What Are the Estate and Inheritance Taxes?

We’ve all heard the phrase, “there are two things in life you can’t escape: death and taxes”, right? But did you know there are two type of taxes that exist post mortem? In the United States, death taxes exist, and they consist of the estate tax and the inheritance tax. The estate tax is a federal tax which, quoted by the IRS, is “a tax on your right to transfer property at your death.” Certain states impose this heavily. Everything you own, and all your leftover money is added together after you pass and the ultimate number is what your estate is. However, the tax is only levied on large amounts. In fact, the IRS offers an exemption of the first $5.5 million of any estate. Unless you’re on the levels of Warren Buffet, you may not have to worry about this tax. But another exemption exists! Massachusetts and Oregon have lower exemptions of $1 million – which is easier to attain after you consider everything you leave behind. The inheritance tax is a state level tax, and only certain states impose it. Iowa, Kentucky, Nebraska, New Jersey, Pennsylvania, and Maryland all tax beneficiaries after a person dies. Giving away money or property to your beneficiaries while you’re still alive is one way to avoid inheritance taxes. You can also opt to pay your beneficiaries medical or tuition fees, or create a trust for your property – like your home – to avoid these taxes too. Anything left to a spouse or charity doesn’t get hit by the aforementioned estate tax. Some states have lower rates for charities and close relatives, in regard to the inheritance tax.Here’s a look at what states have the highest death taxes:New York: 5.6% - 16% estate tax on estates valued at more than $10 million; no inheritance tax.Vermont: 9%-16% estate tax; no inheritance tax.Maryland: 5.6% - 16% estate tax on valuables estimated at $10 million or more; inheritance tax.Washington: 15%-20% on estates valued at more than $9 million; no inheritance tax.Connecticut: 7.2%-12% estate tax on valuables estimated at $10 million or more; no inheritance tax.New Jersey: 4.8% - 16% on estates valued $10 million or more; an inheritance tax of 11%-16% on inheritances valued at $500 or more.Rhode Island: 5.6% - 16% on estates valued at about $10 million or more; no inheritance tax.Minnesota : 5.6%-16% on estates valued at $10 million or more; no inheritance tax.Massachusetts : 5.6% - 16% on valuables estimated at $10 million or more; no inheritance tax.Oregon: 10%-16% on estates valued at $9.5 million or more; no inheritance tax.