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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsQuestion of estate taxes/ inheritance tax
okay I had a interesting talk with 2 friends this past weekend Two friends inherited money from family members who had passed about a year ago. One said she got her money in about 3 months after the family member passed and she said the estate tax and inheritance taxes was taken from the WHOLE of the estate than the money and possessions went to the individuals. The second friend said it took a year for him to get what he was inheriting AND each family member was taxed for the value of the item.
Is it depended on the state or each estate?
Can anyone give me more insight.
The Velveteen Ocelot
(115,829 posts)If it's an inheritance tax, the heir pays the tax. If it's an estate tax, the tax is paid out of the estate before it's distributed to the heirs. There's also a federal estate tax but no federal tax is owed on estates less than $5 million.
diabeticman
(3,121 posts)family members and I won't pay federal taxes we would just have to pay the State estate/ineritance tax?
MiniMe
(21,718 posts)Most states don't tax at $300,000, but don't quote me on that. I am working on closing out my mother's estate now, she died in November. So far, I am the only beneficiary, and haven't had to pay taxes yet. I'm sure I will at some point. My parents protected as much as possible. Haven't had to pay taxes, but have hefty lawyer's fees.
The Velveteen Ocelot
(115,829 posts)and a lawyer to help with that process. A state with an inheritance tax or an estate tax probably also has a minimum. In my state, Minnesota, there is no estate tax payable on an estate worth less than $1 million. You should get some legal advice.
DURHAM D
(32,611 posts)Inheritance taxes are paid by the heir. Only 6 states have inheritance taxes.
Google is your friend.
diabeticman
(3,121 posts)DURHAM D
(32,611 posts)States that have inheritance taxes. Also, a few states also have estate taxes.
diabeticman
(3,121 posts)The Velveteen Ocelot
(115,829 posts)elleng
(131,074 posts)it may depend on efficiency of the state, and of the attorney retained by the estate to process things. My Dad's estate just closed; he passed about 2 years ago (in Iowa.) My husband's estate is about to close, one year after his death, in DC.
As I've learned, and I'm not an expert, just have some experience, usually funds from estates are NOT taxable to inheritors, but I'm referring NOT to million+ estates. And it depends on how things were structured, to some extent. The 'estate' opens its own bank account, and is responsible to pay whatever is due to wherever (like, past income taxes, medical bills, etc.) before beneficiaries receive funds in the estate.
diabeticman
(3,121 posts)elleng
(131,074 posts)maybe due to 'small' size of estates, but have had to pay 'old' income taxes.
SheilaT
(23,156 posts)At the federal level, a person can currently leave a little over five million dollars to his heirs before any tax is due.
When my mother died in Arizona in 1999, that state wanted to tax any value over something like $40,000, which is shockingly low if you ask me. Luckily, my brother's name was on her condo, the only thing of real worth, with the possible exception of her jewelry, although even the most optimistic assessment would no doubt have been well below 40 grand.
According to a quick internet search, Arizona eliminated the inheritance tax in 2005.
As to your actual examples, I'm guessing that with the second friend whoever did the accounting for the estate, showed the total amounts, divided by the number of heirs, and then treated the estate tax as if each heir was paying it. In reality, the feds want their share given directly to them, and the heirs split whatever is left.
When my in-laws died a decade or so ago, they had substantial money and assets, and it took about a year for everything to be settled up. I do recall seeing some paperwork telling us what the value of the estate was and what the taxes were. Once an estate is large enough, the final accounting and settling up of everything takes time, but their is a limit, a year? two? can't recall, on how long the executor has to file everything.
The Velveteen Ocelot
(115,829 posts)and how much time is needed for the probate process. Generally, whoever is named the executor in the will must file papers with the probate court requesting formal appointment (unless the estate is small enough to be handled informally). This takes a little while because it can't be done until a death certificate is issued. Then the court issues a document called letters testamentary, which indicates who the executor is, and creates the estate as a separate legal entity. Then the executor has to open a checking account for the estate, and pay funeral and medical bills, etc. Also a notice has to be published that will allow creditors a period of time (in my state, 4 months) in which to make claims against the estate. The executor has to do other stuff like collect on insurance policies, transfer the titles to cars, and sell real estate if it can't be partitioned or if it wasn't devised to anybody in particular. If the estate is mostly cash it doesn't take awfully long to collect all the assets, but if there is real estate or a small business it's more complicated. If there's out-of-state real estate it's even more complicated because there has to be an ancillary probate proceeding in that state.
So it could take a few months, or several years.
rudolph the red
(666 posts)pnwmom
(108,990 posts)But the taxes should come out of the whole estate before it's distributed.