People often have many goals when they start planning their estate. For example, you may know that you want to draft a will or establish a trust to help your loved ones avoid probate after you pass away. However, there are elements of estate planning that are often overlooked. These include inheritance and estate taxes.
If these taxes are not considered when planning your estate, your beneficiaries may be left with less than you intended to receive. Below, our Nevada estate planning lawyer explains more.
What is an Inheritance Tax?
Inheritance taxes are imposed on people who inherit from a person’s estate after they pass away. In some states the inheritance tax is mandatory. When people draft their wills, they then try to avoid this tax for their loved ones because it can impose a real financial burden. The only way to fully avoid the inheritance tax is if the state law does not require it for inheritances.
In Nevada, there are no taxes imposed on inheritances. This means under state law, you can leave as much property as you would like to your beneficiaries and they will not be responsible for paying taxes on it. However, there are instances when some residents in Nevada may have to pay inheritance taxes.
When Do Residents in Nevada Have to Pay Inheritance Taxes?
The state law on inheritance taxes in Nevada only applies to property within the state. If a resident of Nevada inherits property that is located in another state, such as New Jersey, and that state imposes an inheritance tax, the Nevada resident is liable for paying it. It does not matter where the owner lived, even if that was in Nevada. The state law where the property is located takes precedence in these situations.
If you own property in another state, you need to consider the impact the inheritance tax may have on your loved ones. If the state where the property is located imposes an inheritance tax, you may have to find another way to transfer the property to your beneficiaries rather than using a will. A Nevada estate planning lawyer can advise on the options available and help you determine which one is best for your situation.
Are Inheritance Taxes and Estate Taxes the Same Thing?
Some people confuse estate taxes with inheritance taxes and even use the terms interchangeably. However, while both of these taxes are imposed after a person passes away, they are not the same thing. The main difference between inheritance and estate taxes is the person responsible for paying them.
Estate taxes are determined by the value of a person’s estate and are also paid by the estate before the remaining property is distributed to beneficiaries. On the other hand, inheritance taxes are imposed on beneficiaries who inherit property and they have to pay them. Inheritance taxes are determined by the value of the property inherited.
Like inheritance taxes, Nevada does not impose estate taxes on estates. Still, there are federal estate taxes that should be taken into consideration when planning your estate.
The Federal Estate Tax
Estate taxes imposed at the federal level are paid to the federal government. These taxes target the estates of individuals who have a high net worth or significant assets. Only estates that are valued at a certain threshold are required to pay these taxes. The amount of estate taxes ranges between 18 and 40 percent of the total value of a person’s estate.
Under federal law, estate taxes apply to estates valued at $6.8 million per individual or $13.6 per married couple, which is almost half of the threshold in 2023. The federal estate tax can seriously impact the property remaining in an estate for beneficiaries. A Nevada estate planning lawyer will ensure you consider the federal estate tax when creating your plan so you and your family are fully protected.
Call Our Estate Planning Lawyer in Nevada Now
While Nevada residents largely do not have to concern themselves with paying estate or inheritance taxes, there are times when federal tax law may apply. At Boyer Law Group, our Nevada estate planning lawyers can advise on your situation, whether certain taxes will apply, and how to minimize their impact on your loved ones. Call us now at 702-255-2000 or contact us online to schedule a free consultation with our experienced attorney and to learn more about how we can help with your case.