An inheritance tax differs from an estate tax in one direct way: it is charged to the person receiving the assets, not to the estate itself. The rate each heir pays typically depends on that person’s relationship to the deceased. Spouses and direct-line descendants often qualify for exemptions or lower rates, while siblings, nieces, nephews, and unrelated beneficiaries can owe substantially more. That structure means two heirs of the same estate can face very different tax bills based solely on how closely they were related to the person who died.
Nebraska’s system adds a layer that helps explain why repeal efforts stall. The state’s inheritance tax is administered at the county level by county courts and county treasurers rather than by a central state agency. Counties collect the revenue and distribute it locally, which means the tax functions as a stable, non-property-tax funding stream for local government. Eliminating it would force counties to find replacement revenue or cut services, giving local officials a direct financial reason to resist repeal. That dynamic creates slower legislative momentum compared to states where the tax feeds a single state general fund.
How each state structures the tax on inherited assets
Kentucky’s inheritance tax applies to both resident and nonresident decedents who owned Kentucky-situs property. The Kentucky Revised Statutes set out beneficiary classes and corresponding rate schedules, with section 140.070 specifying how rates escalate based on the heir’s class. Surviving spouses and certain close relatives are exempt, but more distant relatives and non-family beneficiaries can face meaningful tax liability on the value they receive. The Kentucky Department of Revenue provides practical guidance and forms for this levy through its dedicated inheritance tax portal, which outlines who must file, applicable exemptions, and deadlines.
Maryland’s Register of Wills distinguishes between exempt transferees and taxable collateral heirs. The state’s Tax-General code section 7-203 spells out which transfers are exempt from the inheritance tax and which trigger liability. Spouses, children, and certain other close relatives are generally excluded, while more remote beneficiaries can face tax on what they receive. Maryland is also one of only two states that impose both an inheritance tax and a separate estate tax, so some larger estates may confront two layers of state-level death taxation before assets reach beneficiaries…