Indiana families who inherited property from a relative who died in 2010 paid inheritance tax on the transfer. Indiana families who inherited from a relative who died in 2013 paid none. The change happened in a single legislative session and has held for thirteen years. As of 2026, an adult child who inherits the family farm in Wabash County or a home in Carmel pays Indiana nothing on the inheritance — regardless of value, regardless of relationship to the deceased.

The 2013 repeal under HEA 1001 made Indiana one of the most tax-friendly states in the Midwest for inherited wealth.1It also rearranged the planning conversation for Indiana families. Pre-2013, state-level inheritance-tax minimization drove a lot of estate-planning work — gifting strategies, trust structures, and beneficiary-designation configurations designed to use the (relatively low) inheritance-tax exemptions efficiently. Post-2013, most of that work became unnecessary. What replaced it isn’t nothing; it’s a different set of priorities entirely. This piece walks through what changed, what didn’t (which is more than most families realize), and where the practical planning attention should sit for Indiana families in 2026.

What the pre-2013 statute actually did

Indiana’s inheritance tax under former Ind. Code § 6-4.1 was a beneficiary-level tax (not an estate-level tax) that applied to the value of property transferred from a decedent to specific recipients. The tax structure was tiered by relationship:

The structure was already partially gentle — Class A children inheriting a typical family estate rarely owed material tax, given the per-recipient exemption. But for larger estates, sibling inheritances, and inheritances by non-relatives, the tax was real and could reach into significant dollars. The pre-repeal planning landscape included gifting structures designed to use the exemption across multiple Class A recipients efficiently and life-insurance configurations designed to bypass the inheritance tax base entirely.

What the 2013 repeal actually changed

Three immediate consequences for Indiana families:

1. The cross-class inheritance penalty vanished

The pre-repeal tax fell hardest on Class C beneficiaries — an unmarried partner inheriting from a long-term companion, a friend receiving a bequest, an adult step-child without legal adoption, or a more distant relative. The rate could reach 20% on amounts above a $100 exemption. After repeal, these inheritances are treated identically to Class A inheritances for state purposes (which is to say, not taxed).

2. Lifetime gifting to bypass inheritance tax became unnecessary

A common pre-repeal strategy was to gift assets during life to beneficiaries who would otherwise pay inheritance tax at higher rates. The federal annual exclusion plus the Indiana exemption made these gifts partly or wholly tax-free during life; the same property received at death might have triggered significant state tax. After repeal, the strategy still may make sense for federal estate-tax reasons (for large estates) or for Medicaid look-back planning, but it’s not driven by Indiana inheritance tax.

3. The Indiana Department of Revenue stopped processing returns

IH-6 (the Indiana inheritance tax return) became a legacy form. Estates of decedents who died before January 1, 2013 still occasionally need to file late returns for transition reasons; estates of decedents who died after that date do not.

What the repeal did not change

The repeal applied to inheritance and estate taxes only. Several substantial planning concerns remain in force for Indiana families.

Federal estate tax for high-net-worth estates

The federal estate tax under IRC § 2001 still applies to estates exceeding the federal exclusion. For 2024, the exclusion was $13.61 million per individual ($27.22 million per married couple with portability). The Tax Cuts and Jobs Act’s temporary doubling sunsets after 2025, with the exclusion reverting to approximately $7 million per individual (indexed).5For Indiana families with combined net worth approaching $7–$10 million, federal estate-tax planning — including credit-shelter trusts, lifetime gifting, and irrevocable life-insurance trusts — is still consequential, even though Indiana itself imposes no state-level tax.

Probate administration costs and timing

Probate in Indiana, under the Indiana Probate Code, remains a real procedural and financial concern. Estates that pass through probate face attorney fees, court costs, and administrative timing that can take 6–18 months to fully resolve.3Indiana’s small-estate affidavit procedure covers estates with gross probate value of $100,000 or less, which handles many uncomplicated estates without formal administration. For estates above that threshold, probate avoidance through revocable living trusts, transfer-on-death deeds, and beneficiary designations remains valuable — not for tax reasons, but for procedural simplicity and family time.

Medicaid estate recovery

This is the most-missed continuing concern. The federal Medicaid statute requires states to recover the cost of long-term-care services from the probate estates of Medicaid recipients aged 55 or older.4Indiana implements this recovery through Ind. Code § 12-15-9, and the recovery is substantial — nursing-home care paid by Medicaid LTC over a multi-year stay can be hundreds of thousands of dollars, all of which the state will seek to recover from the deceased recipient’s estate.

Critically, Indiana applies the probate-only definition of “estate” for recovery purposes. This means assets that pass outside probate — assets in revocable living trusts, assets with named beneficiaries (TOD/POD accounts, life-insurance payouts to named individuals), property held in joint tenancy with right of survivorship, and real estate transferred via a TOD deed — are generally outside the recovery base. For families anticipating a parent’s potential Medicaid LTC use, probate-avoidance structures do double duty: avoiding both the procedural cost of probate and the recovery exposure.

The basis step-up at death (still preserved)

Federal income-tax rules under IRC § 1014 still provide a step-up in basis for inherited property: the heir takes the inherited asset at its date-of- death fair market value rather than the decedent’s original cost basis. For an Indiana family inheriting a home purchased for $80,000 in 1985 and worth $400,000 at death, the basis step-up eliminates approximately $320,000 of latent capital gain. The home can be sold the next month at $400,000 with effectively zero capital-gain tax.

This is one of the most consequential federal levers for Indiana families because it favors holding appreciated assets until death rather than selling during life. The state inheritance-tax repeal doesn’t change the basis step-up; it does mean that the cost of holding until death (previously, the state inheritance tax owed at death) is now zero, which strengthens the case for appreciated-asset retention.

The four planning priorities for Indiana families in 2026

With state inheritance and estate taxes off the table, Indiana planning attention should focus on:

1. Medicaid LTC planning, if applicable

For Indiana parents who may need long-term care, the combination of federal Medicaid look-back rules and Indiana’s probate-only recovery definition creates a clean planning runway: assets moved into probate-avoidance structures (revocable trust, TOD deeds, named beneficiaries) at least five years before a Medicaid LTC application are generally both (a) outside the look-back for transfer-penalty purposes and (b) outside the eventual estate-recovery claim. The five-year window matters; the probate-avoidance structure matters; the combination protects the inheritance.

2. Federal estate-tax planning, if applicable

For Indiana families with combined net worth approaching $7 million per spouse, federal estate- tax planning becomes relevant after the TCJA sunset. Most Indiana families won’t hit this threshold, but those who do should treat federal planning the same way Illinois families treat the state cliff: time-sensitive, professionally drafted, worth real money.

3. Probate-avoidance for time and simplicity

A revocable living trust holding the primary residence and significant financial accounts can take an Indiana estate’s post-death timeline from 12–18 months down to weeks. The cost of trust establishment ($1,500–$3,500 typically) is small relative to the family time and stress recovered. For Indiana families with straightforward estates, the simplified probate affidavit handles much of this without a trust. For families with real-estate holdings, multiple financial accounts, or business interests, the trust is the cleaner structure.

4. Beneficiary-designation hygiene

The single highest-leverage planning move in Indiana — precisely because the state has no inheritance tax to complicate it — is getting beneficiary designations right on every financial account, retirement plan, life-insurance policy, and TOD-eligible asset. A clean beneficiary-designation set passes the bulk of the estate outside probate, outside Medicaid recovery, and outside any procedural delay. Indiana law makes this strategy especially effective; the work is making sure each designation is current and consistent.

What this means for adult children helping an Indiana parent

For an adult child whose parent lives in Indiana and is in the planning conversation:

The bottom line

Indiana’s 2013 inheritance-tax repeal was a structural change to the state’s tax landscape that has held without modification for more than a decade. For Indiana families, the repeal removed the single largest historical planning concern and left a cleaner field. What remains — federal estate tax for large estates, probate administration for any probate-eligible asset, Medicaid estate recovery for LTC recipients, and the income-tax basis step- up at death — is what should drive Indiana planning today. Families who treat the repeal as “no tax on inheritance, full stop” miss the Medicaid recovery exposure, which can be materially larger than the inheritance tax ever was. The cleanest planning posture is to assume state-level transfer tax isn’t a concern, focus the planning conversation on federal and procedural matters, and treat the Medicaid recovery question as the most consequential remaining lever.6