Estate taxes can be a puzzling subject. You might wonder whether a South Carolina estate tax exists or if you need to worry about paying additional taxes beyond federal regulations. The good news is that understanding how these taxes work can empower you and your family members to make informed decisions and better prepare for the future.
In this post, we’ll explore the specifics of estate taxes and whether any tax applies to your assets in South Carolina. By reading on, you’ll gain insight into the steps you can take to minimize your potential tax liability and keep more of your wealth in the hands of those you care about.
What Is an Estate Tax?
An estate tax, frequently called the “death tax,” is imposed on the comprehensive worth of a deceased person’s property before any portion is passed on to their beneficiaries. Because the tax is paid directly from the estate, it can reduce the amount ultimately passed on to heirs.
Below is a closer look at which assets may count toward a taxable estate:
Real estate: Real estate property can include houses, rental complexes, raw land, and vacation retreats that form part of the estate.
Investments: Financial holdings such as stocks, bonds, mutual funds, and similar securities owned by the decedent fall under this category.
Retirement accounts: Traditional IRAs, 401(k) plans, and pensions may be counted toward your estate, depending on the specifics of your situation.
Personal valuables: High-value personal items—such as jewelry, artwork, antiques, and collectibles—often make a substantial difference in an estate’s total value.
Business interests: Stakes in companies or partnerships are also included and are typically assessed based on fair market value.
Please Note: While the estate is valued at fair market rates, any debts, funeral expenses, and administrative costs can be subtracted to arrive at the net figure that might be subject to taxation. Remember, the tax rate will often depend on the estate’s overall value and whether it exceeds the federal or state threshold set by law.
Does South Carolina Have an Estate Tax?
There is currently no state-level estate tax in South Carolina. In other words, the state does not impose its own separate estate tax on top of any federal taxes that might apply to larger estates. This lack of an additional South Carolina estate tax means many residents won’t face extra charges when transferring assets to their heirs.
In the United States, you’ll find additional estate taxes in the following places:1
- Washington
- District of Columbia
- Minnesota
- Hawaii
- Rhode Island
- Maryland
- Maine
- Oregon
- Connecticut
- Illinois
- Vermont
- New York
- Massachusetts
Please Note: As a South Carolina resident, it’s important to remember that tax laws and regulations can change over time. While there is currently no separate state estate tax in South Carolina, future legislative updates or federal changes may affect your estate planning.
Does South Carolina Have an Inheritance Tax?
An inheritance tax is a charge imposed on individuals who receive assets from a deceased person, requiring beneficiaries to pay a levy on the property or funds they inherit. This differs from an estate tax, which is taken from the estate’s assets before anything is distributed to them.
In South Carolina, beneficiaries do not pay a separate inheritance tax. The state imposes neither an estate tax nor an inheritance tax, so heirs living in or inheriting from South Carolina aren’t subject to these extra tax burdens at the state level.
There are a few states that levy their own inheritance tax, these include:2
- Pennsylvania
- New Jersey
- Maryland
- Nebraska
- Kentucky
If you’re inheriting assets from someone who lived in one of the states listed above, you may still be responsible for that state’s rules. For example, if you receive property from an individual who resided in Pennsylvania, you could be subject to Pennsylvania’s inheritance tax, even if you live in South Carolina.
Federal Estate Tax Overview for South Carolina Residents
While South Carolina doesn’t impose a special estate tax, the federal government’s tax applies to estates meeting a certain dollar threshold. To determine whether your estate could face taxes, knowing the latest rules surrounding the federal exemption for estates is important.
Current Federal Exemption
The federal government sets a basic exemption amount below which estates owe no estate tax. For 2025, the federal exclusion amount is $13.99 million per individual ($27.98 million for married couples).3 If the total worth of your assets—after deductions for debts and administrative costs—is less than this figure, you won’t incur federal estate taxes.
When your taxable estate exceeds the designated threshold, you’ll be subject to a percentage-based tax on the excess. Married couples can often use “portability,” which lets the surviving spouse apply any remaining exemption from the deceased spouse.
Please Note: The current exemption threshold is significantly elevated but is on track to revert to pre-TCJA levels in 2026, factoring in inflation. Under this rollback, the individual exemption could shrink to around $7 million, while married couples might see a combined exemption of about $14 million. Of course, these figures remain subject to change if new legislation is enacted before then.4
Federal Estate Tax Rates
The federal estate tax is progressive, which means the rate goes up in brackets—starting in the high teens (around 18%) and topping out near 40% for significantly valuable estates. These rates apply only to the portion of your estate that exceeds the federal threshold, so you don’t pay on every dollar, just the amount above the limit.5
Nonetheless, for families with considerable assets, being unprepared can result in a large tax bill. This makes early and strategic planning a priority. This is a particularly important consideration for those near the exemption threshold, as even a modest increase in their estate’s value could push them into a higher tax bracket.
Ways to Lower Your Estate Tax Liability
If your estate is large enough to face federal taxes, planning ahead can mitigate future costs for your loved ones. Thankfully, there are several time-tested strategies to reduce your estate’s potential federal tax liability.
These strategies include:
Gifting Assets and Annual Exclusion: One straightforward way to lower your estate’s taxable value is by gifting assets while you’re alive. The annual gift tax exclusion allows you to give away a set amount each year to as many people as you like without eroding your lifetime exemption. Over time, these gifts can help shift assets out of your estate, reducing what might be taxed after your death. For 2025, the annual gift tax exclusion is $19,000 per individual.6
Lifetime Gift Exemption: Beyond the annual gift exclusion, the federal government also grants a lifetime gift exemption that parallels the estate tax exemption. This means you can give away a significant amount throughout your lifetime without immediate tax consequences, though any gifts you make will typically reduce the estate exemption available to you later. Keeping a close eye on these numbers is important, as gifting can be a powerful tool if done correctly. Again, for 2025, this figure is $13.99 million per individual.
Trusts and Asset Protection: Setting up irrevocable trusts can be particularly effective in removing assets from your estate. For instance, an Irrevocable Life Insurance Trust (ILIT) ensures the death benefit from your life insurance policy is excluded from the taxable portion of your estate. Other types of trusts, such as marital trusts, bypass trusts, or dynasty trusts, help manage how assets pass to future generations while also potentially lowering the estate’s overall taxable value.
Life Insurance Strategies: Aside from ILITs, specific life insurance plans can serve as a safeguard to cover any estate taxes. If appropriately structured, the payout can be used by your heirs to handle taxes without them needing to sell other property or investments. This arrangement helps keep assets intact while providing liquidity whenever estate taxes come due.
Family Limited Partnerships (FLPs): An FLP is useful for consolidating and managing family business interests or property. By transferring limited partnership shares to younger family members, you can reduce the remaining amount in your personal estate. FLPs often allow for valuation discounts, particularly if transferred shares lack control or marketability.
Charitable Contributions: Donating part of your estate to charities can offer a dual benefit: you support causes that matter to you while decreasing your estate’s value for tax purposes. Whether you give through a direct bequest in your will or set up a donor-advised fund, these contributions typically reduce the estate’s taxable portion, making sure that less of your estate is subject to federal levies.
Please Note: These aren’t all of the strategies you have at your disposal. Moreover, the most effective strategy involves using several methods in tandem. For example, you might pair trust structures with gifting and charitable contributions or supplement everything with life insurance.
Planning Your Estate in South Carolina: Where to Start
Estate planning can feel intimidating, but the right approach can make the process more manageable. Starting early gives you more time to address potential challenges and adapt as laws evolve or personal circumstances change.
Early Planning and Regular Updates
Significant changes in your personal or financial situation—such as getting married, going through a divorce, having a child, or experiencing a major shift in your finances—can shift your estate planning priorities. Updating your documents whenever these milestones occur allows your wishes to remain clear and properly accounted for.
Even smaller developments, like revisions to state or federal laws, may require minor but important adjustments. By scheduling a review every few years, you can catch overlooked details and adapt your plan as needed, keeping it aligned with both legal requirements and your evolving goals.
Key Actions
By carefully considering these key actions, you’ll lay the foundation for a well-structured estate plan. Each step serves a specific purpose in protecting your assets, clarifying your wishes, and providing for your loved ones.
Make sure you work through the following:
Draft a Will: Provide explicit instructions for dividing your property, and appoint an executor who will make sure your preferences are carried out.
Establish Powers of Attorney: Designate someone to manage your financial affairs if you become unable to do so.
Set Up Healthcare Directives: Document your healthcare preferences and appoint a healthcare proxy to make medical decisions on your behalf.
Review Beneficiary Designations: Double check that life insurance policies and retirement accounts list the correct beneficiaries.
Keep Organized Records: Maintain a current list of all assets, debts, and key contacts to streamline the administration process.
Explore Your Options: Look into trusts, gifting strategies, and beneficiary designations to reduce potential federal estate taxes.
Consult Professionals
Even though South Carolina does not impose a separate estate tax, expert guidance can help you navigate federal laws and craft a plan that best serves your family’s needs. This expert guidance often comes from a variety of sources.
Consider consulting with:
Estate Planning Attorneys: Attorneys who specialize in estate planning can help draft and review key legal documents, including wills, trusts, and powers of attorney. They’ll make certain your plan complies with current regulations, minimizing the risk of costly errors or disputes. Working closely with an experienced attorney also gives you peace of mind that any unique needs—such as special needs trusts or guardianship provisions—are adequately addressed.
Accountants: Professional accountants possess in-depth knowledge of tax laws and can identify strategies to minimize the overall tax burden on your estate. They can also help you organize and track your assets, debts, and financial records, offering valuable insights into how certain decisions may impact your long-term goals. By staying proactive, accountants make certain that your estate plan remains efficient and up to date as laws and personal circumstances change.
Financial Advisors: Financial advisors help create and maintain investment strategies aligned with your estate planning objectives. Their guidance may include recommendations on insurance policies, retirement accounts, and other investment vehicles designed to protect your loved ones and support your legacy. With a holistic view of your finances, a skilled advisor will work to balance growth potential with the security needed to preserve your estate for future generations.
Secure Your Legacy in South Carolina: Start Your Estate Planning Today
When it comes to estate matters, it’s reassuring to know that South Carolina doesn’t impose its own tax on your assets. However, the federal system remains relevant if your estate’s size meets certain thresholds. By taking advantage of trusts, gifting, or other strategies, you can shield a portion of your assets and pass along more to the people and causes you care about.
Proactive planning also helps prevent legal hiccups and makes it easier on your loved ones. If you haven’t already begun to organize your estate, now is the time. Our financial advisory team is happy to walk you through the process.
We can collaborate with your attorneys or accountants or recommend ones from our vetted professional network. Don’t wait on securing your legacy! Schedule some time with our team to get started protecting your wealth today.
References:
- https://taxfoundation.org/data/all/state/state-estate-tax-inheritance-tax-2023/
- https://www.nerdwallet.com/article/taxes/inheritance-tax
- https://www.morganlewis.com/pubs/2024/10/irs-announces-increased-gift-and-estate-tax-exemption-amounts-for-2025#:~:text=In%20addition%2C%20the%20estate%20and,federal%20estate%20or%20gift%20tax.
- https://www.schwab.com/learn/story/countdown-gift-and-estate-tax-exemptions
- https://www.investopedia.com/estate-tax-exemption-2021-definition-5114715
- https://www.kiplinger.com/taxes/gift-tax-exclusion#:~:text=Gift%20tax%20limit%202025,typically%20filed%20in%20early%202026.
