An inheritance tax is a state tax that is collected from the estate of a deceased person. The benefactor pays this tax, not the estate itself. There are four states in the United States that charge inheritance tax. If your loved one dies without a will, you can use an estate planning attorney or financial planner to transfer your assets to your beneficiaries efficiently. Inheritance tax generally affects only 2% of taxpayers, and it is primarily the responsibility of the benefactor to pay the taxes.

While inheritance tax is usually high for those who inherit a large estate, the rules are different depending on who pays the tax. Relatives, like siblings, pay no inheritance tax if they are under a certain threshold. Other family members may pay the tax, like sons and daughters-in-law, foster children, cousins, or relatives. However, the tax does not apply to grandchildren. It is only when there are complex estates that need to be valued and prepared to pay the inheritance tax.

If there are assets worth more than $2 million, a five percent inheritance tax will apply. The amount of inheritance tax is calculated separately for each beneficiary. In some states, a spouse will be exempt from paying the tax, while biological children and stepchildren may not be. However, the tax is still applicable for those who do not have a close familial relationship with the deceased. For this reason, it is important to plan carefully ahead of time.

The federal estate tax exemption for single people is $11.7 million and $23.4 million for married couples. However, each state has its own threshold. As a result, the amount of inheritance tax owed on each individual property will vary. Inheritance taxes are deducted from the property before the beneficiary can claim it. The tax is also eliminated for the heirs of those who are adopted over 21. For couples who are not in this category, the inheritance tax rates for those under this threshold are 15% and 16%.

Most states will waive inheritance tax for spouses and children if the deceased did not have any dependents. Non-family members will be charged a higher rate. However, with the use of TurboTax, it is easy to file your estate tax return. By answering a few simple questions, the software will help you fill out the correct tax forms. If you owe more than $5,000, you can choose to pay it over the course of ten years.

There are also some situations when giving large gifts can be taxable. However, under the federal law, a gift of up to $15,000 per recipient per year without filing a gift tax return is tax-deductible. This amount can be cash, stock, bonds, or physical assets. While this amount may seem small, you should consider using the entire exemption each year if you have a large estate. Inheritance tax laws vary from state to state, and you should seek legal advice from an estate planning attorney to ensure the transaction goes smoothly.