It’s typical for an individual to pay 4.5% on an inheritance from a family member. This rate can increase to 10% or even 20% for inheritance distributed to friends.

A trust doesn’t have to pay income tax on income that is distributed to the beneficiaries. It does have to pay tax on undistributed income. The trustee is free to distribute trust income to as many beneficiaries as possible, and in any advantageous amount based on the recipients' personal marginal tax rates. Distributing trust income before taxes are due can prevent having to pay taxes on the trust income at all.