Inheritance Taxes for Unmarried Partners

Married couples get a set of tax privileges that operate silently in the background. Unmarried partners get none of them. If you and your partner have deliberately not married — or cannot, or simply have not yet — the transfer of assets at death is taxed on entirely different terms, and the gap is larger than most people expect.

No unlimited marital deduction

A spouse can leave an unlimited amount to the surviving spouse with no federal estate tax at the first death. An unmarried partner cannot. Everything passing to a partner counts against the decedent's lifetime exemption, which for 2026 sits at $15 million per person following the One Big Beautiful Bill Act. Above that, the federal rate is 40 percent.

Fifteen million sounds like plenty until you include a primary residence in a high-cost metro, a second property, concentrated equity comp, and life insurance owned by the insured — which is included in the taxable estate, a detail that surprises nearly everyone.

No portability of the unused exemption

A surviving spouse can elect to carry over the deceased spouse's unused federal exemption, effectively doubling the shelter. Unmarried partners have no portability. Each exemption is use-it-or-lose-it at that person's death, which makes lifetime planning far more important than it is for a married couple who can afford to wait.

State estate and inheritance tax is the real exposure

Federal exemptions are high. State thresholds are not. Oregon taxes estates above $1 million. Massachusetts above $2 million. Washington above $3 million following ESB 6347, with rates topping out at 35 percent. New York has a cliff that can pull the entire estate into tax if you exceed the threshold by more than five percent.

Separately, a handful of states levy an inheritance tax on the recipient rather than the estate — and the rate depends on the recipient's relationship to the deceased. Spouses are exempt. Children are usually exempt or taxed lightly. An unmarried partner is generally taxed as an unrelated person, at the highest bracket the state offers. Pennsylvania and Nebraska are the ones most likely to catch queer households off guard.

Retirement accounts: no spousal rollover

This is often the single largest asset and the most punishing rule. A surviving spouse can roll an inherited IRA or 401(k) into their own account and continue deferring. An unmarried partner cannot. They inherit as a non-spouse beneficiary and are subject to the ten-year rule under the SECURE Act — the entire balance must come out within ten years, with annual distributions required if the original owner had already begun taking RMDs.

For a traditional IRA, that means ten years of forced ordinary income stacked on top of the survivor's own earnings — frequently pushing them into a higher bracket during their peak-earning years, and potentially into IRMAA surcharges later. An HSA is worse still: a spouse inherits it as their own HSA tax-free, while a non-spouse beneficiary receives a fully taxable account balance in the year of death, with no ability to stretch it at all.

Gifts during life work differently too

Spouses can transfer unlimited amounts to each other during life. Unmarried partners are limited to the annual exclusion — $19,000 per recipient in 2026 — before a gift tax return is required and the lifetime exemption starts getting consumed. Adding a partner to a deed, paying off their student loans, or funding their share of a down payment are all gifts, whether or not anyone thinks of them that way.

What actually reduces the bill

Roth conversions during lower-income years, so the partner inherits tax-free rather than inheriting a ten-year tax bill. Life insurance owned by an irrevocable trust rather than by the insured, which keeps the death benefit outside the taxable estate and gives the survivor liquidity. Joint tenancy with right of survivorship or a properly funded revocable trust to keep the home out of probate. Systematic annual-exclusion gifting to equalize assets between two partners so neither estate carries all the exposure. And domicile planning if a move is already on the table.

None of this requires getting married. It does require doing it deliberately, and early — most of these tools only work when there is time left to use them.

This article is educational and is not tax or legal advice. Estate and inheritance tax rules vary by state and change frequently; work with a qualified attorney and tax professional on your specific situation.