The Truth about Estate Tax Rates

Taxes are the government’s way of earning revenue in order for it to provide social services to the people. Taxes are usually based on income and you are required to pay for it, year in and year out. It is routine for all earning individuals. There is tax for everything, even death. But one that is gaining much talk is the estate tax rates.

It is the least accepted form of tax in the United States because it is considered a double tax. It is a form of taxing what has already been taxed before. What has already been paid and basically nobody would want to pay for that again, right? It just doesn’t seem right but we cannot avoid that. For the wealthy people with several assets, they just see double when talking about estate tax rates and to them it is volunteer tax.

Estate Tax Defined

Estate tax rates apply to all transfers of a taxable property due to the incident of death in the form of an intestate trust or estate, regardless of how it was transferred. Whether it was transferred according to the state laws of intestacy or through a will, it is still required to pay the estate tax. Estate tax is part of the Unified Gift and Estate Tax System of the country.

It may also be imposed on the payment of life insurance benefits and financial account left to beneficiaries. For those assets left to spouses or donated to charitable institutions, estate taxes do not apply. Gift tax being the other part of the tax system is imposed on the transfer of a taxable property prior to his death.

Different States and Estate Tax Rates

There are a number of states that impose estate taxes. Sometimes the estate tax rates vary on the recipient of the property. One typical example is that an estate left to a child is imposed at a lower tax rate than a property left to a cousin. Or that a decedent’s spouse is taxed at a much lower rate than a distant relative or his friend. Whatever the estate tax rates that apply, the fact remains that you will be required to pay estate taxes.

Massachusetts Estate Tax

In Massachusetts, inheritance tax does not apply but estate tax prevails. Massachusetts estate tax rates are tied and regulated by their federal estate tax collection division but has already disconnected ties with the state’s current federal levy.

New Jersey Estate Tax

In New Jersey, inheritance taxes are imposed above the New Jersey estate tax rates that they apply on the estate of the resident decedent. Estate taxes are computed as the allowable amount for inheritance, succession, legacy, or estate less the inheritance tax. New Jersey estate tax rates are applied on all estates even those that are fully exempt from inheritance tax.

New York Estate Tax

In New York, they have their own New York estate tax rates and brackets but inheritance tax do not apply. They have discontinued their link and no longer apply the federal estate tax rates, which are currently being phased out. In other words, New York and their estate tax liabilities have already exceeded the allowable credit for federal and state death taxes or estate taxes.

In most states in the U.S. that are still technically collecting estate taxes, they follow up the pickup tax system at the time of the decedent’s death. A state tax return is required to be filed on behalf of the estate or by the recipient inheriting the property and the state’s share of the tax is already what is being paid to the IRS. So there are no longer taxes required on amounts paid beyond federal estate tax paid to the federal government.