Estate Tax vs. Inheritance Tax. What is the Difference?
Taxation is an extremely important aspect of estate planning, wealth management, and asset protection. Although Benjamin Franklin famously declared that death and taxes share an unavoidable certainty, the burdens of inheritance and estate taxes can be significantly reduced with the adequate estate planning and the right legal strategies.
Inheritance and estate assessments are often called “death taxes,” because a taxpayer must pass away before they can be collected. The main difference between these two taxes is what the tax is assessed on. The differences can be gleaned by means of their description below:
In the case of estate taxation, the amount to be levied is calculated based on the fair market value of the entire estate. The amount owed in taxes is paid out of the deceased’s assets. Most simple estates do not need to file an estate tax return. As of late 2016, the federal estate tax was collected from individuals whose assets were valued at more than $5.43 million when they passed away. In addition to federal estate taxes, 15 states also collect these assessments. In those particular 15 states, a wealthy individual could end up paying local estate taxes on top of inheritance and federal estate taxes. Nevada is not one of these 15 states, and therefore, does not collect an estate tax at the state level.
Federal estate taxes may go through another amendment once New York billionaire and President-elect Donald Trump moves to the Oval Office. Trump has not been very specific with a lot of his campaign promises, but the issue of death taxes has been an exception. In September 2015, Trump mentioned that he intends to eliminate the taxation of most estate taxes by increasing the threshold to $10 million before an assessment can be made.
This tax is imposed on survivors, heirs, and beneficiaries who receive assets as part of a will or by an order issued by a probate court. Each beneficiary may owe a different amount in taxes, because the amount owed is calculated separately for each beneficiary.
The jurisdictions where inheritance taxes are levied do not generally impose assessments against widows, and the rate of taxation is reduced for children. Other close relatives included on wills or determined by probate courts in cases of intestacy may have to pay inheritance taxes at the full rate determined by the assets they receive.
State of Nevada
Nevada does not collect inheritance or estate taxes at the state level. For this reason, the Silver State continues to attract a significant number of retirees.
For any of your legal needs regarding estate taxes to help with probate in Las Vegas, contact us via our website or call (702) 337-3000 for more information.