The taxes on asset transfers can sometimes be confusing. There are taxes on the federal level, and in some cases, there are taxes on the state level.
Plus, there are inheritance taxes, and there are estate taxes. These are two different forms of taxation.
Let’s look at the differences.
Estate Tax
An estate tax is imposed on the entire taxable portion of an estate. It would not be applicable on transfers to each individual inheritor. However, inheritors who are receiving percentages of the whole could clearly be impacted.
There are a number of states in the union that impose state-level estate taxes. We practice law in North Dakota, and there is no state-level estate tax in our state.
However, if you own property in a state that does have an estate tax, the tax in that state could be applicable after you pass away.
We also have a federal estate tax in the United States that everyone has to be concerned about. That’s the bad news, but the good news is that there is a relatively large exclusion. The exclusion is the amount that you can transfer before the estate tax would become a factor.
In 2015, the federal estate tax exclusion is $5.43 million. The state level exclusions are typically much lower than this, so you have to look into state laws if you own property in a state with an estate tax.
We should touch upon the existence of the unlimited marital deduction. You can leave unlimited assets to your spouse free of the estate tax.
Inheritance Tax
An inheritance tax is a tax that would be imposed on asset transfers to each inheritor who is not exempt from the tax. As a result, when one estate is being administered, there can be multiple impositions of an inheritance tax.
Fortunately, there is no inheritance tax on the federal level, but there are six states in the union that impose state-level inheritance taxes. North Dakota is not one of them, so you do not have to worry about an inheritance tax if you live in North Dakota.
Estate Tax Report
As a resident of North Dakota, the primary death tax that you have to be concerned about is the federal estate tax. We have prepared an in-depth report that will provide you with a great deal of valuable information about this tax.
The report is free, and you can visit this page to access your copy: Free Report on Federal Estate Tax.
Schedule a No Obligation Consultation
If you would like to discuss your estate planning objectives with a licensed professional, we would be glad to assist you. Our firm offers free consultations, and you can visit our contact page to send us a message requesting an appointment: Grand Forks ND Estate Planning Attorneys.
To learn more, please download our free to pay a North Dakota inheritance tax here.
