Last Updated: April 2026
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.
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:
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.
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:
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.
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):
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.
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):
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.
Wealthy families in all countries use legitimate planning strategies to reduce inheritance and estate tax exposure. Common approaches by jurisdiction:
United States:
United Kingdom:
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Work Remotely from Anywhere →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.
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).
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.
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.
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.
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.
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.