Estate and Inheritance Taxes

Estate and Inheritance Taxes

Estate taxes are levied against the amount in the estate. Inheritance taxes are levied against what is received by a person as an inheritance from an estate.

The federal government presently only taxes estates of $5,430,000 and higher (as of 2015). There is also an annual exclusion of $14,000 per person. This means that every year you can give any person $14,000 and it will not count toward the unified credit. A married couple can receive double this amount, or $28,000 (all values current as of 2015).

Example: Edna would like to give her five children each $50,000. She gives them each $10,000 per year for five years so it does not take away from her unified credit.

State Taxes

There is a big difference among the states as to whether and how most estates are taxed. Most states do not tax estates, unless the estates are very large, and then they only take as tax an amount that would have gone to the federal government anyway.

Because the federal estate tax is changing, states are amending their taxes. Check with your state department of revenue for any recent changes.

By setting up a primary residence in another state, you may be able to avoid estate taxes. Remember that most states have income or capital gains taxes. States that have no income, capital gains, estate or inheritance taxes are Alaska, Florida, Nevada, Texas and Wyoming.

  • What is a Will?
    A last will is a document that you create to direct the management and distribution of your property and provide for the care of your minor children after your death. The importance of a last will cannot be overstated. A last will is arguably the most important legal document that the average...
    read more
  • Leaving Property to Heirs in a Will
    A typical last will contains two types of gifts: specific and general. Specific gifts, which leave a particular object or dollar amount to a particular person, are optional, but are generally the first items of property that are distributed from a last will. A specific gift might read: "I leave to...
    read more
  • Last Wills and Probate Court
    Probate is the legal process through which the court decides how your property will be divided. If you have a last will, the court will review that document to determine your wishes and will follow those wishes unless the last will is successfully contested by your heirs. If you do not have a last...
    read more
  • Joint Tenancy
    Property that is owned in joint tenancy with right of survivorship does not pass under a will. If a will gives property to one person but it is already in a joint account with another person, the will is usually ignored and the joint owner of the account gets the property. The property in the...
    read more
  • Overruling Your Will
    If all property is in joint ownership or if all property is distributed through a will, things are simple. But when some property passes by each method, a person's plans may not be fulfilled. Example 1: Bill's will leaves all his property to his sister, Mary. Bill dies owning a house jointly with...
    read more
  • Tenancy in Common
    Property that is owned by more than one person but not owned in joint tenancy with right of survivorship or in tenancy by the entireties is often owned in a tenancy in common. This means that each person owns part of the property (such as one half or one third), and upon each person's death, the...
    read more