Whether your loved one left a will or died intestate, you are confident about one thing. Your loved one did not want their assets to go towards succession taxes. Instead, your loved one wanted you and their other heirs to inherit as much as possible.
You want to honor your loved one’s wishes, and you know that you must comply with all state laws. Accordingly, you likely have questions.
Will Succession Taxes Cut Into Your Inheritance?
The short answer is no.
Under current Louisiana law, you don’t have to worry about paying succession taxes after a loved one dies. Instead, your loved one’s property and assets should be distributed to succession heirs according to the terms of your loved one’s will or the Louisiana intestacy laws after all costs of settling the estate are paid.
It wasn’t always like this in Louisiana, however. Until relatively recently, there used to be two types of succession taxes in Louisiana. If you were involved in a succession previously, you might have dealt with:
- State inheritance taxes. Louisiana law used to require that an inheritance tax return be filed with the Louisiana Department of Revenue before a succession was opened. The Louisiana Department of Revenue would then issue a certificate that had to be attached to the petition for possession when the succession case was filed with the court. This law has been repealed, and there is no longer an inheritance tax for people who died after June 30, 2004. Therefore, nothing needs to be filed with the Louisiana Department of Revenue before, during, or after a succession case is filed with the court.
- Estate transfer taxes. Louisiana law used to require that an estate transfer tax return be filed if the decedent’s net estate was $60,000 or more. The estate would then be given a federal tax credit for the amount of state estate taxes that were paid. In 2001, federal law changed and no longer permitted a federal tax credit for taxes paid to the state. The effect of the change in federal law was that Louisiana estate transfer taxes no longer apply to people who died on or after January 1, 2005.
For a short time in the late 1980s, New Orleans also had its own inheritance tax. However, like the Louisiana inheritance taxes described above, that law no longer applies.
Currently, Louisiana law does not permit these taxes, and your loved one’s estate will not owe state inheritance taxes or estate transfer taxes regardless of the size of the estate.
Can Succession Laws Change?
While succession taxes are not currently a concern for Louisiana heirs, these taxes were an issue in the past and potentially could be an issue again in the future. Additionally, other succession laws may change and affect your loved one’s estate in ways that you do not anticipate.
Louisiana Has No State Inheritance or Estate Tax
Louisiana abolished its state inheritance tax for deaths occurring on or after July 1, 2004, and has no state-level estate tax. This means Louisiana beneficiaries receive their inheritance free of any Louisiana tax on the transfer itself. Whether you inherit $50,000 or $5 million from a Louisiana estate, the State of Louisiana does not impose a tax on that inheritance.
This confuses many Louisiana families, particularly those who recall the old inheritance tax or who have been warned by well-meaning friends or advisors that they “need to plan for the inheritance tax.” The state inheritance tax is gone. What remains is the federal estate tax (for very large estates) and the ongoing income tax on any income the inherited assets generate after you receive them.
Income Taxes on Inherited Assets: What Beneficiaries Actually Owe
Inheriting money or property is not taxable income — you do not report the inheritance itself on your federal or Louisiana income tax return. The federal tax code excludes inheritances from gross income (IRC §102). However, income generated by inherited assets is taxable, and Louisiana beneficiaries need to understand several specific scenarios:
- Inherited retirement accounts (IRAs, 401ks, pensions). These are the most tax-significant assets most Louisianans inherit. Unlike a bank account or real estate, an inherited retirement account carries a built-in income tax liability: every dollar withdrawn is ordinary income to the beneficiary. Under the SECURE Act (effective 2020), most non-spouse beneficiaries must withdraw the entire inherited IRA balance within 10 years. There are no required minimum distributions within that 10-year window (under the SECURE 2.0 Act rules), but the full balance must be emptied. A $300,000 inherited IRA withdrawn over 10 years is $30,000 of additional taxable income per year — a substantial burden that requires planning.
- Inherited real estate and capital gains. Real estate you inherit receives a “stepped-up” basis to the fair market value on the date of death. If you immediately sell inherited property at its date-of-death value, you owe zero capital gains tax. If you hold the property and it appreciates, only the gain above the stepped-up value is taxable. This is a major benefit compared to property transferred during life (such as by gift), which carries the original owner’s lower basis.
- Louisiana community property and the double step-up. In Louisiana, when a married decedent’s community property passes through the succession, the surviving spouse also gets a stepped-up basis on their own half of the community property — not just the half that passes to the heirs. This “double step-up” is one of the most valuable (and underappreciated) aspects of Louisiana’s community property system. A couple who has owned a home since 1980 can use the surviving spouse’s basis step-up on the entire property, potentially eliminating decades of capital gain if the property is later sold.
- Income earned after inheritance. Interest, dividends, rental income, and business income generated by inherited assets after the date of distribution are taxable income to the beneficiary in the year received. This is true regardless of whether the assets came from a succession or a trust.
- Inherited savings accounts, CDs, and money market accounts. No income tax at the time of inheritance. But if a CD matures and pays interest after you inherit it, that interest is your taxable income.
Federal Estate Tax: The Threshold Louisiana Families Should Know
The federal estate tax is the primary tax concern for large Louisiana estates. It applies to estates above the federal exemption amount, which for 2024 is $13.61 million per individual. A married couple can effectively shelter $27.22 million from federal estate tax through the “portability” election, which allows the surviving spouse to use the deceased spouse’s unused exemption.
The 2026 sunset: The current high exemption is scheduled to expire at the end of 2025 absent congressional action. If the exemption drops as projected to approximately $6–7 million per person, many Louisiana families who are currently below the threshold will find themselves exposed. Families with illiquid assets — real estate, business interests, farmland — face particular risk because the estate tax is due in cash within nine months of the decedent’s death, even if the estate’s value is tied up in property that cannot easily be sold.
The interplay between federal estate taxes, income taxes on inherited retirement accounts, and Louisiana’s community property system creates a complex planning landscape that benefits from professional guidance — even for estates that appear straightforward on the surface.
Our Louisiana succession lawyers make sure that we:
- Are always up to date on the latest changes to Louisiana succession law and federal estate tax law
- Provide you with all of your legal options
- Answer all of your questions completely and accurately
- Provide easy and cost-effective solutions for succession issues
- Let you know our step-by-step process for handling your loved one’s estate
Whether you have a simple succession or a succession that is complicated by family members who can’t agree on what should happen next or other factors, our Louisiana succession lawyers are here to help you. We help hundreds of families all over Louisiana each year, and we will work hard to resolve your loved one’s estate quickly and easily.
You shouldn’t have to deal with the complications of a Louisiana succession while you grieve. Instead, let us shoulder that burden for you. Call us or fill out our online contact form today to schedule your first meeting with us so that you can start and finish the succession process with as little stress as possible.