When a loved one dies, the last thing people want to think about is money, but it is often one of the most pressing concerns. A common question people have regarding the estate of loved ones is the taxes that may apply.
There are really two special types of taxes that apply in connection to a person’s death: the estate tax and the inheritance tax. The estate tax is charged to the deceased person’s estate before any distributions are made and it is the responsibility of the person who manages the estate (the Executor) to file the tax return to report the total value of the estate. The inheritance tax is the tax charged to a person that receives an inheritance and it is that person that needs to file a tax return to report what was received. Some states have both an inheritance and estate tax, meaning the same funds get taxed twice, and some have only one or the other. Fortunately for many beneficiaries, there are several states that have neither tax.
Neither of the Carolinas have an estate or inheritance tax. However, if a Carolinian inherits property in another state, that state’s taxes may apply. Likewise, there is a federal estate tax that you may have to worry about. The federal estate tax only applies to multimillion-dollar estates (as of this writing, estates more than eleven million dollars). As the federal estate tax applies only to such large estates, it is not something the average person has to worry about. In fact, there were only 1,890 taxable estates in 2018. Additionally, federal estate taxes do not apply if passing to a surviving spouse or qualifying charity.
While you most likely will not need to pay an estate or inheritance tax, other taxes may apply. These include Capital Gains, income tax from retirement accounts, and other like taxes. These tax issues vary a great deal based on state law and unique circumstances, so if you have a tax issue, or other legal issue, contact King Law at 888-748- (5464) KING for a consultation. We have offices located across western North Carolina and upstate South Carolina. King Law is here to serve you and help navigate this journey you are on.