Who Pays Inheritance Tax in the United States?

Save

Inheritance taxes, also called estate taxes or "death taxes," have been a moving target in recent years. Large estates were briefly free of any federal inheritance taxes when the estate tax briefly expired in 2010. But the tax was scheduled to return on Jan. 1, 2011, meaning heirs of wealthy estates will have to pay taxes on their inheritance for the foreseeable future to Uncle Sam and, in many cases, to individual states.

Who Qualifies

Federal estate taxes in 2011 are levied on estates valued at over $5 million for individuals and $10 million for couples. The threshold is significantly higher than 2009, before the tax expired for a year, when the cut-off was $3.5 million for individuals and $7 million for couples.

Who Pays

The money due from estate taxes comes out of the assets of the person who died, called the estate. Calculating and paying estate taxes is part of the complicated process of administering the financial affairs of someone who has died and is generally organized by one person who is legally appointed to the responsibility. This person is called the executor or administrator of the estate. Estates large enough to be levied inheritance taxes will generally be executed with the help of an attorney.

Gifts

The 2011 legislation that raised the threshold for estate taxes also said Americans can give away as much as $5 million, or $10 million, to their children, grandchildren or friends without paying taxes. That means the only inheritances subject to taxes in the 2011 calendar year will be those over the $5 million or $10 million threshold, and donors can avoid having future taxes levied on the money they plan to pass on to their heirs by granting them their inheritance in 2011.

State Taxes

Some estates might still might be subject to hefty state taxes in spite of the new federal threshold in 2011. Inheritances passed down in 21 states and Washington D.C. are subject to estate or inheritance taxes in 2011. Those taxes typically are levied on estates worth $1 million or more and carry a top rate of 16 percent.

Related Searches

References

Promoted By Zergnet

Comments

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!