Not all states have an inheritance tax.
The vast majority of Americans will not owe inheritance taxes.
Most states no longer impose one on their citizens.
Only a handful of states do.
What if you are in one of those states?
What does an inheritance tax mean for you?
According to a recent NJ.com article titled “How to avoid the inheritance tax,” an inheritance tax is levied based on the heir not the size of the estate.
Let me use New Jersey as an example.
If you are a spouse, parent, grandparent, domestic partner, child, step-child or grandchild, you will be considered a Class “A” beneficiary.
Class “A” beneficiaries are exempt from inheritance taxes.
That is right, no inheritance tax at all.
On the other hand, Class “D” beneficiaries will be subject to an inheritance tax.
Examples of Class “D” beneficiaries include nieces or nephews.
How much would they be taxed?
The rate in New Jersey is about 15 to 16 percent.
How do you avoid leaving your loved ones with an inheritance tax to pay?
Start planning early.
You can give gifts during your lifetime up to $14,000 per person per year without being subject to gift taxes.
If you want to give more than this amount, you can pay for education or medical expenses.
These are exempt from gift taxes as long as they are paid directly to the school or medical provider.
Avoid making transfers with three years of death because these are regarded as part of your estate at death, not as gifts during life.
As such, they may be subject to inheritance or estates taxes.
To plan for your specific situation, work with an experience estate planning attorney.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: NJ.com (July 14, 2017) “How to avoid the inheritance tax”