The inheritance tax is a tax on the beneficiary’s gift. The beneficiary of the property is responsible for paying the tax him or herself-not the estate. You can, however, breathe a little easier as there are now only eight states that impose an inheritance tax [Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania and Tennessee]. But even if you live in one of those states, many beneficiaries may end up being exempt from paying the inheritance tax.
These two types of taxes often get confusing, and if a fair amount of planning isn’t done before a person passes away, it can cause headaches for those who are to receive something from the estate.
The best course of business is to speak with an experienced estate planning attorney who has the background and skills necessary to make the estate plan easy-to-understand both for the owner while he or she is still alive - as well as for the beneficiaries when the estate is being probated. In addition, and equally as important, is working with an attorney to avoid unnecessary tax consequences for everyone involved.
