What is the inheritance tax rate? There is no such thing as a federal
inheritance tax rate. The inheritance tax is imposed on a state level,
and not all states have one. For example, Texas does not impose an
inheritance tax, and some states refer to an estate tax and an
inheritance tax as the same thing even though they are technically very
different.
Other terms you may hear used in place of inheritance tax are “death
duty" in the United Kingdom, “estate duty" in Hong Kong, or “stamp
duty" in Bermuda. Some places such as Australia and the British Virgin
Islands do not currently have an inheritance tax nor have they ever had
one.
DIFFERENCE OF AN ESTATE TAX AND INHERITANCE TAX
The difference between the estate tax and the inheritance tax lies with who is actually responsible for paying the taxes owed.
WHO PAYS THE ESTATE TAX?
With an estate tax it is the responsibility of the Administrator, or
Executor, of the estate to pay the taxes. The taxes are calculated
based on the entire value of the estate, and if the Administrator
cannot pay the taxes out of the estate’s value then it becomes the
responsibility of the heirs to pay the taxes. The federal government
will impose this tax according to established guidelines which include
the value of the estate.
WHO PAYS THE INHERITANCE TAX?
An inheritance tax is the individual responsibility of each heir.
Determining the financial responsibility of the heirs for the
inheritance tax is based on several key factors.
WHAT IS THE INHERITANCE TAX RATE? IT DEPENDS...
The inheritance tax rate varies depending on the relationship of the
heir to the deceased (decedent). Each state may determine this rate,
and if the heir is a distant relative or friend the inheritance tax
rate will be much higher than if the heir is a spouse or child of the
decedent.
A child may be entitled to an exemption of the first $3000 of their
inheritance and be responsible for only a 7.5% tax on inheritance
valued over $100,000. In contrast, a friend of the decedent may be
taxed as much as thirty percent and only receive a tax exemption on the
first hundred dollars.
Another consideration state government will make when determining the
inheritance tax rate will be the fair market value of the property
being transferred. Fair market value is not what it would cost to
replace the property, but what you would be able to sell the property
for if needed.
WHAT ARE THE INHERITANCE TAX EXEMPTIONS?
Your heirs may receive tax exemptions for taxes that have already been
paid on the property and it is important to have all documents in a
readily accessible location to prove that little or no debt is owed
upon your death. If any of the inheritance has been designated for
charitable organizations your heirs will not be held accountable for
paying an inheritance tax on this portion of the estate.
FRAUDULENT INCOME TAX RETURNS TO AVOID THE INHERITANCE TAX
Opponents of the inheritance tax feel that in addition to an estate
tax, the inheritance tax is harmful to families who may need the money
immediately and cannot afford to pay harsh taxes imposed on them during
an already emotionally difficult time. Critics also feel that taxes
such as these encourage individuals to file fraudulent income tax
returns by placing their money into annuities both on and offshore, and
to establish trusts for their heirs to remove large amounts of property
from their listed estate.
Call a professional estate planner such as Estate Street Partners if
you wish to know more about how to reduce your estate tax, eliminate
your inheritance tax, possibly eliminate some of your income tax and
learn how to strategize your money and assets to be in compliance with
the IRS and federal and state-specific regulations. Estate planning can
be complex and taking the route of doing it yourself can lead to severe
financial penalties.
SEEK KNOWLEDGEABLE AND PROFESSIONAL ESTATE PLANNING ADVICE
Inheritance tax information can be obtained by seeking the services of
a knowledgeable estate planner. Since each state differs in the amount
taxed to heirs, an estate planner will be able to provide accurate
information involving up-to-date tax laws and ways to protect assets.
One of the more common means of protecting inheritance from taxes is to
place money into trusts and elect a trustee to transfer the property to
your beneficiaries upon your death. Once money has been allocated into
a trust it is removed from you listed estate and upon your death it
will be distributed to your heirs free from estate and inheritance
taxes.
Some people also choose to give their money in the form of gifts to
organizations and establish a charitable gift annuity. Receiving money
from an annuity protects your heirs from paying any inheritance tax,
although they may still be responsible for an early withdrawal penalty
from the IRS. Failure to consult with an advisor could result in
unnecessarily high taxes for your heirs. Please seek professional
advice on these important financial matters.
Rocco and his team of bonded professional attorneys, CPAs and
accountants help affluent individuals and companies retain control of
their domestic and foreign/offshore assets, protect their assets, build
& preserve their wealth and financially structure their money to
reduce capital gains taxes, estate taxes, inheritance taxes, avoid the
probate process and decrease income taxes.
--------------------------------------------------------------------------------
Rocco Beatrice, CPA, MST, MBA, Award-winning trust & estate-planning expert
71 Commercial Street #150 Boston, MA 02109 tel: 508.429.0011 fax: 508.429.3034
Click here for more info: http://www.UltraTrust.com, http://ultratrust.com/frivolous-lawsuits-trivial.html
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
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