Inheritance works through one of three paths: a valid will directs who gets what, state intestacy laws take over if there is no will, and certain assets skip both of those routes and pass directly to a named beneficiary. Before anything reaches heirs, the estate has to pay the deceased’s debts and any taxes owed. Most inheritances are not taxed federally — in 2026, only estates worth more than $15 million owe federal estate tax.1Internal Revenue Service. Estate Tax The details of how quickly you receive property, whether you owe anything, and what you’re legally entitled to depend on which path applies and what the assets are.
With a Will Versus Without One
When someone dies with a valid will, the document controls distribution. The testator names beneficiaries and describes what each receives, and names an executor to carry the instructions out. The executor files the will with the probate court, manages estate finances, pays debts, and distributes property.
A will generally must be signed by the testator and witnessed by at least two people who are not beneficiaries. Some states accept handwritten wills without witnesses; others impose stricter formalities. A will that fails the state’s requirements can be declared invalid, in which case the estate is distributed as if no will existed.
Without a valid will, state intestacy statutes take over. They follow a fixed hierarchy: surviving spouse and children first, then parents, siblings, and progressively more distant relatives. Verbal promises the deceased made during their lifetime don’t count — only the statute matters. If a beneficiary in the hierarchy died before the deceased, most states use “per stirpes” distribution, meaning that person’s share passes down to their own children rather than being split among surviving beneficiaries at the same level. If no living relative can be found at any level, the property escheats to the state government. That outcome is rare, but it happens.
What a Surviving Spouse Is Entitled To
Even with a will, the testator can’t disinherit a spouse in most separate-property states. A surviving spouse can claim an “elective share” — typically one-third of the estate — regardless of what the will says. If the spouse feels shortchanged, they file a claim with the probate court to receive the statutory share instead of what the will provides. Community property states handle this differently, generally giving the surviving spouse automatic ownership of half the marital property.
Assets That Bypass Probate Entirely
A significant portion of what people own often never enters probate. These assets transfer directly to a named beneficiary by contract or by operation of law, regardless of what a will says or what intestacy laws provide:
- Life insurance proceeds go to the named beneficiary on the policy.
- Retirement accounts like 401(k) plans and IRAs pass to whoever is listed on the beneficiary designation form.
- Payable-on-death and transfer-on-death bank and brokerage accounts transfer immediately to the named person.
- Real estate or accounts held in joint tenancy with rights of survivorship pass automatically to the surviving co-owner.
- Property held inside a properly funded revocable living trust passes according to the trust’s terms without court involvement.
Because these transfers happen outside probate, beneficiaries can typically access funds within days or weeks rather than months. One caution with living trusts: the trust only controls assets actually transferred into it during the owner’s lifetime. Real estate must be re-titled in the trust’s name, and financial accounts must list the trust as owner or beneficiary. Anything left outside the trust still goes through probate.
What Probate Actually Involves
Probate is the court-supervised process of validating a will (if one exists), paying the deceased’s debts, and distributing what remains. It starts when someone — usually the executor named in the will, or a close family member if there is no will — files a petition with the local probate court. The court formally appoints a personal representative, called an executor under a will or an administrator under intestacy, who then has legal authority to manage the estate.
The executor has a fiduciary duty to act in the best interests of the estate and its beneficiaries. That means identifying and securing assets, getting appraisals where needed, paying valid debts and taxes, and distributing what remains. Estate funds must stay separate from personal funds. A court can hold an executor personally liable for losses caused by mismanagement, such as missing tax deadlines or making risky investments with estate money.
Creditor Notice and Debt Payment
After appointment, the executor notifies creditors, usually through a published notice in a local newspaper and direct notice to known creditors. Creditors then have a limited window, commonly a few months but varying by state, to file formal claims for unpaid debts. The executor pays legitimate claims from estate assets and can challenge ones that appear invalid. Only after all debts, funeral expenses, taxes, and administrative costs are paid does the court authorize final distribution to beneficiaries.
How Long It Takes
Simple estates can sometimes be settled within six months. Complex ones — those with hard-to-value assets, required estate tax returns, or family disputes — can take several years. If the IRS reviews an estate tax return, that review alone can take more than two years from the date of death. Contested wills and litigation among heirs extend the timeline further.
Small Estate Shortcuts
Most states offer a streamlined alternative to full probate for smaller estates. These small estate procedures, often called small estate affidavits, let heirs collect assets by filing a sworn statement instead of going through formal court proceedings. Dollar thresholds vary widely, generally ranging from around $50,000 to $150,000 in total personal property, with some states higher or lower.
To use the process you typically wait a short period after the death, confirm no formal probate case has been opened, account for outstanding debts, and sign the affidavit under penalty of perjury. A death certificate is usually required. Banks and brokerages can then release funds directly to the heir based on the affidavit alone, without a court order. If the estate exceeds the threshold or involves contested claims, full probate is required.
When the Estate Owes More Than It Has
An estate is insolvent when its debts exceed its assets. In that case, beneficiaries receive nothing, but they also generally do not inherit the debt. You are not personally responsible for a deceased relative’s unpaid bills unless you co-signed the debt, held a joint account, or fall into a specific legal exception such as certain spousal liability rules that vary by state.2Consumer Financial Protection Bureau. Does a Person’s Debt Go Away When They Die?
When an estate is insolvent, debts are paid in a priority order set by state law. Federal debts owed to the U.S. government take priority over most other claims.3Office of the Law Revision Counsel. 31 U.S. Code 3713 – Priority of Government Claims After federal claims, states typically prioritize funeral expenses, administrative costs, and secured debts before unsecured obligations like credit cards and medical bills. If the estate runs out of money, remaining creditors go unpaid. Collectors may contact a surviving spouse or executor about payment from estate funds, but they cannot legally claim you owe the debt personally unless one of the specific exceptions applies.2Consumer Financial Protection Bureau. Does a Person’s Debt Go Away When They Die?
Taxes on What You Inherit
For most heirs, the tax picture is simpler than expected. The inheritance itself is generally not treated as taxable income to you. Where taxes come in is at the estate level and, in a few states, on the receiving end.
Stepped-Up Basis
When you inherit property, your tax basis — the value used to calculate gain or loss when you eventually sell — is generally reset to the property’s fair market value on the date of the owner’s death, not what the owner originally paid.4Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent If a parent bought a home for $100,000 and it was worth $500,000 when they died, your basis is $500,000. Sell it soon after for $500,000 and you owe no capital gains tax. Without the step-up, you’d owe tax on $400,000 of gain. The rule applies to real estate, stocks, and most other inherited assets.
If you sell for more than the stepped-up basis, you report the gain on Schedule D of your federal tax return.5Internal Revenue Service. Gifts and Inheritances If the estate was large enough to require a federal estate tax return, the executor may send you a Schedule A to Form 8971, and your reported basis must match the value on that return.
Federal Estate Tax
The federal estate tax applies only to estates whose total value exceeds the filing threshold. For someone who dies in 2026, the threshold is $15 million.1Internal Revenue Service. Estate Tax Amounts above the exemption are taxed at a top rate of 40 percent.6Office of the Law Revision Counsel. 26 U.S. Code 2001 – Imposition and Rate of Tax The estate pays this tax, not the individual beneficiaries. The executor files Form 706 within nine months of the date of death, with a six-month extension available by filing Form 4768, though any tax owed is still due at the original nine-month deadline and interest accrues on unpaid amounts.7Internal Revenue Service. Frequently Asked Questions on Estate Taxes
State Estate and Inheritance Taxes
Some states impose their own transfer taxes at death, in two forms. Twelve states and the District of Columbia levy a state-level estate tax. These work like the federal version, but exemption thresholds are much lower, ranging from $1 million up to amounts matching the federal threshold. An estate that owes nothing to the IRS could still owe state estate tax.
Five states impose an inheritance tax, which the person receiving the inheritance pays rather than the estate. The rate depends on the beneficiary’s relationship to the deceased. Surviving spouses are exempt in every state that has an inheritance tax, and children or other close relatives either pay nothing or face low rates. More distant relatives and unrelated beneficiaries pay higher rates, generally between 1 and 16 percent depending on the state and the relationship. Maryland is the only state that imposes both an estate tax and an inheritance tax. Because state rules change frequently, check the current law in the state where the deceased lived to see whether any state tax applies to what you’re receiving.