fbpx Ask An Expert

How Are Inheritances Taxed?

Male Financial Advisor In Modern Office Sitting At Desk Meeting Female Client

When a person dies, his or her assets can be subject to both Federal estate tax and state inheritance tax – if the value of the decedent’s assets exceed a certain value. In 2020, for Federal estate tax purposes, estate tax is imposed if a person has a “taxable estate” of more than $11,580,000 (less certain lifetime gifts that reduce that amount).  In some cases, the unused exemption of the first spouse to die may be used to offset the estate taxes of the surviving spouse.  Many states have no inheritance tax; the ones that do have different amounts that the value of a decedent’s assets must exceed for the state inheritance tax to be due.
There are certain deductions that reduce the amount of the taxable estate: (a) outstanding taxes and other debts owed by the decedent; (b) amounts left to charity; and (c) amounts left either outright or in the right kind of a trust for a surviving spouse (the “marital deduction”).  Special rules apply that limit the availability of the marital deduction for a surviving non-citizen spouse.
The Federal estate tax rate in 2020 is 40%. State inheritance taxes range from 0% (e.g., California) to 18% (the highest rate, Nebraska).


Want to read more?

Please login below. If you don't have an account, feel free to sign up and get access to the entire WealthCAP HUB®.

error: This content is protected!

suggestion

Feedback

Ask An Expert