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Estate Planning FAQ’s: Is a Beneficiaries’ Inheritance Taxable?

Estate Planning FAQ’s: Is a Beneficiaries’ Inheritance Taxable?

This is a great question and one that we hear often.

Estate tax and inheritance tax are two different things.

The estate tax is a tax on a person’s assets after death..In 2021, the federal government assesses a tax on all estates with a value greater than $11.7 million. Estate tax ranges from 18% to 40% once you reach that $11.7 minimum. If an estate is valued less than that amount, no federal estate tax is owed. 

Inheritance tax is a state tax on assets inherited from someone who died. The person who inherits the assets pays the inheritance tax. Rules vary by state. It all depends on estate size and asset types that are subject to inheritance tax. 

If you live in a state that has an estate tax,  one way to avoid the tax is to give assets away before dying. Many states don’t tax gifts. 

The answer to this question depends on a variety of factors such as federal or state tax law, the state of the decedent’s death, the type of tax involved (estate or inheritance), and the size of the estate. 

For an excellent discussion describing all of the factors involved, click here.

As always, it is recommended that you consult with an estate planning attorney or a tax professional.

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Kevin Miller is ready to advise you on estate tax, inheritance tax, and estate planning and can assist with tax questions that you may have, so you are able to care for your loved ones. It is important that you plan ahead and make the legal arrangements necessary to protect yourself, and your loved ones should you pass away. Kevin Miller has extensive experience in estate planning and will put your interests first. Contact us or call us at 405-443-5100 if you have questions. We are here to help.