Estate And Inheritance Taxes - How To Manage Them
Let's clear things first: Estate Taxes are a tax on the Estate, and is levied by the Federal Government.
Inheritance Tax is paid by the inheritor, and is levied by the State Government.
Inheritance tax varies from State to State, but Estate Tax does not.
Before the Estate can be distributed amongst the beneficiaries, according to the Will of the deceased, the Estate Tax has to be first paid first.
Only the remaining part of the Estate can then be distributed as per the Will.
If the Estate left behind is inadequate to pay the Estate tax, then the assets left behind must first be sold to pay the taxes, and only then the balance can be distributed amongst the beneficiaries.
The responsibility for paying the Estate Tax is the responsibility of the Executor named in the Will.
The Executor is also responsible for seeing that the estate, or what remains of it, goes to the right beneficiary.
In the case of inheritance tax, as mentioned above, it varies from State to State.
In some States, there is no tax.
Where the tax is levied, there are some concessions to the beneficiaries which are often related to the degree of relationship of the beneficiary to the deceased, such as the spouse and children paying less, and more the distance of the relationship with the deceased, higher is the tax.
Here again, if the inheritor is not in a position to pay the inheritance tax, then the part of the estate that was received is liquidated, and after paying the inheritance tax, the balance is given to the beneficiary.
Sometimes the testator (the drawer of the Will) may specify that the inheritance and Estate tax would be paid from the Estate itself.
This removes a lot of the complexity that sometimes encumbers a deceased's estate, although the Will may be clear on what will devolve on whom.
Estate Duty and Inheritance tax can become complex depending upon the manner in which the Will was drawn up.
When there is complexity involved, it is better to consult an expert in the subject, and/or a financial planner.
This is advisable because since every State has its own guidelines on inheritance tax, it can become quite cumbersome when the inheritors are located in different States.
The help of a financial advisory service, experienced in these matters, would then become necessary.
The subject of Estate Duty tax and inheritance tax has long been a bone of contention, with many for it, and many not for it.
Therefore, the laws relating to these taxes are constantly changing or are varied.
Each change creates a change for the better, but at the same time, it also increases the complexity of the issues of inheritance and the estate.
The use of an expert in these matters would therefore make sense both to the Executor and the inheritors.
Inheritance Tax is paid by the inheritor, and is levied by the State Government.
Inheritance tax varies from State to State, but Estate Tax does not.
Before the Estate can be distributed amongst the beneficiaries, according to the Will of the deceased, the Estate Tax has to be first paid first.
Only the remaining part of the Estate can then be distributed as per the Will.
If the Estate left behind is inadequate to pay the Estate tax, then the assets left behind must first be sold to pay the taxes, and only then the balance can be distributed amongst the beneficiaries.
The responsibility for paying the Estate Tax is the responsibility of the Executor named in the Will.
The Executor is also responsible for seeing that the estate, or what remains of it, goes to the right beneficiary.
In the case of inheritance tax, as mentioned above, it varies from State to State.
In some States, there is no tax.
Where the tax is levied, there are some concessions to the beneficiaries which are often related to the degree of relationship of the beneficiary to the deceased, such as the spouse and children paying less, and more the distance of the relationship with the deceased, higher is the tax.
Here again, if the inheritor is not in a position to pay the inheritance tax, then the part of the estate that was received is liquidated, and after paying the inheritance tax, the balance is given to the beneficiary.
Sometimes the testator (the drawer of the Will) may specify that the inheritance and Estate tax would be paid from the Estate itself.
This removes a lot of the complexity that sometimes encumbers a deceased's estate, although the Will may be clear on what will devolve on whom.
Estate Duty and Inheritance tax can become complex depending upon the manner in which the Will was drawn up.
When there is complexity involved, it is better to consult an expert in the subject, and/or a financial planner.
This is advisable because since every State has its own guidelines on inheritance tax, it can become quite cumbersome when the inheritors are located in different States.
The help of a financial advisory service, experienced in these matters, would then become necessary.
The subject of Estate Duty tax and inheritance tax has long been a bone of contention, with many for it, and many not for it.
Therefore, the laws relating to these taxes are constantly changing or are varied.
Each change creates a change for the better, but at the same time, it also increases the complexity of the issues of inheritance and the estate.
The use of an expert in these matters would therefore make sense both to the Executor and the inheritors.
