Home / Personal Finance / An Overview On Inheritance Tax

An overview on inheritance tax

Who knew there would be taxes at the time of death also? These taxes, known by various names such as inheritances taxes, estate taxes, etc. and are collectively known as death taxes’. Morbid, eh? While at first glance, inheritance and estate tax might appear to be the same thing after all they are both collected as the result of someone’s death. However, the basic difference is that while estate taxes are assessed by the overall value of the deceased’s estate (including gifts given to beneficiaries), inheritance taxes apply to an individual’s bequest of any gift or property which literally means each and every kind of inheritance.

An overview on inheritance tax
So, while the decedent’s estate pays the estate tax, it’s the beneficiary who pays the inheritance tax.

As of 2017, the six states of Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania only collect inheritance taxes, and there is no Federal Inheritance Tax at work.

How does an inheritance tax work?

Spouses and domestic partners While spouses of the deceased (who are surviving) are exempt in all six states levying inheritance tax, NJ also exempts any surviving domestic or registered civil union partners.

Children or parents When it comes to family and children, things get a little more complex. In certain states, such as Kentucky children (both daughter and sons) as well as parents are exempt from inheritance tax. Usually, they are required to pay the least inheritance tax percentage in the states in which they aren’t exempt, and are given more liberal dollar exemptions, which essentially are certain money they could inherit, after which the tax is levied on the rest of the amount.

On the other hand, in New Jersey, siblings can inherit $25,000 tax-free, while no exemption is granted to an unrelated person.

Here are a few factors related to inheritance tax that you should know of.

  • The term descendants stands for children or grandchildren.
  • A minimum amount of tax rates apply for the closely related family members who don’t aren’t exempted from the tax.
  • The tax rates are the highest for the unrelated individuals or organizations (excluding charitable establishments).
  • Nebraska (1%-18%), Kentucky (6%-16%) and New Jersey (11% – 16%)has the maximum tax rate.
  • Iowa has zero inheritance tax on beneficiaries who receive basic estates with a property worth less than $25,000.
  • In all the 6 states, spouses are exempt from the inheritance tax.
  • Nebraska and Pennsylvania are the only two states, where descendants don’t receive exemption from the inheritance tax.
Disclaimer:
The content provided on our blog site traverses numerous categories, offering readers valuable and practical information. Readers can use the editorial team’s research and data to gain more insights into their topics of interest. However, they are requested not to treat the articles as conclusive. The website team cannot be held responsible for differences in data or inaccuracies found across other platforms. Please also note that the site might also miss out on various schemes and offers available that the readers may find more beneficial than the ones we cover.

Choosing An Instant Approval Credit Card

Don’t bite off more than you can chew

Recent Articles

An Overview Of Cla Safflower Oil

An Overview Of Cla Safflower Oil

Top 10 Health Benefits Of Safflower Oil

Top 10 Health Benefits Of Safflower Oil

An Overview Of Colon Polyps

An Overview Of Colon Polyps