Inheritance Tax Avoidance

What Is An Inheritance Tax And When Is It Applied?

Executive Summary About What Is An Inheritance Tax And When Is It Applied? By Gray Rollins

When an individual passes, on the federal government imposes an estate tax. This estate tax only applies to estate properties that are over one million fifty thousand dollars. Instead of imposing an estate tax in this situation, there many states that impose an inheritance tax.

An inheritance tax is also commonly referred to as a death tax because it is a tax that is imposed on all estate money and property after an estate owner passes away and leaves their estate or a portion of their estate to another person. Since each state is likely to tax their residents differently, individuals need to research the inheritance tax laws in their state or hire the services of a professional tax attorney. There are also many state governments who regularly update their inheritance tax guidelines, and many states are even considering completely dropping the inheritance tax.

When the federal government imposes an estate tax the amount of taxes owed generally comes from some of the estate money left behind or the sale of estate property. The state taxing process of money or property that was inherited is a little bit different. States that have an inheritance tax require that the individual who receives the inheritance file and pay any taxes due on the money or property they inherited. The majority of states that impose an inheritance tax have a tax website that may have a downloadable copy of the forms that can be printed, completed, and mailed in.

As with estate taxes and traditional state income taxes, there are a number of inheritance tax deductions that can lower the amount of tax money that an individual may owe on their inheritance.

How to Avoid Inheritance Tax

Executive Summary About How to Avoid Inheritance Tax By Chris Fensome

A leading Wealth Management and Wills Solicitor based in the south of England have recently issued a start warning that the HM Revenue and Customs department are very soon to implement a series of strict crackdowns on the current Inheritance Tax gifting loopholes. They further advise anyone who intend to donate their money to their family as a “gift” should ensure that they make sure that they explicitly express this to avoid a hefty inheritance tax bill.

However changes to these rules have meant that the HMRC will no longer just focus on estates that are in excess of the Nil Rate Band at the time of death (and where there is potential charge to IHT). Now the HMRC will look further into the estates where it seems that no tax charge arises in an attempt to maximise the ‘tax take’.

The Wills Solicitor further went on to advice about how best to give a gift to avoid an Inheritance Tax Bill being levied at you:

If any gift is in the shape of Cash, Cheque or even a Chattel (a sentimental piece of personal property like jewellery) a letter should also be included along with the jewellery that states the gift givers intent to give the gift. If the gift is intended as a loan, then a promissory note should be signed and dated by the recipient.

Avoid the use of “Side letters.” A Side letter is a letter that explicitly states that, if for whatever reason the relationship breaks down between the donor and the receiver then the donor can claim the gift back. In order for the gift to be free of Inheritance tax then it must be without this regulation and any letters that fetter the gift to this then the gift because IHT liable.

As can be seen above, correct documentation and holding proper records can make the world of difference to how easily an estate can be manages can speed the whole process along during a painful period in anyone life.

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