How Will My Inheritance Be Taxed?
Amherst, NH Resident Seeks Advice
An inheritance can be taxed through an inheritance tax and an estate tax. The estate tax will come directly out of the estate before it is divided and distributed, leaving recipients only responsible for the inheritance tax. There is no federal inheritance tax and only some states, New Hampshire not being one of them, collect an inheritance tax. In most cases, taxes will already be taken out of the estate before it is given to the benefactors.
An Amherst resident was wondering how his family’s inheritance would be taxed and what to expect in the future. Looking for advice, he contacted the experts at Merrimack Tax Associates.
Inheritance Tax vs. Estate Tax
The biggest difference between an inheritance tax and an estate tax is who the tax is ultimately paying the tax. An estate tax is taken out of the assets before being divided up and given to the deceased’s beneficiaries. The inheritance tax is paid by the receiver of the assets. The inheritance tax is only on a state-level, with few states instituting and collecting this tax. Estate taxes can be collected by both federal and state. However, the federal estate tax is only applicable on assets exceeding $11.4 million.
While the estate tax is unavoidable, most beneficiaries will not have to pay an additional inheritance tax, depending on the state where the deceased resided. Since the estate tax is taken out of the assets prior to being divided up to the beneficiaries, this is not something that you will need to pay separately.
The Amherst resident was relieved to hear that, as a New Hampshire resident, there would be no additional inheritance tax taken out of the estate. He can now rest easy knowing that the estate and associated taxes will be handled without an extra burden on his beneficiaries.