estate and inheritance taxes

[perinova]

17 states levy a 'death' tax; apparently about 10%(?) above 1 to 7M$.

What I am not sure about is : it the deceased state or the person receiving the inheritance state? or both?

https://www.aarp.org/money/taxes/info-2020/states-with-estate-inheritance-taxes.html

 

[RetireeRobert]

Generally speaking, in most cases I would say the deceased's state would be the one to worry about. Deceased's property/assets would be considered as domiciled in that state and that state's laws would rule. I do not know the laws of all states, but generally, estate distributions are "tax-free" to the recipient, so it would not matter where the recipient lived. If one (who is to be a recipient) lives in a state with "inheritance" taxes, that person should look up their own state's laws on whether inheritances received from out-of-state decedents would be subject to any inheritance tax in the recipient's state.

 

[calmloki]

Oregon thinks if you are a resident and have an estate over 1M it is appropriate to share the wealth on the overage - at about the 10% rate. If you aren't a resident you pay a fractional amount for Oregon real estate and tangible personal property - but NOT on non-Oregon intangible property, non-Oregon real estate, and non-Oregon tangible property.
Intangible property includes stocks, bonds, notes, currency, bank deposits. This intangible property wrinkle may turn me into (shudder) a Californican. Lawyer chat is coming up for us.

Dead guy's estate pays the tax.

 

[rk911]

17 states levy a 'death' tax; apparently about 10%(?) above 1 to 7M$.

What I am not sure about is : it the deceased state or the person receiving the inheritance state? or both?

https://www.aarp.org/money/taxes/info-2020/states-with-estate-inheritance-taxes.html

in our case it's the decedant's state. my BIL passed away in CA last March. CA does not levy an inheritance tax whereas IL, where we live, does. had he died in IL we'd have to pony up. and even better...his estate is well under the federal threshhold of $11m.

 

[Souschef]

I made a mistake when my MIL died. She lived in PA and they had a 10% tax. We lived in CA, so I should have told them I would make an offer of a smaller amount

 

[pb4uski]

^^^ Huh?

 

[Souschef]

^^^ Huh?

I should have tried to negotiate a lower amount, since I had no property or ties to PA, and I lived in CA. I do not think they would come after me.

 

[RobbieB]

Yeah, they would.

 

[ivinsfan]

I should have tried to negotiate a lower amount, since I had no property or ties to PA, and I lived in CA. I do not think they would come after me.

Yes they would..they take their money before you get your money

 

[ivinsfan]

in our case it's the decedant's state. my BIL passed away in CA last March. CA does not levy an inheritance tax whereas IL, where we live, does. had he died in IL we'd have to pony up. and even better...his estate is well under the federal threshhold of $11m.

The proverbial dancing on your grave

 

[pb4uski]

I should have tried to negotiate a lower amount, since I had no property or ties to PA, and I lived in CA. I do not think they would come after me.

The PA guy would call the CA guy and before you know it your accounts would be frozen.

There is a member here who PA froze all of their Vanguard accounts, including accounts that didn't receive any money from the estate and it caused them a mess.

 

[USGrant1962]

Generally, estate taxes are levied on the estate before distribution to heirs (tax on the estate) and inheritance taxes are levied on the beneficiary (tax on inheritance). It may or may not matter where the recipient lives.

But, PA for example calls it an inheritance tax but it is a tax on the estate and paid by the estate regardless of where the recipient lives so it is really an estate tax calculated by the beneficiary's relationship to the deceased. [mod edit] Though in MD both taxes are collected where the decedent lived. Good for me because DM lives in PA. PA will take their chunk and I don't think I have to pay MD on top of that.

https://taxfoundation.org/state-estate-tax-state-inheritance-tax-2021/

 

[CRLLS]

I am confused. Are we talking about estate tax or inheritance tax? They are different. The state of the decedent issues a tax on the amount of their estate. The inheritance tax is a tax levied on the beneficiary of the estate. Some states do one some states do the other. ̶I̶f̶ ̶s̶o̶m̶e̶ ̶u̶n̶l̶u̶c̶k̶y̶ ̶p̶e̶r̶s̶o̶n̶ ̶h̶a̶d̶ ̶a̶n̶ ̶i̶n̶h̶e̶r̶i̶t̶a̶n̶c̶e̶ ̶f̶r̶o̶m̶ ̶a̶n̶o̶t̶h̶e̶r̶ ̶s̶t̶a̶t̶e̶,̶ ̶c̶o̶n̶c̶e̶i̶v̶a̶b̶l̶y̶ ̶t̶h̶e̶ ̶e̶s̶t̶a̶t̶e̶ ̶g̶o̶t̶ ̶t̶a̶x̶e̶d̶ ̶A̶N̶D̶ ̶t̶h̶e̶ ̶b̶e̶n̶e̶f̶i̶c̶i̶a̶r̶y̶ ̶a̶l̶s̶o̶ ̶g̶o̶t̶ ̶t̶a̶x̶e̶d̶.̶ ̶ Both have a rather generous base that is tax free. FWIW, there is no federal inheritance tax.

edit: According to https://www.thebalance.com/inheritance-and-state-taxes-3505471, the state inheritance tax is levied on the beneficiary based on the decedent's state, not the beneficiaries state.

How the Inheritance Tax Works
Let's say you live in California—which does not have an inheritance tax—and you inherit from your uncle's estate. He lived in Kentucky at the time of his death. You would owe Kentucky a tax on your inheritance because Kentucky is one of the six states that collect a state inheritance tax.

 

[USGrant1962]

I should have tried to negotiate a lower amount, since I had no property or ties to PA, and I lived in CA. I do not think they would come after me.

First, I don't know where you got 10%. PA is 4.5% on direct descendants, 12% on siblings, and 15% on others - and the tax is paid by the estate. The executor files PA form REV-1500, Inheritance Tax Return Resident Decedent.

It has nothing to do with where beneficiary lives.

 

[ivinsfan]

First, I don't know where you got 10%. PA is 4.5% on direct descendants, 12% on siblings, and 15% on others - and the tax is paid by the estate. The executor files PA form REV-1500, Inheritance Tax Return Resident Decedent.

It has nothing to do with where beneficiary lives.

Yep I got hit by the 15%...right off the top

 

[phil1ben]

First, I don't know where you got 10%. PA is 4.5% on direct descendants, 12% on siblings, and 15% on others - and the tax is paid by the estate. The executor files PA form REV-1500, Inheritance Tax Return Resident Decedent.

It has nothing to do with where beneficiary lives.

Yes, among other things, this is how we in PA can maintain (so far) a low 3.07% state income tax across all levels of income. Some counties do also levy a 1% additional income tax but we are still low. People have been crossing the Delaware River in groves to escape the high NJ income tax. I was one of them 15 years ago.

 

[MichaelB]

Snarky state references only detract from otherwise thoughtful thread discussions, so let’s please stop making them.

 

[ncbill]

So what would happen if you just transferred everything (including real estate) to a revocable living trust.

But it was domiciled outside of the state with inheritance taxes?

 

[rk911]

So what would happen if you just transferred everything (including real estate) to a revocable living trust.

But it was domiciled outside of the state with inheritance taxes?

BIL passed away in CA (no death tax there). my wife is sole beneficiary. we’re doing a 2-step process. everything he left to her that was in his trust was transfered to her control with the EIN issued by the IRS for his estate. from there those trust assets are being transfered to our trust (my SS#) which was created here in IL. neither those accounts or his taxable accounts when transfered to our trust or simply deposited in our bank created a tax event in IL (according to our CPA and atty).

 

[pb4uski]

So what would happen if you just transferred everything (including real estate) to a revocable living trust.

But it was domiciled outside of the state with inheritance taxes?

The relevant factor is where the decedent was resident, not where the trust is organized. If the decedent lived for more than 186 days in a state with an estate tax, absent circumstances that indicate otherwise, the state will want its cut.

 

[Brat]

Ah, now I understand why the family of a neighbor moved her to Vancouver, Washington from Portland when she couldn't live alone.

 

[MrsHaloFIRE]

State of PA held up my security clearance. I did live there but I didn't work while we were there. Pretty hard to prove and a sticky wicket for that ckearance. Screw PA

 

[perinova]

so all taxes, estate or inheritance, are due in the deceased state, do I conclude incorrectly that the heir doesn't need to inform his/her state of received inheritance?

 

[RetireeRobert]

so all taxes, estate or inheritance, are due in the deceased state, do I conclude incorrectly that the heir doesn't need to inform his/her state of received inheritance?

Generally, I would say inheritors who inherit from an out-of-state deceased do not need to say anything to the inheritor's own state.

But never say never. What state do you live in? Google your own state's inheritance laws and see if their is any mention.

 

[perinova]

Generally, I would say inheritors who inherit from an out-of-state deceased do not need to say anything to the inheritor's own state.

But never say never. What state do you live in? Google your own state's inheritance laws and see if their is any mention.

Hi Robert. I am in CA at the present time, but that is purely hypothetical. I am just learning about this process. It may become helpful on deciding where to live.