Inheritance Taxes

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Inheritance taxes come about upon the death of an individual. Inheritance taxes are part of the United Gift and Estate tax system in the United States, and they occur when taxes are transferred from a deceased person to their living beneficiaries. Property can be transferred through a will or through the state laws of intestacy. The laws of intestacy allow property and money to be given to a deceased person's beneficiary, even if they have not made a will. It is all part of the Unified Gift and Estate Tax system.

To calculate the amount of the estate tax, the government starts with the gross estate. The gross estate is considered the value of all property at the deceased's time of death. The gross estate can also include power of appointments, bank accounts, and benefits of life insurance policies. Once the value of the gross estate is calculated, certain deductions can be made, which will yield the total value of the taxable estate. These deductions include funeral expenses, certain charitable contributions, and items left to the spouse. Property and certain types of trust are exempt from taxation for married descendents, as long as they are U.S. citizens.

The federal government imposes inheritance taxes, but many states also impose them, too. Depending on the state, they may be called inheritance taxes or estate taxes. The states of Nebraska, New Jersey, Pennsylvania, and Tennessee refer to them as Inheritance taxes, while other states, such as Missouri, Washington, Wisconsin and Wyoming consider them estate taxes. The gift tax obstructs the avoidance of the estate tax in the case that a person wants to give away their estate right before they pass away. The tax is imposed on different types of transfers of property in the incident of a death, such as the transfer of property from an intestate trust or estate, the payment of financial account sums to beneficiaries, or the payment of certain life insurance benefits.

Many states replicate federal laws, meaning they use the same regulations when determining what is taxable and what is not. For example, if an estate is exempt from taxation by the federal government, then it is also exempt by the state government. However, some states have their own independent inheritance tax laws.

If the tax is larger than the federally exempted amount that is current, the estate tax that is due is paid by the executor, or another person who is responsible for administering the estate, or the person who is in possession of the decedent\'s property. They also have to file a Form 706, which contains the information regarding the value of the estate assets and the exemptions that are claimed. The form is also in place to make sure that the correct amount of the tax is paid. The time limit for this form is nine months from the decedent\'s date of death.

Inheritance taxes often force families to sell businesses or property that have extreme sentimental value. These families may not have received any monetary benefit from their inheritance, but are still required to pay large amounts of state and federal taxes, something many are not able to afford. For this reason, many people argue against inheritance taxes.

Other people believe inheritance taxes are important, and that\'s because they are essential in the system of progressive taxation. Progressive taxation is based on the principle of fairness, wherein people with a large number of assets and income should be taxed more than those with fewer assets and lesser income.

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