Income and estate taxes are different.
Perhaps you have heard of an estate tax.
If not, you may know it as a "death" tax.
According to a recent Forbes article entitled “Eight Things You Need To Know About The Death Tax Before You Die,” this tax is levied by the federal government and some states on the transfer of assets after death.
While an income tax is imposed every year, the estate tax is taken once.
You only die once.
Not everyone will owe an estate tax.
In 2019 the exemption threshold on the federal level is $11.4 million per individual.
If your assets total below this level, you will not owe a federal estate tax.
If your assets exceed this amount, you will owe a tax of 40 percent on any amount above the threshold.
If you live in a state with an estate tax, your state may have a lower threshold.
So, what does this mean?
If you are exempt from a federal death tax, you may still owe money to the state when you die.
Fortunately, neither Kansas nor Missouri has a separate "state" estate tax of its own.
What is included in your gross estate?
Any assets held in your name alone or even jointly with others.
This includes bonds, stocks, bank account, life insurance benefits, jewelry, artwork furniture, business interests, and real estate.
If your assets pass outside probate does this exempt them from estate taxes?
IRAs, 401(k)s, and life insurance policies will still be calculated in your gross estate even if you name a beneficiary rather than your will or revocable living trust.
What if you own property jointly with your spouse in Kansas or Missouri?
Your half will be included in the estate estimate.
What if you jointly own property with someone who is not your spouse?
The estate estimate will include 100 percent of the property value, unless you can prove the other party contributed either some or all of the value.
If you are the beneficiary to a trust, the trust assets may need to be included depending on the terms of the trust.
With strategic planning, you can minimize or abolish your estate tax liability.
Work with an experienced estate planning attorney to create a plan to meet your needs while satisfying the laws of both the state and federal government.
Reference: Forbes (May 20, 2019) “Eight Things You Need To Know About The Death Tax Before You Die”