Inheritance works through three overlapping systems: a will directs who gets what, state law fills in when there’s no will or protects family members the will tried to shortchange, and some of the biggest assets, like retirement accounts and life insurance, bypass both and go straight to whoever is named on the account. Understanding how inheritance works means knowing which track each asset is on, what the probate court does with the rest, and which taxes, if any, apply before heirs receive anything.
Most families never owe federal estate tax. What they do deal with is probate, beneficiary paperwork, and sometimes income tax on an inherited retirement account. The specifics depend on whether there’s a valid will, what kinds of assets the person owned, and the state where they lived.
With a Will or Without One
When someone dies owning property in their name alone, one of two frameworks takes over. If there’s a valid will, the property goes to the people the will names. If there’s no will, or the will is thrown out, state intestacy law distributes the property according to a fixed hierarchy of relatives.
A will generally has to be a written document, signed by the person making it, and witnessed by two people who don’t stand to inherit under it. Witnesses typically must be adults of sound mind. Some states recognize handwritten wills without witnesses, but the requirements vary and these are easier to challenge. If a will fails the required formalities, a court can throw it out entirely, and the estate is handled as if no will ever existed.
Intestacy follows a strict order. The Uniform Probate Code, adopted in whole or in part by most states, puts the surviving spouse first. If the deceased person and the spouse share all the same children and neither has children from other relationships, the spouse inherits everything. When children from a prior relationship are involved, the spouse’s share shrinks and the rest goes to those children. With no surviving spouse, children inherit equally. With no children, the estate passes to parents, then siblings, then grandparents and their descendants. A cousin inherits nothing while a sibling is alive. Only if no living relative can be found does the property go to the state, a result courts work hard to avoid.
Assets That Skip Probate
Many of the most valuable assets people own don’t pass under a will at all. They transfer directly to whoever is named on the account or title, and the designation generally overrides anything the will says.
- Life insurance policies, 401(k)s, and IRAs pay out to whoever is listed on the beneficiary form. If the will says one thing and the form says another, the form wins.
- Bank and brokerage accounts can carry payable-on-death or transfer-on-death designations that move the account to a named person at death with no court involvement.
- Property held in joint tenancy with right of survivorship automatically becomes the surviving owner’s at the other owner’s death. This is common for married couples and real estate.
- Assets held in a revocable living trust are owned by the trust, not the individual, so the successor trustee distributes them under the trust’s terms without any court proceeding. Trust terms also stay private, unlike a will, which becomes a public record once filed with the probate court.
Figuring out which assets fall outside probate early on saves time. The personal representative only controls probate assets. Everything else flows directly to the people named on the paperwork.
What Probate Actually Involves
Probate is the court-supervised process of settling an estate. It covers validating the will if there is one, appointing someone to manage the estate, paying debts, and distributing what remains. The average estate takes six to nine months. Contested or complex estates can run well beyond a year.
The case opens when someone files a petition in the court where the deceased person lived. The court appoints a personal representative, called an executor if named in the will and an administrator if not. That person has a legal duty to act in the best interest of the estate and its beneficiaries. They gather assets, pay bills, file tax returns, and eventually distribute what’s left.
Before any beneficiary receives anything, the estate has to settle its debts. The personal representative notifies creditors through a published announcement and direct notices to known creditors. Creditors typically have about four months to file claims. Debts are paid in a legal priority order: administrative costs like court and attorney fees first, then funeral expenses, then taxes, then secured creditors against their collateral, and finally unsecured creditors like credit card companies and medical providers, who split whatever remains.
Once debts are paid and the court approves a final accounting, the personal representative distributes the remaining assets to the beneficiaries and formally closes the estate.
Small Estate Shortcuts
Full probate is expensive and slow for modest estates. Most states offer a simplified path through a small estate affidavit. The heir signs a sworn statement, presents it with a death certificate to whoever is holding the asset, and collects the property without going to court. Dollar thresholds vary widely, from as low as $15,000 in personal property in some states to $100,000 or more in others. Most states exclude real estate from the affidavit process, though a few have special procedures for low-value real property. There’s usually a waiting period of 30 to 45 days after the death before the affidavit can be used. Filing fees are minimal or nonexistent.
Protections That Override a Will
State law carves out protections for certain family members that trump even a clear, valid will. The policy is that a spouse and minor children shouldn’t be left destitute no matter what the deceased person wrote.
The Spousal Elective Share
In most states that use common-law property rules, a surviving spouse can claim a minimum share of the deceased spouse’s estate regardless of the will. The Uniform Probate Code calculates this on a sliding scale based on the length of the marriage, starting at 3 percent after one year and reaching 50 percent after 15 years or more. Outside the UPC, many states set the elective share at a flat one-third or one-half.
The right isn’t automatic. The surviving spouse has to formally assert it within a deadline set by state law, often within six months of the probate case opening. Missing that window usually forfeits the claim.
Community Property States
Nine states handle marital property differently. In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, most property acquired during a marriage belongs equally to both spouses no matter who earned it or whose name is on the title. When one spouse dies, the surviving spouse already owns half of the community property outright, and the deceased spouse’s will can only control the other half. This built-in protection often makes the elective share unnecessary in these states.
Children
Children born or adopted after a parent creates a will are called pretermitted children. State law generally presumes the parent didn’t mean to leave them out and gives them a share, usually what they would have received under intestacy. The only way to avoid that result is to say explicitly in the will that the child should get nothing. Silence is not enough.
Adult children have no guaranteed right to inherit in most states. A parent can disinherit an adult child by naming them in the will and clearly stating the intent to leave them nothing. Simply omitting the child is risky because a court might read it as an oversight. The safer approach is to name the child and make the exclusion unmistakable. Louisiana is a notable exception: children under 24 and children with certain disabilities cannot be disinherited there.
Who Pays the Debts
Debt collectors sometimes contact family members after a death and imply that survivors owe the balance. In most cases, they don’t. Federal guidance is clear that family members generally are not required to pay a deceased relative’s debts out of their own money.1Federal Trade Commission. Debts and Deceased Relatives The estate pays what it can, and if the money runs out, remaining debts typically go unpaid.
Personal liability exists only in narrow situations: you cosigned the debt, you’re a surviving spouse in a community property state, your state holds spouses responsible for specific obligations like medical bills, or you were the personal representative and distributed assets to heirs before properly paying creditors. If none of those applies, the debt belongs to the estate, not to you.1Federal Trade Commission. Debts and Deceased Relatives
Taxes on What You Inherit
Three different tax questions can come up: federal estate tax on the estate itself, state estate or inheritance tax, and income tax on certain inherited assets. Most heirs run into the third one, not the first.
Federal Estate Tax
The federal estate tax applies to the total value of everything a person owned at death, minus debts and certain deductions. For 2026, the basic exclusion is $15 million, so estates below that owe no federal estate tax.2Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax The amount adjusts for inflation in future years. The top rate on the portion above the exclusion is 40 percent.3Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax Estates that owe tax or need to make a portability election file Form 706 within nine months of the date of death, with an automatic six-month extension available on Form 4768.4Internal Revenue Service. Instructions for Form 706
When the first spouse in a married couple dies without using their full exclusion, the leftover amount can transfer to the surviving spouse. This is called portability, and it can shelter up to $30 million for a couple. Portability isn’t automatic. The deceased spouse’s estate has to file Form 706 to make the election, even if no tax is owed.5Internal Revenue Service. Frequently Asked Questions on Estate Taxes Families that skip this step lose the unused exclusion permanently. A simplified late-election process allows filing up to five years after the death for estates that weren’t otherwise required to file.
State Estate and Inheritance Taxes
Even when no federal tax is owed, a state tax can still apply. Twelve states and the District of Columbia impose their own estate taxes, with exemption thresholds far lower than the federal level. The lowest starts at $1 million. Five states impose inheritance taxes, which are paid by the beneficiary rather than the estate. Maryland is the only state that imposes both. Whether your family owes a state tax depends on where the deceased person lived and, for inheritance taxes, sometimes on the beneficiary’s relationship to the deceased.
Step-Up in Basis
When you inherit an asset like a house or stock, its tax value resets to its fair market value on the date the previous owner died.6Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent This is called the step-up in basis. If a parent bought a house for $100,000 and it was worth $400,000 when they died, your basis is $400,000. Sell it a year later for $420,000, and you owe capital gains tax only on the $20,000 of appreciation since you inherited it, not on the $320,000 that built up during your parent’s lifetime. The rule applies to most inherited assets, including real estate, stocks, bonds, and business interests. It does not apply to tax-deferred retirement accounts.
Inherited Retirement Accounts
Inherited retirement accounts are where many people get an unwelcome surprise. Money in a traditional IRA or 401(k) has never been taxed, so when a beneficiary takes distributions, those withdrawals count as taxable income.7Internal Revenue Service. Retirement Topics – Beneficiary
For most non-spouse beneficiaries who inherited an account from someone who died in 2020 or later, the entire account must be emptied by the end of the tenth year following the year of the account owner’s death. This is the 10-year rule, and it can produce a significant tax hit if the account is large and the beneficiary is in peak earning years.
Some beneficiaries are exempt from the 10-year deadline. Minor children of the account owner can stretch distributions over their life expectancy until they reach adulthood, at which point the 10-year clock starts. Beneficiaries who are disabled, chronically ill, or no more than 10 years younger than the deceased account owner can also use a longer payout period. A surviving spouse has the most flexibility and can roll the account into their own IRA and take distributions on their own schedule.7Internal Revenue Service. Retirement Topics – Beneficiary
Inherited Roth IRAs also fall under the 10-year rule for non-spouse beneficiaries, but withdrawals are generally tax-free as long as the Roth was open for at least five years before the original owner’s death.
Challenging a Will
A will isn’t untouchable. People who would inherit under a prior will or under intestacy can challenge one in court. The most common grounds are lack of mental capacity (the person didn’t understand what they owned, who their family was, or what signing meant), undue influence (someone pressured or manipulated the person into particular provisions), fraud (the person was tricked about the contents or a material fact), and improper execution (the will wasn’t signed or witnessed the way state law requires).
Will contests are hard to win. Courts start with a strong presumption that a properly executed will reflects what the person wanted, and the challenger carries the burden of proving otherwise. Deadlines are tight, often as short as six months after probate opens. Missing the deadline forfeits the right to challenge, no matter how strong the evidence.