Taxes that Affect Estates

We are all going to leave things behind when we die. And, if we plan carefully, those things can go to the people we want them to, like our family members and friends. However, it is important to remember that our estates are affected by certain taxes, and we need to be aware of and plan for those taxes if we want everything to ultimately go as we planned.  

Gift Taxes

One of the first taxes that can affect an estate is what is known as the gift tax. Federal law mandates that a person can not give more than $14,000 worth of gifts to a single person tax-free. Once that value amount is reached and surpassed, a gift tax comes into play.

Of course, there are ways around paying the gift tax. For example, there is a lifetime gift tax exemption of $5,340,000 that can help to offset taxable gifts and keep you from paying taxes out of your own pocket.

To learn more about gift taxes and related exemptions or if you’re concerned about how this tax will affect your estate, be sure to speak with a tax professional.

State Inheritance Taxes

Some states collect special inheritance taxes from the beneficiaries of a deceased person’s estate. These states include:

l  Iowa

l  Pennsylvania

l  Kentucky

l  New Jersey

l  Maryland

l  Nebraska

Fortunately, not all beneficiaries have to pay the tax. Surviving spouses of the deceased and reputable charities are exempt from the tax. Other exemptions are possible in some of these states as well, so it’s always best to check with your tax adviser if you have questions or concerns about possible taxation of your gift.