Understanding Inheritance Tax - A Basic Overview
Inheritance tax is imposed on individuals who receive property from someone who has died.
The amount of tax is determined by the appraised value of the property and the recipient's relationship to the deceased.
In actuality, inheritance tax isn't charged on the decedent's assets, but rather for the right to assume ownership of the property.
Inheritance tax is not imposed on property which is passed to the surviving spouse.
However, it is imposed when property is passed to children, other family members, or friends.
Tax rates and allowable deductions are based on the lineage.
For instance, children are taxed at a lesser rate than a distant cousin.
Inheritance taxes are regulated by each individual state.
Currently, 10 of the 50 states within the U.
S.
impose inheritance tax.
These include: Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania and Tennessee.
For those who reside in a state that charges inheritance tax, the Estate Executor is required to file an inheritance tax return.
All of the estate property must be gathered and appraised to determine its value.
A detailed list of outstanding debts owed by the deceased must be documented.
This information is then used to determine the gross value of the estate.
Outstanding debts and taxes must be paid from the estate before distribution is made to beneficiaries.
Funeral expenses and estate administration fees are allowable deductions.
After expenses are paid, tax is imposed on the net value of the estate.
As a general rule, inheritance tax returns are filed with the county Probate court where the deceased person resided.
The return must be filed within nine months after the date of death.
Inheritance taxes must be paid in full at the time the return is filed.
If the estate executor is unable to pay the tax in full, an extension request can be filed.
However, the balance due will be subject to interest fees and late penalties.
Inheritance laws are complex and confusing; particularly with larger estates.
Many factors are involved so it's best to consult with an attorney experienced in Inheritance Law.
The amount of tax is determined by the appraised value of the property and the recipient's relationship to the deceased.
In actuality, inheritance tax isn't charged on the decedent's assets, but rather for the right to assume ownership of the property.
Inheritance tax is not imposed on property which is passed to the surviving spouse.
However, it is imposed when property is passed to children, other family members, or friends.
Tax rates and allowable deductions are based on the lineage.
For instance, children are taxed at a lesser rate than a distant cousin.
Inheritance taxes are regulated by each individual state.
Currently, 10 of the 50 states within the U.
S.
impose inheritance tax.
These include: Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania and Tennessee.
For those who reside in a state that charges inheritance tax, the Estate Executor is required to file an inheritance tax return.
All of the estate property must be gathered and appraised to determine its value.
A detailed list of outstanding debts owed by the deceased must be documented.
This information is then used to determine the gross value of the estate.
Outstanding debts and taxes must be paid from the estate before distribution is made to beneficiaries.
Funeral expenses and estate administration fees are allowable deductions.
After expenses are paid, tax is imposed on the net value of the estate.
As a general rule, inheritance tax returns are filed with the county Probate court where the deceased person resided.
The return must be filed within nine months after the date of death.
Inheritance taxes must be paid in full at the time the return is filed.
If the estate executor is unable to pay the tax in full, an extension request can be filed.
However, the balance due will be subject to interest fees and late penalties.
Inheritance laws are complex and confusing; particularly with larger estates.
Many factors are involved so it's best to consult with an attorney experienced in Inheritance Law.
