Inheritance Tax Planning for 2011, 2012

Inheritance Tax Planning Information

If you have recently inherited an estate, cash, stocks, trusts, or other assets in the last year, you may have to file a tax return regarding your inheritance.

What is an Inheritance Tax and how is it taxed?

An inheritance tax is the tax on the assets you have received as a beneficiary, from the decedent (deceased).

The tax rate will depend on the type of property and assets you have inherited and the relationship between the beneficiary and the decedent. There are several deductions a beneficiary can claim to reduce the amount of tax owed on the inheritance.

What is an Estate Tax and how is it taxed?

The estate tax is based on the fair market value of the entire estate. The beneficiaries are responsible for paying the taxes due on what they inherit and this is determined by the amount of the inheritance and their relationship to the deceased.

The tax rate depends on the overall value of your inheritance. The estate and any assests are appraised and assessed at fair market value.

However, there are some tax exceptions and some assets that are taxed on part or all of the value. This rule is called “ income in respect to the decedents”. This means that you may not have to pay all of the tax that is due. There are some tax deductions available that will help reduce the amount you may owe.

The most common examples of this type of inheritance are:

• Savings bonds
• Annuities
• IRA’s
• Retirement plans, 401K

We suggest that you use an online tax preparation service
such as TurboTax Online that will help calculate the amount you may owe on your inheritance or estate tax. Try one of their free calculators today!