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    Category Archives: Inheritance Tax

    Death & (Income) Taxes

    Death and taxes may be equally inevitable, but the taxman demands the last word. Death does not excuse a final accounting with the IRS. In fact, taxes can further complicate the lives of survivors.

    Of the two certainties in life – death and taxes – the taxman always gets the grim last word. End-of-life taxes are, moreover, often considered the most onerous. For many loved ones, writing those last few checks to the IRS can be especially tough … and seem to never end. Enter the postmortem income tax return.

    The death taxes are one thing, and inheritance taxes are generally another, since they are paid by the inheritor. However, as a recent article in Kiplinger makes clear, there usually is one final income tax return to file for the decedent. I recommend the article, titled Death and Taxes, for your reading.

    The burden of filing this final income tax return is something you assign in your will, usually to the executor or administrator, or failing that it falls upon a survivor. If you are planning your estate or if you are administrating one, this burden is not one to be taken lightly. To make matters worse, the fiduciary is on the hook for any sins of commission or omission. If ever there was a time to retain appropriate legal, accounting and tax advice, then this is one of them.

    Bottom line: The income taxes likely are the least of your taxation concerns with the estate, inheritance, gift, and generation-skipping taxes all vying for attention. Unfortunately, that doesn’t diminish the importance of income taxes.

    Even if an estate will not be subject to extra taxation, this last rite to the IRS has to be observed.

    Reference: Kiplinger (March 2012) “Death and Taxes

    Indiana Death Tax Dies – Will Other States Follow?

    It’s official. The Indiana inheritance tax is repealed for deaths after Dec. 31, 2021.

    The Indiana inheritance tax is officially on its way out the door. What does this mean for other states?

    For some taxpayers, wealth transfer planning has required two layers of tax consideration. First, the federal estate tax, which traditionally has received the lion’s share of attention and, second, “state” estate taxes or even “state” inheritance taxes. And, in some instances, those state taxes can be harsher than the federal estate tax (especially given the current federal estate tax exemption of $5.12 million per taxpayer)!

    Accordingly, the demise of another state wealth transfer tax is welcome news to many in Indiana. Might this signal a trend extending beyond the Hoosier state? This question is explored in a recent Forbes article titled Another State Death Tax Kicks The Bucket, Will More Fall?. As the author points out, this development in Indiana could buttress the argument for the repeal of such wealth transfer taxes in sister states and maybe even at the federal level. The states, after all, are always in constant competition with one another (for residents and businesses) and taxes are a constant give and take in the exchange.

    For more information on the Indiana laws and the politics involved, I recommend reading the original article.

    Reference: Forbes (March 20, 2012) “Another State Death Tax Kicks The Bucket, Will More Fall?




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