One of the biggest and most important exceptions to that rule that inheritances are not taxed is with IRA’s. The reason is that with an IRA or 401(k) or many other retirement plans, the participant made contributions to the plan with “pre-tax” dollars. That means any money which someone puts into their IRA during their working years is not included in the person’s “gross wages” on their income tax returns, so it is not taxed. But, as you know, when someone starts taking distributions from that IRA when they retire, now that money goes on the person’s income tax return, and is taxed at that time. That’s when the IRS gets their money. And the same rule applies when someone dies: when the IRA is distributed, the IRS wants their money. Now, there are various ways to put off paying these taxes into the future, and those ways require some pre-planning to setup. But where an IRA does not have a beneficiary, which happens more frequently that you might imagine, then some complicated tax rules apply. I will give some (just a little) information about those rules on this website, but it’s not an area which most people should be handling themselves. If there’s a lot of money on the table (and what “a lot of money” means is always relevant to your financial situation), it’s a good idea to see a lawyer.