inheritance tax

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Inheritance Tax

A tax on the money or assets that one inherits from an estate, as opposed to a tax on the estate itself. In the United States, inheritance taxes are levied at the state level and apply to the inheritors rather than the estate of the deceased. Generally speaking, inheritance taxes vary according to the inheritor's relationship with the deceased. For example, a spouse rarely, if ever, is responsible for an inheritance tax. It should not be confused with an estate tax, which is a tax on the estate before it is distributed.

inheritance tax

A state tax levied on the recipient of an estate rather than on the estate itself. The tax varies by state and its severity in a given state usually depends on the kinship between the deceased and the heir. Some states levy a tax on the estate instead of a tax on the amount inherited. Also called death tax. Compare estate tax.
How can I minimize inheritance tax?

Estate and gift tax law is in a state of flux. An estate planning attorney will have the most up-to-date information available to assist you in minimizing your tax liability. Avoiding probate should also be a goal. Joint ownership, revocable living trust, irrevocable trusts, and life insurance may be useful tools to avoid or eliminate the estate tax and costs of probate, but only an experienced estate planning attorney can help you decide which of these tools will suit your needs best.

Gloria Cole, Attorney, private practice, Weston, MA

inheritance tax

a form of WEALTH TAX imposed by the UK government on a proportion of a person's private assets when these assets are transferred to the person's beneficiaries. Currently (as at 2005/06) ‘chargeable assets’ such as houses, stocks and shares, etc. up to a maximum of £275,000 are tax-exempt. Above £275,000 inheritance tax is levied at a flat rate of 40%. Assets transferred more than seven years before the donor's death are exempt from inheritance tax, while assets transferred between three and seven years before death are taxed at lower rates.

Inheritance tax superseded earlier UK arrangements for taxing wealth, including estate duty or death duty and capital transfer tax.

inheritance tax

see WEALTH TAX.

inheritance tax

See estate tax.

References in periodicals archive ?
When the decedent's cooperative was ultimately sold by her estate, New York State sent the estate's executor a notice inquiring why a New York State estate tax return had not been filed.
While portability may also be a solution to this problem in some cases, without a separate election, decedents may be forced to incur state estate tax upon the death of the first spouse to die or "waste" a portion of their federal estate tax exemption.
Also, while individuals and couples with estates valued at Less than $5 and $10 million, respectively, need not be concerned about federal, estate tax, Shakter says they may need life insurance to cover state estate tax, which some 20 states decoupled from the federal, tax in 2001.
Also assume this decedent died in a state where there either is no state estate tax or the state exclusion exceeds $1 million, so that no state estate tax return is required.
In a 45% combined federal and state estate tax bracket, this transfer can result in large estate tax savings over a period of time.
We have had a few years to get used to the "decoupling" of state estate taxes from the federal estate tax, (6) but many property owners (and some estate planners) are still shocked to learn that there may be a state estate tax assessed on their out-of-state real property even if the estate escapes federal estate taxation.
This study, which was commissioned to determine why Connecticut was losing its wealthiest retirees, also found that the state estate tax was the leading cause of out-migration, and that the average estate of those leaving was $7.
Reinstate the full state estate tax credit, or provide another mechanism (such as a surtax) that would allow states to uniformly "piggyback" on the Federal estate tax.
Some states have lower exemption amounts, requiring a state estate tax return to be filed.
Retaining an asset until death can result in no federal estate tax, a state estate tax and a fresh start income tax basis for income tax purposes.
This provision should remind you that estates may owe state estate tax even if they are exempt from federal estate tax.

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