When someone passes, emotions hit hard. You’re dealing with loss, and then suddenly, there are questions about taxes. It’s not what anyone wants to think about—but here in Wilmington, it’s one of the first things people ask us: Will I owe anything on what I inherited?
The short answer? Sometimes yes, sometimes no. It really depends on what you’re inheriting, how it’s structured, and whether the estate itself crosses certain thresholds.
A house is different from a retirement account. A savings account isn’t treated the same as a stock portfolio. And that’s where things can get confusing fast, because the tax consequences don’t always show up right away.
Here’s some immediate good news for Wilmington families—North Carolina eliminated its estate tax in 2013. This repeal gave beneficiaries across the state a major break by removing state-level taxation on what they inherit.
Before the repeal, North Carolina’s estate tax was tied to the federal system and applied to larger estates. The now-repealed statute, found under Article 1A of Chapter 105, used this language:
“A tax is imposed upon the transfer of the taxable estate of every decedent who at the time of death was a resident of this State. The amount of the tax shall be the maximum credit for state death taxes allowable to the estate of the decedent against the federal estate tax.”
— Former N.C. Gen. Stat. § 105-32.2
That tax structure essentially mirrored the federal estate tax credit system, meaning North Carolina taxed estates only to the extent allowed under federal law. But that entire section was wiped clean with the passage of Session Law 2013-316, which stated:
“Article 1A of Chapter 105 of the General Statutes is repealed.”
Today, the result is simple: there’s no inheritance tax and no state estate tax in North Carolina, regardless of the estate’s value.
So yes, North Carolina’s tax structure is more favorable than many realize. But when it comes to inheritance, especially if you’re dealing with investment accounts, property, or anything with a title or beneficiary designation, it’s worth understanding where federal tax liabilities might show up.
Careful planning around federal rules is still the best way to minimize tax exposure and protect your inheritance. It can help reduce surprises—and help you keep more of what your loved one meant for you to have.
Even though North Carolina doesn’t impose an inheritance tax, the federal government still might—especially when we’re talking about high-value estates. For 2023, the federal estate tax exemption is $12.92 million per person. That number shifts slightly each year with inflation, but this is the figure families are working with right now.
What that really means is this: if everything you own—home, investments, retirement accounts, life insurance, the whole picture—adds up to less than $12.92 million, there’s no federal estate tax due. Go above that, and the IRS may come calling.
If you’re married and plan ahead, you can double that amount. The current system allows spouses to combine their exemptions—up to $25.84 million—as long as certain rules are followed. It’s called portability, and it’s a powerful tool if you use it correctly.
Once the estate’s value crosses the exemption, the tax rate can go as high as 40%, which is no small hit. That’s why tax-efficient estate planning matters so much, especially for families with complex or sizable estates.
Even if the estate won’t owe any tax, filing might still be required. For 2023, the IRS says a Form 706 must be filed if the estate plus any adjusted taxable gifts exceeds $12.92 million.
Why file if there’s no tax due? Two main reasons:
We often see executors skip this step, thinking it’s unnecessary. But in reality, it can help close the loop and protect the estate from future complications. Especially when portability is in play, filing Form 706 can preserve the surviving spouse’s exemption—and that’s not something you want to overlook.
Giving during your lifetime can be just as important as planning for what happens after. And the IRS actually encourages this kind of transfer—up to a point. That’s where the annual gift tax exclusion comes in.
For 2023, you can give up to $17,000 per person, per year, without having to file a gift tax return or dip into your gift tax exemption. If you’re married, you and your spouse can split the gift, which means $34,000 per recipient—completely tax-free and with no reporting required.
This isn’t just a number on paper. For families looking to reduce the taxable value of their estate, this exclusion creates real opportunities. Over time, gifting smaller amounts to multiple people can add up to significant estate tax savings, all while helping your loved ones in the present.
The beauty of the annual exclusion is that it applies to each recipient individually. So if you’ve got three kids and five grandkids? That’s eight people you can give to, every year, without triggering gift tax issues.
Some smart ways families put this into action:
Used thoughtfully, these strategies can help reduce your estate’s overall tax exposure while keeping your wealth where it belongs—with your family.
When families talk about leaving wealth to the next generation, that usually means children. But sometimes, the goal is to help grandchildren—or even great-grandchildren—directly. That’s where a whole different layer of tax rules comes into play.
If you skip a generation when transferring assets, the IRS sees it differently. That’s because without extra rules in place, families could just leap over their children and avoid estate taxes entirely. To close that gap, the government introduced the generation-skipping transfer tax, or GST.
Here’s the key point: if you’re transferring wealth directly to a grandchild—or to anyone more than one generation below you—the GST may apply, and it’s in addition to any estate tax already owed.
For 2023, the GST exemption matches the federal estate tax exemption: 12.92 million per individual. Go over that, and anything beyond the exemption could be taxed at a flat 40% rate—on top of estate tax. That kind of overlap can create a major tax liability if families aren’t planning ahead.
The good news? There are tools to manage this. Generation-skipping trusts (GSTs) are one of the most effective ways to preserve wealth across multiple generations while limiting exposure to unnecessary tax hits. But these aren’t DIY setups—they need to be built carefully, with attention to detail and long-term strategy.
When structured properly, a GST trust can hold assets and provide for your grandchildren—and even future generations—without triggering extra estate or GST taxes every time the wealth is passed down. It’s a powerful tool, especially for families focused on long-term planning.
We talk with a lot of Wilmington families about their estate plans, and while taxes aren’t always the first thing on their minds, they come up quickly. Not because folks are trying to game the system, but because they want to do right by their family and not leave a mess behind.
If there’s a way to pass things on cleanly, without unnecessary tax complications, it’s worth knowing about.
Life insurance can feel pretty simple—you take out a policy, name your beneficiaries, and that’s that. But here’s what surprises people: if you still “own” the policy when you pass, the payout could be pulled into your taxable estate. And depending on the size of the estate, that might trigger estate taxes that nobody saw coming.
One workaround? An irrevocable life insurance trust, or ILIT. You don’t own the policy anymore—the trust does. You can’t pull it back or change your mind later, but in exchange, the proceeds stay outside your estate, and your loved ones get what you meant them to have. Plus, it gives them cash at a time when they might need it most—funeral costs, taxes, legal fees—it adds up fast.
The right type of trust depends on what you’re passing down, who you want to benefit, and how long you want that protection to last.
Here are a few we see in real life:
Each one comes with trade-offs. It’s not about finding a perfect solution—it’s about choosing the one that fits your values and what you’re trying to leave behind while also minimizing estate taxes where possible.
Let’s say you bought a piece of land 30 years ago for $50,000, and now it’s worth $500,000. If you give it to your kids while you’re alive, they inherit your original cost basis. That means if they sell it, they might owe capital gains tax on nearly half a million dollars.
But if they inherit it after you pass? The basis gets “stepped up” to today’s market value. No tax on all that growth. It resets.
So while gifting during your lifetime can make sense in some cases, holding on to appreciated assets until death can be a smarter move, tax-wise. Especially with property or investments that have climbed in value over time.
Estate planning doesn’t stay still. The rules shift. The tax code changes. What works now might not work five years from now—and that’s especially true with the current federal estate tax exemption set to shrink after 2025. If nothing changes in Congress, we could be looking at a much lower threshold. For some Wilmington families, that’s going to matter. A lot.
So if your estate is close to the line—or might be someday—it’s not too early to plan. And honestly, waiting could cost more than just peace of mind.
At Johnson Legal, we don’t believe in one-size-fits-all solutions—we focus on comprehensive estate planning that matches your needs, your assets, and your family goals. In other words, we sit down, look at the full picture, and talk about what really matters to you and your family, not just the numbers.
If you’re not sure where to start, contact us. We’ll help you figure it out—without pressure, and without the legal jargon. Just a real conversation about how to make smart choices now that hold up later.
Shane T. Johnson is the CEO and Managing Partner of Johnson Legal, an estate planning and business law firm in Wilmington, NC. With years of experience in estate and business law, he has zealously represented clients in various legal matters, including small business formation and purchasing, estate planning, probate, domestic violence, and other legal cases.
Shane received his Juris Doctor from the University of Wyoming and is a member of the North Carolina Bar Association. He has received numerous accolades for her work, including being named among the Best Probate Lawyers in Wilmington by Expertise.com.
