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.