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Obama's 2013 Budget and Estate Taxes - Same Thing, Different Year

Tue, 21 Feb 2012 01:01:21 +0000

When I read the estate tax, gift tax and generation-skipping transfer tax provisions of President Obama's 2013 budget proposal, I couldn't help but think "same thing, different year." With that said, here is what the 2013 Obama budget says about proposed changes to the laws governing estate taxes, gift taxes, and generation-skipping transfer taxes:

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IRS Grants Certain Estates Extra Time to Make the Portability Election

Mon, 20 Feb 2012 01:36:22 +0000

In Notice 2012-21, which was released on Friday, the IRS stated the following:

Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the estate of a decedent who is survived by a spouse is allowed to make a portability election to permit the surviving spouse to apply the decedent's unused federal estate tax exemption to the surviving spouse's own transfers during life and at death. The portability election may be made only by the estates of decedents dying after December 31, 2010.

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What is the Federal Inheritance Tax?

Wed, 15 Feb 2012 01:10:13 +0000

Recently I've noticed a lot of searches on this website for the phrase "federal inheritance tax," so I thought it would be a good idea to explain a few things about the phrase. First and foremost, technically speaking there is no such thing as a federal "inheritance tax." Instead, the Internal Revenue Code calls the tax assessed against the estate of a deceased person an "estate tax." So what's the difference between an estate tax and an inheritance tax? In the strictest sense an estate tax is assessed against the entire estate while an inheritance tax is only assessed against the individual heirs of an estate.

For instance, if the Internal Revenue Code stated that property transferred after death to a person's spouse or descendants would not be taxed, but property transferred to the same person's brothers and sisters, nieces and nephews, or anyone else would be taxed, then that would be an example of an inheritance tax. But that's not what the Internal Revenue Code says, instead it says that a deceased person's entire estate is subject to the estate tax regardless of who inherits it. There are, however, various deductions from the federal estate tax which exclude transfers to spouses who are U.S. citizens and transfers to certain charitable organizations from the tax, which certainly does confuse the matter even more.

So why care about the technical difference between an estate tax and an inheritance tax? Because currently there are 7 states that assess an inheritance tax based on who inherits what and there are 17 states plus the District of Columbia that assess an estate tax based on the entire value of the estate. In fact, two states, Maryland and New Jersey, assess both an inheritance tax and an estate tax, which goes to show that particularly in these states, the phrase "estate tax" is certainly not interchangeable with the phrase "inheritance tax."

With all of that said, the phrases "estate tax," "inheritance tax" and even "death tax" are often used interchangeably by the media to describe any tax that is collected as the result of someone's death, but now you know that legally speaking there is a real difference between an estate tax and an inheritance tax.

Is it Time to Say Goodbye to Indiana's Inheritance Tax?

Tue, 14 Feb 2012 01:37:13 +0000

Now it appears that it will just be a matter of time before significant changes are made to the laws governing Indiana's inheritance tax . Why? Because currently there are two bills circulating in the Indiana legislature that would either completely eliminate the inheritance tax or increase the exemption and cut the inheritance tax rate in half.

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Ohio Probate Judge Starts Initiative to Help Homeowners Avoid Probate

Mon, 13 Feb 2012 01:15:56 +0000

Summit County, Ohio probate judge Todd McKinney has started an initiative aimed at helping residents avoid probate of real estate after a loved one dies. Many homeowners are not aware of the rules governing ownership of property and that simple steps can be taken to avoid the costs - both monetary and emotional - and time involved in probating a loved one's property. Judge McKinney wants to change this by having volunteers review the local real estate records in order to identify people who may benefit from a "Joint and Survivorship Deed" or "Transfer on Death Affidavit" - both are designed to avoid probate of real estate after an owner dies and would cost about $200, while probate fees and costs can top several thousand dollars.

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IRAs Can Still Be Stretched, At Least For Now

Sun, 12 Feb 2012 01:02:39 +0000

Senator Max Baucus (D-MT) has done an abrupt about-face on his proposal to require inherited IRAs to be liquidated within five years of the deceased owner's death, thereby subjecting the inherited assets to income taxes over a five-year period instead of allowing the IRA beneficiaries to stretch withdrawals over their entire life expectancies. But don't be surprised if this proposal reappears in some shape or form in the future, just like portability of the estate tax exemption and permanent repeal of the estate tax coupled with the modified carryover basis rules - everything that's old is new again.

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Are "Stretch" IRAs Going Away?

Wed, 08 Feb 2012 01:00:56 +0000

A memorandum released yesterday by The United States Senate Committee on Finance outlines nine modifications to The Highway Investment, Job Creation and Economic Growth Act of 2012 being proposed by committee chairman Max Baucus (D-MT). Among the modifications is the requirement for the complete distribution of inherited IRAs and 401(k)-type accounts within five years of the account owner's date of death.

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Will the Federal Estate Tax Be Repealed in 2012?

Tue, 07 Feb 2012 01:53:25 +0000

The associate director of legislative affairs for the National Cattlemen's Beef Association, Kent Baucus, thinks so. Speaking at the Cattle Industry Convention and NCBA Trade Show which was held in Nashville February 1 - 4, Mr. Baucus said that "this [the federal estate tax] is not a tax on the wealthy elite. The wealthy are more likely to find a way to weather the storm. Small business owners and family farmers and ranchers will be forced to make difficult decisions. As the global population continues to grow, it is paramount we keep farms and ranches intact. We have to be able to feed people."

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North Carolina Legislators to Consider Repeal of North Carolina Estate Tax

Mon, 06 Feb 2012 01:23:54 +0000

North Carolina has joined a growing number of states that are considering changes to their estate tax or inheritance tax laws. Currently 17 states and the District of Columbia collect a state estate tax and 7 states collect a state inheritance tax (Maryland and New Jersey collect both an estate tax and an inheritance tax). Last year Ohio became the latest state to repeal its state estate tax, which will take effect on January 1, 2013. In four states - Indiana, Nebraska...

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About.com

Most Read Wills & Estate Planning Blogs in January 2012

Top 5 Blogs Posted in January 2012

Obama's 2013 Budget and Estate Taxes - Same Thing, Different Year

IRS Grants Certain Estates Extra Time to Make the Portability Election

What is the Federal Inheritance Tax?

Is it Time to Say Goodbye to Indiana's Inheritance Tax?

Ohio Probate Judge Starts Initiative to Help Homeowners Avoid Probate

IRAs Can Still Be Stretched, At Least For Now

Are "Stretch" IRAs Going Away?

Will the Federal Estate Tax Be Repealed in 2012?

North Carolina Legislators to Consider Repeal of North Carolina Estate Tax