I live in one of the states that has a state inheritance tax. This article states that this tax is paid by the heir on their personal tax return, and has a link to the irs website. Since this is a state (actually collected by the county in my state) tax, it has nothing to do with the federal tax system. Also, even though an heir might live in a state that does not have an inheritance tax, the tax is still owed to the decedent's county. In other words, taxability is dependent on the decedent's residence, not the beneficiary's state of residence. In my state, there are graduated tax rates depending on the relationship of the heir to the decedent, and varying exempt amounts, also dependent on the relationship. This is all reported on a form that is not part of the state income tax return.

When do you 'not' have to go through probate?