Inheritance Tax
3rd August 2011 by Tax Man No CommentsAn inheritance tax is commonly referred to as a death tax because it is a tax that is imposed on all estate money and property after an estate owner passes away and leaves their estate or a portion of their estate to another person. States that currently collect a tax on inherited estate money or property are Connecticut, Maryland, Massachusetts, New Jersey, Nebraska, Pennsylvania, Oregon, New York, Indiana, Kansas, Louisiana, Kentucky, and Iowa.
Since each state is likely to tax their residents differently, individuals need to research the inheritance tax laws in their state or hire the services of a professional tax attorney. There are also many state governments who regularly update their inheritance tax guidelines, and many states are even considering completely dropping the inheritance tax. Therefore, it is important for taxpayers or their tax attorneys to keep up-to-date on the lastest inheritance tax information.
The Inheritance Tax Act 1984 states that it shall be charged on the value transferred by a chargeable transfer. It is therefore imposed that people should be prevented from giving away all their property immediately before they die to then avoid tax. Further to this, the rules provide that inheritance tax is calculated not only on the value of the property that a deceased person has when he or she dies, but it takes into consideration the running total of gifts that the deceased has made over the last seven years. Thus, when calculating the size of an estate, all the gifts made in the last seven years up to and made on death are included.
Inheritance tax is generally more subject to a person’s property that is passing on death, but it can also refer to lifetime gifts unless they fall into an exempt category.
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