Indiana residents enjoy a significant advantage when planning their estates. The state eliminated its estate tax years ago, leaving only federal tax requirements for the wealthiest families. (It doesn’t have an inheritance tax either.)
The state has no state-level estate tax or inheritance tax. This places Indiana among the majority of states that do not impose additional taxes on inherited wealth beyond federal requirements.
Only the federal tax applies to Indiana residents, with an exemption of $15 million in 2026. This means fewer than 2% of estates nationwide face any estate tax burden.
The state phased out its estate tax in the early 2000s. The state previously imposed a “pick-up tax” that captured the maximum federal credit allowed for state estate taxes paid. When federal law eliminated this credit in 2005, the state chose not to implement an independent state estate tax.
This decision aligned Indiana with neighboring states like Iowa, which also eliminated estate taxes during the same period. Illinois, however, maintained its estate tax with a $4 million exemption.
What Does No Estate Tax in Indiana Mean for Families?
The absence of state estate tax creates several practical benefits for Indiana residents and property owners:
Simplified Planning: Families focus solely on federal tax implications rather than navigating dual tax systems. A couple with a $10 million estate faces no state estate tax, unlike similar families in Illinois who would owe significant state taxes.
Property Ownership Advantages: Homeowners can transfer valuable real estate without state tax consequences. A family farm worth $3 million passes to heirs without triggering Indiana estate taxes, though federal taxes may still apply if the total estate exceeds $15 million.
Business Succession Benefits: Family businesses transfer more smoothly without state estate tax complications. A manufacturing company valued at $8 million faces no Indiana estate tax burden during succession planning.
How Does This Compare to Federal Requirements?
While Indiana imposes no estate tax, federal requirements still apply to larger estates. The federal exemption of $15 million per person means married couples can protect up to $30 million from federal estate taxes through proper planning.
Indiana’s probate process remains separate from tax considerations [1][2]. Estates must still complete probate administration, pay valid claims, and distribute assets according to law, regardless of tax implications.
For most families, the combination of no state estate tax and high federal exemptions means estate taxes never become a concern. This allows families to focus on other important aspects of estate planning, such as avoiding probate and ensuring smooth asset transfers to beneficiaries.
