• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Parman & Easterday

Oklahoma Estate Planning Attorneys

Call Now: (405) 843-6100 |
(918) 615-2700

Attend an Education Program-Oklahoma City Area Attend An Education Program in the Tulsa Area
  • Home
  • Our Firm
    • About Our Firm
    • Attorney and Staff Profiles
    • What Our Clients Say
  • Estate Planning
    • Asset Protection
    • Business Succession Planning
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • IRA and Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • Powers of Attorney
    • Probate
    • SECURE Act
    • Special Needs Planning
    • Trust Administration and Probate
    • Young Families
  • Elder Law
    • Coping With Alzheimer’s
    • Elder Law
    • Emergency Medicaid
    • Guardianship & Conservatorship
    • Hospice Care
    • Medicaid Planning
    • Veteran’s Benefits
  • Resources
    • Asset Protection Worksheet
    • DocuBank
    • Elder Law
      • Elder Law & Medicaid Definitions
      • Elder Law Reports
      • Elder Law Resources
        • Edmond Elder Law
        • Oklahoma City Elder Law
        • Overland Park Elder Law
        • Yukon Elder Law
      • Medicaid
      • Nursing Home Resources
    • Estate Planning
      • An Overview of Estate and Gift Taxes
      • Estate Planning Checkup
      • Estate Planning Definitions
      • Estate Planning Reports
        • Advanced Estate Planning
        • Basic Estate Planning
        • Estate Planning for Niches
        • Trust Administration
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate and Legacy Planning Techniques
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Alzheimer’s FAQs
      • Asset Protection Planning
      • Estate Planning
      • Elder Law
      • Frequently Asked Questions for Families Without an Estate Plan
      • Inheritance Planning for Minors
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid Planning
      • Nursing Home Asset Protection
      • Probate
      • Trust Administration
      • Trust Administration & Probate
      • Wills and Trusts
    • Newsletters
    • Probate and Trust Administration
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss of a Loved One
      • Probate Checklist
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
    • Probate Resources
      • Midwest City Probate
      • Moore Probate
      • Oklahoma City Probate
      • Overland Park Probate
    • Published Books
    • Pre Consultation Form
  • Communities We Serve
    • Edmond
    • Midwest City
    • Moore
    • Norman
    • Oklahoma City
    • Owasso
    • Yukon
  • Reviews
    • Our Reviews
    • Review Us
  • BLOG
  • Contact Us
Home » Estate Planning » Are You Aware of State Inheritance Taxes?

Are You Aware of State Inheritance Taxes?

April 14, 2022 by Larry Parman, Attorney at Law

inheritance taxYou should work with an Oklahoma City estate planning lawyer to plan your estate because there are details that you probably don’t know about. If you are not fully informed, you can make mistakes that cost your loved ones a good bit of money.

Income Taxes on Inheritances

For the most part, the tax situation for people that inherit assets is surprisingly good. You do not have to report an inheritance as taxable income under most circumstances.

What are the exceptions? Distributions of the earnings generated by trust assets would be taxable income. Distributions of the principal would not be subject to taxes.

You make contributions into a traditional individual retirement account before you pay taxes on the income. When you take money out of the account, you pay taxes. A beneficiary would be in the same position.

Original account holders and beneficiaries are not taxed on Roth accounts. This is because they are funded after taxes have been paid.

Capital Gains Taxes

If you inherit assets that appreciated during the life of the person that left you the inheritance, the resources get a stepped-up basis. This means the value for capital gains tax purposes is the value at the time you acquire the resources.

You are not required to pay taxes on the appreciation that accumulated before you were the owner of the assets. Of course, if they continue to appreciate and you sell them later on, you will have capital gains tax liability.

Federal Estate and Gift Taxes

There is a federal estate tax that carries a 40 percent top rate, and that’s the bad news. The good news is there is a $12.06 million exclusion in 2022. This exclusion is the amount that you can transfer tax-free. The rest of your estate would potentially be subject to taxation.

Strangely enough, most of us would be pretty happy campers if we had to be concerned about this tax, but it is not relevant to most people. If you are exposed, you can use the unlimited marital deduction to leave assets to your spouse free of the estate tax.

Wealthy people cannot give large lifetime gifts to completely avoid the estate tax, because there is a gift tax. It is unified with the estate tax, so if you give large gifts while you are living, you would be using some of your $12.06 million exclusion.

However, there is an additional gift tax exclusion that can be utilized. The first $16,000 that you give to any number of people during a calendar year is not taxable. This figure was $15,000 for a few years, but was raised to $16,000 in 2022.

There are also medical and educational gift tax exclusions. If you want to pay medical bills or school tuition for others, you can do it in a tax-free manner.

State-Level Estate Taxes

Twelve states have state-level estate taxes, and there is a separate estate tax in the District of Columbia. We do not have this type of tax in Oklahoma, but a state estate tax would apply to your estate if you owned property in a state with an estate tax.

State Inheritance Taxes

Now that we have provided a broader overview, we can focus on the subject that we want to highlight here. In addition to all the taxes we have looked at up to this point, there are six states with state-level inheritance taxes.

As we have explained, an estate tax is levied on the portion of an estate that exceeds the exclusion amount. With an inheritance tax, each person that is receiving an inheritance can be required to pay a tax, and there may not be an exclusion.

Once again, we don’t have this type of tax in Oklahoma. If you inherit property that is located in a state with an inheritance tax, you would be required to pay the tax if you are not exempt.

The six states with inheritance taxes are Iowa, Nebraska, Kentucky, New Jersey, Pennsylvania, and Maryland.

Schedule a Consultation Today!

We are here to help if you are ready to work with an Oklahoma City estate planning lawyer to put a plan in place. You can contact us at 405-843-6100 to set up a consultation appointment or you can send us a message by selecting the underlined link.

 

 

  • Author
  • Recent Posts
Larry Parman, Attorney at Law
Larry Parman, Attorney at Law
Founder and Owner at Parman & Easterday
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.
Larry Parman, Attorney at Law
Latest posts by Larry Parman, Attorney at Law (see all)
  • Digital Estate Planning Overview - March 23, 2023
  • Five Thoughts About Estate Planning for Blended Families - March 21, 2023
  • The Pros and Cons of Long-Term Care Insurance - March 16, 2023

Filed Under: Estate Planning Tagged With: Estate tax, inheritance tax, step-up in basis

Other Articles You May Find Useful

digital estate planning
Digital Estate Planning Overview
What Happens When You Don’t Trust Your Trustee – Part I
HIPAA
What Does HIPAA Stand For and Why Should I Care?
charitable giving
Is Charitable Giving Part of Your Estate Plan?
The View from Heckerling
guardian selection
How Do I Select a Legal Guardian for My Children?

Primary Sidebar

Parman & Easterday, LLP

DOWNLOAD OUR FREE ESTATE PLANNING CHECKLIST

SUBSCRIBE TO OUR BLOG

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Where We Are

OKLAHOMA CITY, OK
13913 Quail Pointe Drive, Suite B
Oklahoma City, OK 73134
Phone: (405) 843-6100
Fax: (405) 917-7018

MAP

parman_sidbr_map

Where We Are

TULSA, OK
Memorial Place 7633 E. 63rd Place Suite 312
Tulsa, OK 74133
United States (US)
Phone: (405) 843-6100

MAP

parman_sidbr_map

Office Hours

Monday9:00 AM - 5:30 PM
Tuesday9:00 AM - 5:30 PM
Wednesday9:00 AM - 5:30 PM
Thursday9:00 AM - 5:30 PM
Friday9:00 AM - 12:00 PM

Footer

footer-logo

The information on this Oklahoma Law Firm website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Oklahoma City Estate Planning Attorneys at Parman & Easterday offer estate planning services in the Oklahoma City, Oklahoma and surrounding areas. Contact us for help today.

Privacy Policy | Contact Us | Disclaimer | Site Map | Powered by American Academy of Estate Planning Attorneys


© 2023 American Academy of Estate Planning Attorneys, Inc.
  • Facebook
  • LinkedIn
  • Twitter
  • YouTube