For decades, death taxes (inheritance and estate) have been a problem for planning one’s estate. At times, the taxes applied to even small estates. Even if they didn’t, they still caused a lot of concern for people who were worried about whether they had a death tax consideration.
Much of this confusion has now been clarified, and in something extremely rare, it has been clarified in favor of the taxpayer!
The Indiana Inheritance Tax was often criticized as not being fair. In truth, it was not fair in some respects. For example, taxing the same asset differently, depending on what relationship you had to the decedent. This was also a tax on property that you had already accumulated and paid various taxes on during your lifetime. But now, the Indiana Inheritance Tax has been totally repealed. From a political standpoint, I believe that this tax will not ever be coming back, and we can trust that it is truly gone. It is also totally gone; at one time the legislature was phasing it out, but the phase out also has now been eliminated, and there is virtually no Indiana Inheritance Tax.
You could have inheritance tax from different states, if you own property, particularly real estate, in other states. That would be determined on a case-by-case basis, after having checked with one of the CCHA probate lawyers.
The Federal Estate Tax has also been very difficult for people to work with. Over the past several decades, the amount of tax has varied widely, and the amount of exemptions has varied widely. Here again, the clarification in favor of the taxpayer has now been accomplished. In the meantime, the exemption for Federal Estate Taxes is $5.4 million per person. This means that if your estate is less than $5.4 million, you have no liability for Federal Estate Tax. Since this is per person, married couples have, in essence, $10.8 million in exemption, so long as a federal estate tax return is timely filed. There are some complicated rules for how the exemption gets dealt with by spouses, or subsequent spouses, and that would probably require an examination of your estate with one of our attorneys to be sure. This larger exemption has also eliminated the need for some of the traditional estate tax planning which we did, but it does not eliminate it entirely. But here again, you should check with your specific attorney on those questions.
Be careful not to ignore taxes completely in your estate, because there is still some income tax planning that you would want to consider. For example, before you make a substantial gift, you may want to check the impact on that for future capital gains, and basis determination. Gifting substantial assets can still be a little complicated and should be discussed with your attorney.
Contact us to help you develop an estate plan that is tailored to meet your unique goals, expectations, and family circumstances. To learn more about Jack and his practice, please visit his profile.
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