What Happens If I Die Without a Will?
Dying without a will means you are what the courts consider “intestate,” which means laws of your state determine how your property is distributed. In most cases, your assets would go to your spouse,...
Losing a loved one is a tragedy that requires space to grieve, and the last thing a family needs at that time is to deal with unexpected costs. However, there are federal and state-level taxes that need to be handled if the decedent had an estate or property to pass on. Knowing the differences between estate tax and inheritance tax can help you plan ahead of time and navigate the process more smoothly.
Most people don't have to worry about the federal estate tax, which excludes up to $12.92 million for individuals and $25.84 million for married couples in 2023 (up from $12.06 million and $24.12 million, respectively, for the 2022 tax year). But 17 states and the District of Columbia may tax your estate, an inheritance or both, according to the Tax Foundation.
What's The Difference?
Eleven states have only an estate tax: Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. Washington, D.C. does, as well. Estate taxes are levied on the value of a decedent's assets after debts have been paid. Maine, for example, levies no tax the first $5.8 million of an estate and taxes amounts above that at a rate of 8 percent to a maximum 12 percent.
Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania have only an inheritance tax — that is, a tax on what you receive as the beneficiary of an estate. Kentucky, for example, taxes inheritances at up to 16 percent. Spouses and certain other heirs are typically excluded by states from paying inheritance taxes.
Maryland is the lone state that levies both an inheritance tax and an estate tax.
In Pennsylvania you can reduce the tax that will be eventually levied against your estate by carefully choosing who you leave your property to. The tax on proeprty left to your children in Pennsylvania is 4.5% while the tax on the same property left to your brother or sister is taxed at 12%.
At Penglase & Benson our trainned attorneys can help you reduce your inheritance taxes by carefully drafting a Will that meets your goals and needs. Call us to reduce your future taxes or to deal with your probate issues.