For simplicity, the broad categories of taxes applicable to inheritance are roughly summarized here: Estate Tax: The estate tax in the United States is a tax on the transfer of the estate of a deceased person. The tax applies to property that is transferred via a will or according to state laws of intestacy. Other transfers that are subject to the tax can include those made through an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries. According to the IRS, the estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, applies to transfers of property during a person’s life. In addition to the federal estate tax, many states have enacted similar taxes of their own. These taxes may be termed an “inheritance tax.” If an asset is left to a spouse or a federally recognized charity, the tax usually does not apply. In addition, a maximum amount can be given by an individual, before and/ or upon their death, without incurring federal gift estate taxes. It should be noted that this varies each year and should be checked and verified. For example, in 2022 the maximum amount for married couples was $24 million and $12 million for individuals. For 2024, the maximum amount increased to $13.61 million for individuals and $27.22 million for couples. The annual gift exclusion in 2022 was $16,000 for individuals and rose to $18,000 in 2024. • Inheritance Tax: Heirs pay federal inheritance tax on the net worth of their inheritance. The net worth is the gross value less certain deductions, a mortgage that must be paid off on an inherited house, for instance, or a marital deduction for property inherited by a spouse. If the result is more than the IRS-exempt amount for a given year, the
13
Powered by FlippingBook