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Estate Planning - State Estate And Inheritance Taxes

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Two kinds of state death taxes may be required: estate and inheritance. Estate taxes are levied by only a handful of states, with tax rates that vary from 1 percent to 32 percent. The decedent's estate must pay these taxes. About half of the states use a pickup tax, which applies only to the estates that pay federal taxes. The tax is designed to obtain, for the state, some of the money that otherwise would go to the federal government. The revenue comes from the federal government's share of the estate taxes, not from the estate of the deceased. In at least sixteen states, heirs must pay state inheritance taxes based on the value of the assets they receive. Inheritance tax rates typically are lowest (and exemptions highest) for the closest kin, and highest (and exemptions lowest) for more distantly related kin and unrelated beneficiaries. Oftentimes, property left to a surviving spouse is completely exempt from tax. Only ten states have a gift tax on lifetime gifts, although state estate and inheritance taxes may apply to gifts made in anticipation of death.

SHARON A. DEVANEY W. ALAN MILLER

BIBLIOGRAPHY

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GARMAN, E. T., and FORGUE, R. E. "Estate Planning." In Personal Finance, 6th ed. Edited by E. T. Garman. Boston, Mass.: Houghton Mifflin Company, 2000. Pages 554–567.

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LEIMBERG, S. R.; KASNER, J. A.; KANDELL, S. N.; MILLER, R. G.; ROSENBLOOM, M. S.; and LEVY, H. L. "Anatomical Gifts." In The Tools & Techniques of Estate Planning, 10th ed., Cincinnati, Ohio: The National Underwriter Company, 1995. Pages 442–443.

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SCHRADER, S. J. G., ed. Introduction to Estates and Trusts, 2d ed. The Philadelphia Institute, St. Paul, Minn.: West Publishing Company, 1992.

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SHILLING, D. Financial Planning for the Older Client, 5th ed. Erlanger, Ky.: National Underwriter, 2001.

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