Estate and Inheritance Tax Considerations in Georgia: What You Need to Know for 2025 and Beyond

Estate planning is an essential part of managing your financial legacy, ensuring that your wealth is distributed according to your wishes while minimizing the tax burden on your heirs. With upcoming changes in federal estate tax laws set for 2026, it's natural to wonder how these changes might affect you, especially if you reside in Georgia. In this article, we'll answer three crucial questions to help you navigate estate and inheritance tax concerns in Georgia.

1. If I live in Georgia, do I have to worry about the potential rollback of the estate tax laws set for 2026?

The federal estate tax exemption is set to revert to a lower threshold in January 2026, which could impact many individuals across the United States. As of 2024, the federal estate tax exemption is approximately $13.61 million per individual, or $27.22 million for a married couple, meaning estates valued below this amount are not subject to federal estate tax. However, unless Congress acts to extend the current law, the exemption is scheduled to drop to approximately $5 million per individual (adjusted for inflation) in 2026.

If you live in Georgia, the impact of this rollback depends on the value of your estate. If your estate exceeds the new exemption threshold, your estate may be subject to federal estate taxes. For example, if the exemption falls to $7 million and your estate is valued at $10 million, $3 million of your estate would be subject to federal estate tax, which would be taxed at a rate of 40%. The estate tax rate can range from 18% to 40%, depending on the value taxable amount of the estate; however if the taxable amount of the estate is more than $1 million, it will be taxed at the maximum rate of 40%.

It's crucial to consider whether your estate might exceed the future exemption threshold. If so, you may want to consult with a financial advisor or estate planning attorney to explore strategies to minimize the potential tax burden. These strategies could include gifting assets during your lifetime, establishing trusts, or other tax-efficient planning methods.

2. Does Georgia have an estate and inheritance tax?

Georgia does not have a state-level estate tax. Georgia also has no inheritance tax. Inheritance tax is imposed by some states on the beneficiaries who receive assets from a deceased person's estate. The tax rate and exemption amounts vary by state and the beneficiary's relationship to the deceased.

Fortunately, Georgia residents do not need to worry about an inheritance tax. This means that if you inherit assets from someone who lived in Georgia, you will not owe any state-level inheritance tax on those assets. However, it's important to note that the absence of an estate tax or inheritance tax in Georgia does not exempt you from federal estate taxes or any inheritance taxes that might be imposed by other states if you inherit from someone who lived outside of Georgia.

3. Do my heirs in Georgia have to pay tax on their inheritance?

While Georgia does not impose an inheritance tax or an estate tax at the state level, there are still potential tax implications for heirs. First, as mentioned earlier, there is no state inheritance tax, so your heirs will not owe any state tax on the inheritance they receive from your estate.

However, if your estate is subject to federal estate taxes (which would occur if the estate's value exceeds the federal exemption threshold), the estate itself is responsible for paying those taxes before any distribution to heirs. This means that your heirs would receive their inheritance after the estate taxes have been paid. The beneficiaries themselves do not directly pay federal estate tax, but the amount they receive could be reduced if the estate is subject to significant taxes.

Additionally, while the inheritance itself is not taxable income for federal tax purposes, any income generated from the inherited assets (such as dividends from stocks, interest from bonds, or rental income from real estate) would be subject to income tax. Therefore, your heirs may need to pay taxes on any income produced by their inherited assets in the years following their inheritance. Finally, if your estate includes an IRA, 401(k), or other funds comprised of pre-tax contributions, it is vital that these accounts be handled correctly in your estate plan to avoid subjecting your heirs to unnecessary and potentially burdensome taxes. 

Conclusion

If you haven't yet created an estate plan, now is the time to do so. Estate planning is important no matter what regardless of your income level. While Georgia residents benefit from the absence of a state inheritance tax and estate tax, understanding the implications of federal estate taxes and other potential tax liabilities for your heirs is essential no matter the size of your estate. If you anticipate that your estate might exceed the federal exemption threshold after the 2026 rollback, let the experts at Kimbrough Law review your estate plan to make sure it will achieve your goals, even if the laws change.  We have experience handling estates of all sizes, and we can help you. Call 706.850.6910 to schedule an appointment.