If you inherit property in Oklahoma, or if you are leaving property to a loved one within this state, it is important to understand the rules for inheritance tax in Oklahoma. While the state does not impose an inheritance tax, or an estate tax, this does not mean that no taxes are assessed as a result of a death. You should talk with an experienced attorney about how best to protect your inheritance or the wealth you are leaving to loved ones so you can reduce taxes or avoid taxes altogether.
Parman & Easterday can provide invaluable assistance understanding your options for tax planning and making smart choices to protect wealth you are leaving to loved ones or that you are inheriting. To find out more about the ways you can plan for taxes connected to a death, give us a call today.
What are the Rules for Inheritance Tax in Oklahoma?
The Tax Foundation explains the rules for inheritance taxes within Oklahoma as well as other locations throughout the country. According to the Tax Foundation, only 15 states plus Washington D.C. charge estates taxes on estates when someone passes away. Only six states have an inheritance tax, which is a different kind of tax altogether. Two states – New Jersey and Maryland – have both of these different kinds of taxes: estate taxes and inheritance taxes. Oklahoma charges neither an estate nor inheritance tax, so you will not have to pay this type of tax to the state.
Estate and inheritance taxes are different because estate taxes are paid by the estate and, generally, are not based on who inherits property or assets. No state or federal estate tax is charged on any money that you leave to a spouse. But, if you leave money to anyone who is not your spouse, then estate taxes would have to be paid if your estate was large enough to exceed the excludable amount that you can pass tax free. The taxes are not based on who inherits, but are assessed based on the estate’s value.
Inheritance taxes, on the other hand, are paid by the person who inherits the assets, rather than being paid by the estate. The rules differ among the states that impose inheritance taxes, but in general, these taxes are typically based upon the relationship between the person who inherits the assets, among other factors.
It is important that you know the rules for both estate and inheritance taxes so you can talk with an attorney and find ways to reduce the amount of taxes that a death could trigger. This is especially important if you own property in a state other than Oklahoma, which might charge an estate or inheritance tax, or if you have a larger estate and your death could trigger federal estate taxes.
Do Heirs or Beneficiaries Ever Have to Pay Taxes When Inheriting Money in Oklahoma?
Heirs or beneficiaries do not have to pay an estate tax to Oklahoma, nor do they have to worry about inheritance tax in Oklahoma. However, if you live in Oklahoma and you inherit valuable certain property from a state that does have an estate tax, you should be aware that the estate may have to pay taxes on the inherited property. This could result in you getting a smaller inheritance than expected.
In any situation where someone passes away, it is also important to make a determination regarding whether federal estate tax will result in a large tax bill. The federal laws allow for taxation on large estates. Tax is charged on any estates that exceed the annual exclusion, which is $5.49 million as of 2017. This means if someone passes away with in excess of $5.49 million of wealth and no asset protection planning has been put in place to avoid estate tax, the estate will be taxed on the value of assets that exceeds that $5.49 million threshold.
Getting Help from An Oklahoma City Tax Planning Lawyer
Although there is no inheritance tax in Oklahoma, you still must consider whether your estate is large enough to be subject to federal estate tax. Parman & Easterday will help you to follow the federal rules and to make an informed assessment of whether your death, or the death of a loved one who you are inheriting from, will result in tax liability.
To find out more about the rules for estate tax and inheritance tax, give us a call today at (405) 843-6100 or (913)385-9400 or contact us online. You can also join us for a free seminar to get more information about estate tax and the tax planning process.
- Understanding Estate Planning – What is a Letter of Instruction? - April 2, 2020
- Do I Really Need an Estate Plan? - March 31, 2020
- Founding Attorney, Larry Parman, Shares a Personal and Insightful Message about the Coronavirus Situation and How the Firm is Handling It (click on the video below) - March 27, 2020