Any time an estate is distributed, there is a chance taxes may be due.
No one likes them.
But they are a fact of life.
According to a recent Financial Buzz article titled “Inheritance Taxes May Await You,” they can also be a fact of death.
What taxes could be owed?
If you are single, you will have an exemption of $5.49 million for the federal estate tax (that is going up to $5.6 million on January 1, 2018).
If your estate is worth less than this, there will be no tax owed.
If you are single, the number doubles accordingly with an exemption of $10.98 million (that is going up to $11.2 million on January 1, 2018).
What if your estate is worth more?
Your estate in excess of the amount exempted with be taxed at 40 percent.
Some states also have an estate tax with their own specific threshold rules.
An inheritance tax is paid by the beneficiary rather than the estate.
There is no federal inheritance tax.
Some states have an inheritance tax, including Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Not all states will have the same rules.
Some exempt spouses and children from this tax.
Some states will have both inheritance and estate taxes.
This means your assets could be taxed rather heavily at your death.
Capital Gains Tax and Income Tax.
The federal government does not consider an inheritance to be income.
Still, depending on what you inherit, you may have taxable income.
A capital gains tax will require payment on any profit.
Estate planning involves many rules and regulations.
Work with an experienced estate planning attorney to meet your goals.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").
Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
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: Financial Buzz (September 12, 2017) “Inheritance Taxes May Await You”