Inheritance taxation question?

Question

What happens if the deceased lived in a state with no income or inheritance taxes, but the heir lives in a state with both?

Also, I know there is an exemption level that is rising slightly each year until about 2010. In my case there are multiple heirs. Is the deceased's estate taxed according to the exemption, and then divided up between the heirs? Or is the estate divided first, then each heir only pays taxes on his or her portion that is above the exemption level?

Thanks Bostonian. Then after the estate is taxed and all debts paid, it is divided among the heirs. The do the heirs each have to pay income tax on their share?

Answer 1

The estate is responsible for any taxes, fees, etc. The Federal inheritance tax exemption is currently $2,000,000 for the entire estate. It's not divided among the heirs as they are not being taxed. Even if there is no state inheritance tax, there is a Federal one. If the estate's net value exceeds the exemption amount it will be taxed.

All of the decedent's outstanding bills need to be paid out of the estate as well. This includes any final hospital bills, burial costs, etc. If there is anything left when all of the bills and taxes are paid, that will then divided up among the heirs according to the terms of the will.

Answer 2

Is inheritance tax top? to three extent, confident. maximum everywhere in the country, every person is taxed for presents as much as a definite volume and this is a lot much less forgiving. it is seen as unjust to pass a large style of money off to somebody who did no longer earn it whether those every person is on your loved ones, aside from the marital deduction. although, many corporation require multi-million investments if no longer multi-million loans (which in many circumstances expenses greater advantageous than purely your guy or woman funds). in my view, taxing something over 3,000,000 is ludicrious (exceedingly because of the fact the inheritance tax value is very almost 50%, aside from the undeniable fact that some states have inheritance taxes). With the way expenses are increasing and how they're going to constantly upward thrust, human beings might desire to have tens of millions interior the economic business enterprise to get companies shifting and make investments interior the economic gadget. Inheritors acquire funds from people who desperate to hoard it instead of putting into the economic gadget by ability of the two spending it or making an investment it. They hid it from taxes in tax loose trusts and foreign places economic business enterprise money owed to get positioned back into the economic gadget, controlled by ability of a few fund supervisor. although, the argument, is that this is there top to hoard there funds. in the event that they have been clever adequate to earn it, then they might desire to do want they want with it. this is the top all to be all taxes so as that Congress can get much greater funds ( at 50% +) to pass their political agendas. Like I reported, to three extent.

Answer 3

The person receiving the inheritance would not pay any taxes unless they inherited an IRA or retirement account. You would pay federal and state income tax on an inherited IRA or retirement account.