The US federal estate tax only affects estates over approximately $13.99 million per person in 2025 (doubled exemption from TCJA — political risk in 2026 if extension fails). Above the exemption, the rate is 40%. By contrast, the UK applies 40% inheritance tax above just £325,000 (approximately $400,000), making it far more impactful for ordinary families. Germany charges 7-50% depending on relationship and amount. Several countries have no inheritance tax at all: Canada, Australia, New Zealand, Sweden, and Portugal.
At a glance
Key Facts
US Federal Estate Tax Exemption (2025)
~$13.99M per person (~$27.98M per couple)
US Federal Estate Tax Rate
40% on amounts above exemption
UK Inheritance Tax (above £325,000)
40% (nil-rate band £325K; RNRB up to +£175K)
Countries with No Inheritance Tax
Canada, Australia, New Zealand, Sweden, Portugal
Germany Max Rate (non-family)
50% for non-family members
Introduction
Inheritance tax is one of the most politically charged areas of taxation globally — touching fundamental questions about intergenerational wealth transfer, fairness, and the role of the state. The rules vary enormously between countries: the US has a very high exemption threshold that shields most families, while the UK taxes middle-class estates at 40%; Germany distinguishes sharply by family relationship; and several countries have abolished inheritance tax entirely.
For families with assets in multiple countries, or considering international relocation, understanding how inheritance tax differs across jurisdictions is essential for estate planning. The TCJA doubling of the US exemption — and the political risk that the extension could fail in future years — adds additional urgency to US estate planning in 2026. This guide compares the US system with major European approaches and identifies countries where inheritance tax creates the most significant planning considerations.
Section 01
US Federal Estate Tax 2026: Exemption and Rates
The US federal estate tax is a tax on the transfer of a deceased person's estate before distribution to heirs. Key parameters for 2026:
Basic exclusion amount: Approximately $13.99 million per person (2025 figure, indexed annually for inflation). The estate tax only applies to the portion of the estate exceeding this amount.
Portability: A surviving spouse can use any unused exemption from the first spouse's death — effectively giving married couples a combined exemption of approximately $27.98 million. Portability must be elected by filing an estate tax return (Form 706) within 9 months of death.
Estate tax rate: The unified estate and gift tax rate is 40% on the taxable estate above the exemption.
Annual gift exclusion: You can give up to $18,000 per recipient per year (2024) completely free of gift tax and without using the lifetime exemption. Married couples can combine to $36,000 per recipient.
Marital deduction: Transfers between US citizen spouses are completely exempt from estate and gift tax — the unlimited marital deduction.
Political risk note: The doubled exemption was a temporary TCJA provision. The 2025 reconciliation legislation extended it, but future Congresses could reduce the exemption. Proper estate planning (irrevocable trusts, lifetime gifting strategies) to lock in the current high exemption is a priority for high-net-worth families.
Section 02
UK Inheritance Tax: 40% Above £325,000
The UK inheritance tax (IHT) is broadly considered one of the most burdensome in the developed world for ordinary families, primarily because the nil-rate band (NRB) has been frozen at £325,000 since 2009 while property values have risen dramatically.
UK IHT structure:
Nil-rate band:£325,000 per person — the first £325,000 of the estate is exempt. This is roughly equivalent to $415,000 at current exchange rates — a fraction of the US exemption.
Residence nil-rate band (RNRB): An additional exemption of up to £175,000 is available when the family home is passed to direct descendants (children, grandchildren). Combined with the NRB, this gives up to £500,000 per person tax-free.
Transferable NRB: Like US portability, any unused NRB and RNRB can be transferred to the surviving spouse — giving up to £1,000,000 combined for a married couple.
Rate: 40% on the estate value above the nil-rate band. A reduced rate of 36% applies if at least 10% of the net estate is left to charity.
The UK property market means many 'ordinary' families in London and the Southeast own homes worth £500,000-£2,000,000 — significantly above the nil-rate band. The IHT impact on middle-class UK families is therefore far more significant than the impact of US estate tax on the median American family. UK IHT generates approximately £7 billion in revenue annually.
Section 03
Germany and France Inheritance Tax: Complex Family Rules
Germany and France both have sophisticated inheritance tax systems with rates and exemptions that vary dramatically based on the relationship between the deceased and the beneficiary.
Germany (Erbschaftsteuer):
Relationship
Exemption
Rate Range
Spouse / civil partner
€500,000
7% – 30%
Child
€400,000 per child
7% – 30%
Grandchild
€200,000
7% – 30%
Sibling, niece/nephew
€20,000
15% – 43%
Non-family (partners, friends)
€20,000
30% – 50%
Germany's family exemptions are more generous than the UK's for direct family, but non-family and distant relatives face very high rates of up to 50%.
France (Droits de succession):
Spouse/civil partner: Fully exempt — no inheritance tax between spouses since 2007.
Children:€100,000 exemption per child (every 15 years). Rates: 5%-45% progressively on the amount above the exemption.
Siblings: €15,932 exemption; 35%-45% rates.
Non-family: Minimal exemption; 60% rate — among the highest globally for non-family transfers.
Section 04
Countries with No Inheritance Tax
Several significant countries have abolished inheritance tax entirely — making them attractive for estate planning purposes:
Country
Inheritance Tax
Notes
Canada
None
Deemed disposition at death triggers capital gains tax on appreciated assets
Australia
None
Similarly, capital gains may apply to some assets on death
New Zealand
None
No estate, inheritance, or gift tax
Sweden
None (abolished 2004)
Sweden abolished inheritance and gift taxes in 2004
Portugal
None for direct family
Stamp duty at 10% for non-direct family; direct family (spouse, children, parents) exempt
UAE
None
No inheritance tax for residents (Sharia law governs succession for Muslims)
Singapore
None (abolished 2008)
Estate duty abolished
It is important to note that 'no inheritance tax' does not mean assets transfer completely free. Canada and Australia both have deemed disposition rules that trigger capital gains tax on appreciated assets at death — the decedent's estate pays CGT as if assets were sold, which can be substantial for highly appreciated property or investments. This is economically similar to an inheritance tax, though calculated on gains rather than total value.
Section 05
State-Level Estate and Inheritance Taxes in the US
Beyond the federal estate tax, 12 US states and the District of Columbia impose their own estate taxes, with exemptions typically much lower than the federal threshold. Additionally, 6 states impose an inheritance tax (paid by the recipient, not the estate):
States with estate tax (lower exemptions):
Massachusetts: Estate tax on estates over just $2 million, with a graduated rate up to 16%.
Oregon: Estate tax threshold of $1 million — very low, catching many ordinary families with appreciated homes.
Washington State: Threshold of $2.193 million; rates up to 20%.
Maryland, New York, Hawaii, Illinois, Vermont, Minnesota, Connecticut, Maine, Rhode Island: Various exemptions and rates.
States with inheritance tax: Iowa (being phased out), Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania. These taxes are paid by the beneficiary (not the estate), with rates and exemptions varying by relationship to the deceased.
Maryland is unique in having both a state estate tax and a state inheritance tax — making it one of the most costly states for wealth transfer.
For US families with significant assets who are not subject to the federal estate tax (estates below $13.99M), state estate taxes can still be material — especially in states like Oregon ($1M threshold) and Massachusetts ($2M threshold). Planning at the state level is as important as federal planning for residents of these states.
Section 06
Planning Strategies: How Wealthy Families Reduce Exposure
Wealthy families in all countries use legitimate planning strategies to reduce inheritance and estate tax exposure. Common approaches by jurisdiction:
United States:
Irrevocable Life Insurance Trusts (ILITs): Life insurance proceeds are estate-tax-free if held in a properly structured ILIT.
Grantor Retained Annuity Trusts (GRATs): Transfer asset appreciation to heirs with minimal gift tax if assets outperform IRS hurdle rates.
Spousal Lifetime Access Trusts (SLATs): Capture the current high exemption by gifting to a trust benefiting the spouse — removes assets from estate while spouse retains access.
Charitable Remainder Trusts (CRTs): Provide income stream in exchange for assets that ultimately pass to charity — removing value from estate.
Annual exclusion gifting: $18,000 per recipient per year (indexed) — systematic gifting over years reduces estate.
United Kingdom:
Business Property Relief (BPR): Unlisted shares and certain business assets qualify for 100% BPR — completely IHT-exempt.
Agricultural Property Relief (APR): Agricultural land and property can be exempt at 100%.
Gifts out of income: Regular gifts from surplus income are exempt from IHT without using the nil-rate band.
7-year rule: Gifts made more than 7 years before death are completely IHT-free (tapering relief applies after 3 years).
💡
CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. This helps us provide free tax calculators and comparison tools. Learn more about our affiliate partnerships
Best Exchange Rates
Wise
★ 4.3 Trustpilot · 287,413 reviews
Moving money across borders? Wise offers mid-market exchange rates with low transparent fees — typically 4-8x cheaper than banks.
⚠ For currency exchange only — not a bank account replacement.
Does the US have an inheritance tax or an estate tax?
The US federal government imposes an estate tax (paid by the estate before distribution to heirs), not an inheritance tax (which would be paid by the recipient). The federal estate tax applies to estates over approximately $13.99 million per person in 2025. Six US states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania) also impose a state inheritance tax paid by recipients, with varying rates and exemptions by relationship. Maryland has both estate and inheritance taxes at the state level.
Q
What is the UK nil-rate band and residence nil-rate band?
The UK nil-rate band (NRB) is £325,000 per person — the portion of the estate exempt from the 40% IHT. The Residence Nil-Rate Band (RNRB) provides an additional £175,000 exemption when the family home is passed to direct descendants (children, grandchildren, step-children). Combined, a single person can pass up to £500,000 IHT-free; married couples can pass up to £1,000,000 (both NRBs and RNRBs combined via transferability). The RNRB phases out for estates over £2 million (£1 reduction for every £2 above the threshold).
Q
How does Germany inheritance tax work for non-family members?
Germany is particularly punitive for non-family inheritance. Friends, unmarried long-term partners, and non-relatives receive a minimal €20,000 exemption and face rates of 30%-50% on the inheritance value above the exemption. This contrasts sharply with spouses (€500,000 exemption, 7-30% rates) and children (€400,000 exemption per child, 7-30% rates). For unmarried couples in Germany, inheritance planning — such as wills making formal bequests, life insurance, and lifetime gifting — is particularly important to avoid the non-family tax rates applying to a domestic partner.
Q
Does Australia have an inheritance tax?
No — Australia abolished inheritance and estate taxes in 1979. There is no federal or state inheritance tax in Australia. However, assets inherited in Australia may trigger Capital Gains Tax when eventually sold by the beneficiary (the cost base is generally the deceased's original cost base, not date-of-death value — so inherited appreciated assets carry embedded CGT). Superannuation (Australia's pension system) has its own death benefit tax rules — the tax treatment of Super death benefits depends on whether the beneficiary is a 'tax dependent' and how the Super is paid out.
Q
How does the TCJA exemption sunset affect estate planning in 2026?
The TCJA doubled the basic estate tax exclusion from approximately $5.5 million to approximately $11 million (now ~$13.99M in 2025 with inflation indexing). The 2025 reconciliation legislation extended this doubled exemption. Without extension, it would have reverted to approximately $7 million per person — subjecting many more families to estate tax. Even with the extension, future political risk remains — wealthy families should consider locking in the current high exemption through lifetime gifting strategies (SLATs, GRATs, irrevocable trusts) now, in case future legislation reduces the exemption. Gifts made using the current high exemption are not 'clawed back' if the exemption later decreases.
Q
What is the annual gift exclusion and how does it work?
The US annual gift tax exclusion allows you to give up to $18,000 per recipient per year (2024) without gift tax liability and without reducing your lifetime estate and gift tax exemption. There is no limit on the number of recipients — you can give $18,000 each to 10, 50, or 100 people annually. Married couples can combine their exclusions to $36,000 per recipient via gift splitting. Systematic annual gifting over many years is one of the most effective ways to reduce a taxable estate. In addition to the annual exclusion, unlimited gifts to qualified educational institutions (paid directly to the institution) and medical providers are also gift-tax-free.
Q
How do 529 plans factor into estate planning?
529 college savings plans are a useful estate planning tool because contributions leave your estate immediately but you retain some control. Contributions are treated as completed gifts eligible for the annual exclusion ($18,000 in 2024). A unique provision allows 'superfunding' a 529 — you can contribute up to 5 years' worth of annual exclusions ($90,000 single / $180,000 married) in a single year and elect to treat them as spread over 5 years for gift tax purposes. This immediately removes up to $90,000-$180,000 from your taxable estate per beneficiary while retaining the ability to change the beneficiary if the original beneficiary doesn't use the funds.
Disclaimer:This guide is for educational purposes only and does not constitute tax or legal advice. Tax rules change annually. Consult a qualified tax professional for advice specific to your situation.