There can be some confusion with regard to taxes on asset transfers. Some people are under the impression that an inheritance tax and an estate tax are one and the same thing. This is not the case.
An estate tax is imposed on all assets owned by the decedent at the time of death. The federal estate tax is applicable in all 50 states, and some states even have state-level estate taxes.
Our firm practices law in Oklahoma and Kansas. Fortunately, there is no state-level estate tax in these two states.
The amount of the federal estate tax exclusion is $5.34 million in 2014. This is the amount that can be transferred estate tax-free. Anything that you want to transfer that exceeds this amount would potentially be subject to the federal death tax at a tax rate of 40%.
There is also a federal gift tax that is unified with the estate tax. It carries the same rate, and the $5.34 million exclusion applies to your estate along with any taxable gifts that you give throughout your life.
Because of the existence of the gift tax, you can’t just give away assets while you are living to avoid transfer taxes.
An inheritance tax differs from an estate tax. If there is an applicable inheritance tax in place, each nonexempt inheritor would have to pay the tax. This tax is imposed on multiple different heirs rather than being levied on the entirety of the estate before it is passed along to the inheritors.
Fortunately, there is no inheritance tax on the federal level. There are a handful of states in the union that do have state-level inheritance taxes, but there is no inheritance tax in Oklahoma or Kansas. So, the answer to the question that serves as the title of this post is no, your heirs would not be forced to pay an inheritance tax if you live in Kansas or Oklahoma.
The states that do have an inheritance tax are Maryland, New Jersey, Indiana, Iowa, Kentucky, Nebraska, and Pennsylvania. You may want to consider the estate planning implications if you are considering relocation to any of these states for one reason or another.
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If you want to learn more about taxes on asset transfers along with a number of other estate planning and elder law topics, attend our upcoming seminar: Discover 7 Ways You Too Can Easily Keep The Government, Devastating Long-Term Care Costs, Greedy Creditors And Lawsuits From Stealing Your Hard-Earned Savings & Income and Inflicting Trauma On Your Family.
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