DEALING WITH DEATH TAXES
Did you know that death can be a taxable event thanks to what are popularly called "death taxes?" There is much uncertainty surrounding exactly how taxes apply at death.
The term "death taxes" is not a legal or technical term. It is a popular (and perjorative) term for two types of taxes -- inheritance and estate taxes.
Inheritance tax is a state tax levied on one who inherits assets. The amount of tax typically depends upon how much one inherits and his or her relationship to the decedent. Not every state has an inheritance tax. Some that do have one, exempt beneficiaries standing in certain relationships with the decedent (e.g., lineal ascendants and descendants).
Estate tax, on the other hand, applies to a decedent's estate based upon its value at death. Normally the term "estate tax" refers to the federal tax, but some states also impose an estate tax. Estate planning professionals traditionally focused only on the federal estate tax because the state tax was usually a "pick-up tax" (i.e., the state received a portion of the federal tax). Recently, however, several states have taken steps to "decouple" their estate tax sysems from the federal system, resulting in increased tax burdens. This has complicated planning efforts, making competent counsel more important than ever.
How Does Federal Estate Tax Work?
What Can You Do About Your Estate Tax?
What is the Best Use of Exclusion Amounts?
How Can Gifts Reduce My Estate Value?
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