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Estate Tax Law Questions

When a person dies they may leave an estate behind, an estate that may be made up of assets such as cash that are in bank accounts, real property, mutual funds, and many other things. If a person is to inherit the assets often they will need to look into what the estate may cost them in taxes. The estate may not have a net value high enough to trigger and estate tax, but to be safe an individual will want to look into what the estate laws are for their state and sometimes the state of the deceased. Below are questions that have been asked of the Experts, in regards to estate tax laws.

What is estate tax?

Estate tax, which may also be known as an inheritance tax, is a tax that is to be paid out by the individual who has inherited real property or money of another individual who has passed away. Internationally the terms estate tax and inheritance tax may not be interchangeable as an estate tax is the tax that has been gauged on the deceased’s assets and an inheritance tax has its basis on the legacies that the beneficiaries of the estate have received. In the United Kingdom an estate tax may also be known, though not legally, as a death duty.

How does estate tax work if the individual is a permanent resident of the United States but is a citizen of another county?

Taxable estates have the estate tax impressed upon the transfer of said estate of all decedents that are United States citizens or are residents of the United States. If an individual meet the requirements of the domicile residence analysis test, they will the same as a United States citizen and will be subjected to the estate tax laws on all of their assets world-wide. If two citizens of the United States are married and one of the individuals becomes deceased the transfer of assets to the survivor are not subjected to the estate tax, due to the Martial Deduction of Sec. 2056. However if the married couple consists of a United States citizen and a resident non-citizen, and the transfer or assets is in excess of $100,000; it is not going to be eligible for the marital deduction and the difference between the amount being transferred and $100,000 will be subjected to the estate tax, unless a qualified domestic trust have been put in place.

Can an individual pre-pay their estate taxes in the State of Arizona?

At this time it is not possible for an individual to pre-pay their estate taxes. There has been much discussion of this becoming possible somewhere in the future, but at this time it has not made in to the tax laws regarding estate taxes. However if an individual’s estate is valued at less than five million dollars then the estate will not be subjected to estate tax.

If an IRA is transferred through an estate to the beneficiaries is it subject to estate taxes?

When an IRA is transferred through an estate, it is not subject to estate taxes. If the transfer is to the surviving spouse, the IRA becomes the spouse and allows the spouse to keep contributing into the account. If the beneficiary is anyone else then the IRA would also become theirs with the difference being that they are not allowed to make contributions into it. However, the IRA may be continued. In either case of beneficiaries the IRA is able to be cashed out with the funds being penalized. However once the IRA is cashed out then the funds will be taxed.

If an IRA is passed on to a beneficiary, it may be continued, but only if it is passed to a spouse is it able to be contributed to. Any beneficiary may cash the IRA in without being penalized, but the funds will be taxable. If an individual has any questions regarding estate tax law they should seek the assistance of the Experts.

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Wallstreet Esq.
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Experience:  10 years experience
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Recent Estate Tax Questions

  • Hi Lane, I 've been doing a lot of research but need your

    Hi Lane,
    I 've been doing a lot of research but need your help.
    Here's the situation: 1. Parent owned and lived in home for decades until 9/2009. The home was part of the family trust, Parent was the grantor, no separate EIN number for the trust. 2. Parent was moved to another state, assisted living, to be near adult Child in 9/2009, due to aging and dementia.3.Demenia and paranoia increased such that in June of 2010 Parent is declared incompetent by court; Child becomes guardian and trustee. Child was advised to rent parent's home to help offset parent's expenses, and did so. 4. In Nov 2010 the trust obtains it's own EIN number and become irrevocable (but was really unrevocable once parent was declared incompetent).5. Separate taxes filed for Parent's personal income vs trust income for the period of Nov 2010-2013. 6. In June 2013, Parent dies. 7. In March 2014 parent's home is sold. Child is sole beneficiary of the trust. Parent only lived in family home 6 mos out of previous 5 years. However, the Parent left the home due to a qualifying medical condition and the home was not sold until after the Parent died. Do these circumstances allow the Child, the sole beneficiary of the trust to have the home assessed at fair market value and thereby eliminate any taxable gain accumulated to the date of the Parent's death? Thank you.
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