Iowa’s inheritance tax laws exempt children when they inherit from parents. However, stepchildren who inherit from stepparents who have divorced their natural parents are now excluded from the exclusion, according to McClatchy in "Court: Kids of Divorced Stepparent Must Pay Inheritance Tax."
Tyler and Mark Acorn remained close to their stepfather, after he divorced their mother. He left them most of his estate.
The state of Iowa sent the Acorn brothers an inheritance tax bill of $200,000. They sued, claiming they were being punished because their parents divorced.
The Iowa Supreme Court ruled that the state had a legitimate interest in keeping families together and that the Acorns' rights were not violated.
Iowa's provision is unique.
If you live in one of the states with an inheritance tax, then it is important to keep that in mind when you plan your estate.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and deals with the laws of your state of residence.
Reference: McClatchy (Nov. 17, 2017) "Court: Kids of Divorced Stepparent Must Pay Inheritance Tax