Taxes are among the most elusive concepts to plague those living in the 21st century. The differences between all of the varying types of taxes, including estate and inheritance tax, can mean the difference of tens to hundreds of thousands of dollars for those in particular situations. Fortunately, getting the most accurate and relevant information on your taxes has never been easier with the help of an Atlanta estate law attorney from Goldberg & Associates.
The Ins and Outs of Estate Taxes
Estate taxes are calculated based on the total net value of the property owned by someone at the time of death. Although quite morbid, estate taxes must be paid in order to fulfill their legal obligation to the state upon passing away. However, the estate’s liabilities are subtracted from the value of the deceased’s property to get a new number – the net taxable estate. The final tax bill is paid by the estate.
Only 12 states and the District of Columbia collect estate tax, meaning most people who have passed on will not need to worry about having their estates taxed by the state. Although there does, technically, exist a federal estate tax, most are not liable for these taxes as one’s estate must value at $12.06 million or more in order to qualify. One of the more concerning parts of estate taxes is that they are commonly mixed up with inheritance taxes, a completely different tax system altogether.
Conceptualizing Inheritance Taxes
Contrary to how estate taxes work, inheritance taxes are never collected by the federal government. Furthermore, only six states in the U.S. collect this type of tax. Inheritance taxes are those that are calculated based on the value of individual bequests received from a deceased person’s estate. In the case of inheritance taxes, beneficiaries are usually the ones required to pay this tax, although it is sometimes preconceived and written off in the will.
Spouses who receive inheritance taxes are always exempt from paying them. Children, grandchildren, siblings, nieces and nephews, and friends, however, are not exempt from paying this tax and will need to upon the reception of their portion of the estate. Generally speaking, the tax rate tends to increase as the relationship becomes more distant.
All of this means that the effective difference between estate and inheritance tax concerns who is paying it. Very rarely will someone have to worry about both taxes. However, there are cases in which relatives or loved ones of a deceased individual will have to worry about paying one or the other.
Financial Planning Made Easy
Upon the passing on of an individual, a complex series of decisions are made regarding their finances. This is done by the government, legally binding documents, friends, and family members who all have a stake in the distribution of the deceased’s fortune. While this can be an emotionally taxing and confusing matter, Atlanta estate law attorneys from Goldberg & Associates are here to help. We provide legal guidance for a lifetime, aimed at producing the best possible scenario for you and your loved ones. Reach out today at (770) 229-5729.
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