Sometimes it can feel as though you are being taxed from every direction. These taxes hound you throughout your life, and you would think that this would be enough to satisfy the taxman. However, there are estate taxes that can enter the picture even after you are gone.
We have a federal estate tax in the United States, and it can take a very big bite if you are exposed. This tax carries a maximum rate of 40 percent at the present time, and that is certainly an eye-catching figure.
The good news is that there is an estate tax exclusion or credit. This is the amount that you can transfer before the estate tax would become applicable. Most estates are not subject to the estate tax, because the exclusion is relatively high. In 2015, we have a $5.43 million exclusion.
There is something you should know about the federal estate tax if you are married. There is a marital deduction, and this allows you to leave unlimited assets to your spouse tax-free. The estate tax is potentially applicable on transfers to anyone else, even your children and parents.
State Level Estate Taxes
The federal estate tax would seem to be sufficient, but there are some states in the union that impose state-level estate taxes. In these states, the exclusions are typically lower than the federal exclusion. As a result, some people are exposed to a state-level estate tax, even though they are exempt from the federal estate tax.
We practice law in North Dakota. In our state, there is no state-level estate tax. However, if you own valuable property in a state that does have a state-level estate tax, the tax could be a factor when your estate is being administered. This is something to take into consideration if you own out-of-state property.
An estate tax is levied on the entirety of the taxable portion of the estate in question. Though some people think they are one and the same thing, an inheritance tax is different. This type of tax is levied on each transfer to nonexempt inheritors.
There is no federal inheritance tax, but a handful of states do impose state-level estate taxes. Fortunately, North Dakota is not one of them.
Tax Efficiency Consultation
You should certainly be aware of the tax laws when you are devising your estate plan. If you face exposure on any level, you can take steps to gain tax efficiency.
Our firm can help if you have concerns. We offer free transfer tax efficiency consultations, and we can answer your questions, become apprised of your objectives, and make the appropriate recommendations.
To set up a consultation, send us a message through this page: Grand Forks ND Estate Planning Attorneys.
Latest posts by Raymond German, Estate Planning Attorney (see all)
- My Mother Just Passed Away. Now What Do I Need to Do? - December 12, 2019
- Income Tax Basis in Estate Planning - December 10, 2019
- 5 Considerations for the First-Time Executor - December 5, 2019