ESTATE PLANNING: Effects of inheritence tax repeal

2013-08-10T13:15:00Z ESTATE PLANNING: Effects of inheritence tax repealChristopher Yugo Times Business Columnist nwitimes.com
August 10, 2013 1:15 pm  • 

Earlier this spring, Indiana made a significant change to its tax laws which will likely affect many of your estates.

On May 8, Governor Pence signed a bill that, among other things, repealed the Indiana Inheritance Tax. The repeal was made retroactive to Jan. 1, 2013.

What this means is that the estate of anyone dying after Dec. 31, 2012 will no longer be subject to inheritance tax. Unfortunately, inheritance tax will still be imposed on estates of those that died in 2012 or earlier.

The inheritance tax was scheduled to be repealed at the end of 2021 and was being phased out over that period. However, with its retroactive repeal the tax savings can be recognized immediately.

Although the estates of anyone who dies after 2012 will benefit, some beneficiaries will see greater benefits.

Remember the inheritance tax was a distributive tax and the tax rates generally increased as the degree of family relationship decreased. On the other hand, exemptions generally decreased as the family relationship stretched.

For example, say that a loved one died in 2012 and she left $300,000 to a daughter and $300,000 to a niece. Using last year’s rates and exemptions, the inheritance tax on her daughter’s distribution would approximately $750 and the tax on the niece’s share would be approximately $26,950. If the decedent were to leave the same amount to a non-blood family member, such as a domestic partner or friend, the amount of inheritance tax could be as high as $39,985.

When comparing the amount of tax savings, you can clearly see that the folks that are going to benefit the most are those beneficiaries and heirs that are more distantly related to a decedent.

Since the tax has been completely repealed, there isn’t anything that you need to do to see the tax savings. For most of you, there won’t be a need to amend your estate plans.

However, for those of you who have incorporated some sort of tax savings device in your estate plan, it may be a good idea to review your plan with your attorney to determine if the estate plan should be changed. Why incorporate some sort or restrictive trust in your plan to obtain tax savings that are now available without it?

Christopher W. Yugo is an attorney in Crown Point. Address questions to Yugo in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to Chrisyugolaw@gmail.com. Yugo’s information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.

Copyright 2014 nwitimes.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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