The Inheritance Tax
Then there’s the other death tax: the inheritance tax. The federal government doesn’t have one of these, but six states do. This tax is levied against those who inherit from you. If you leave your best friend your vintage automobile, he’ll have to pay a percentage of its fair market value to the state if you—not he—lives in one of those that collects an inheritance tax.
You can leave instructions in your estate plan that your estate should pay for any inheritance taxes that come due if you want to spare him this burden when ownership of your property transfers to him. Governments don’t particularly care who pays a given tax as long as someone does.
