When creating an estate plan, you want to think long and hard about the many ways you can save your heirs money upon your death.
We discuss this in great detail on our website, starting with a basic overview of what you should try to accomplish via the estate planning process:
“Estate planning is the creation of a plan that is meant to manage your wealth while you’re alive and subsequently distribute it after you pass on. At Krueger and Hernandez, we help protect your material possessions but more importantly, we help you protect your loved ones and their relationship with one another.”
If you recently received money or property from the estate of a deceased individual, it’s important to learn more about your obligations. In a perfect world, you would be able to take the money and run. However, this is the real world. For this reason, you need to learn more about your financial obligations, which could include taxes.
Tax on the State Level
Do you live in the state of Wisconsin? Have you recently received an inheritance? Are you in line to do so in the near future? If you answered yes to these questions, you may want to learn more about inheritance and state taxes.
First things first, let’s examine your approach on the state level.
At this time, Wisconsin does not have an inheritance or estate tax. While some states levy tax on a beneficiary, this is not one of them. This makes it much easier to move on, at least from a financial perspective, once a person passes.
While it’s good to know that Wisconsin does not have these taxes, there’s something else you need to consider. If you inherit property from a person who lives in another state, one in which inheritance and estate taxes are collected, such as New Jersey, you may be faced with a tax bill from that state.
The amount that you pay is based on many factors, including but not necessarily limited to your relation to the person and how much you inherited.
All in all, you simply need to remember that living in Wisconsin may not be enough to save you from paying these taxes. You also need to consider the state in which the person was a resident upon his or her death.
Federal Estate Tax
Once you get things squared away on the state level, you still have something else to think about: federal estate tax.
The IRS shares plenty of information on this tax, including this important passage:
“The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 (PDF)). The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.” The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.”
Fortunately, if you’re dealing with a simple estate, which most are, you will not have to file an estate tax return. Instead, this is only required in the event that “gross assets and prior taxable gifts” exceed $5,450,000.
Note: $5,450,000 is the number for 2016, but this can and probably will change for 2017 and years beyond.
Are you Confused?
At this point, you may have some questions about your obligations. This may be the case if you’re creating an estate plan or receiving money from a deceased individual.
We can help you by providing a variety of information and advice. For instance, be sure to download our free report entitled “Dangers of Do-It-Yourself Wills and Living Trusts.”
With this report in hand, you may soon realize that you shouldn’t create your own will or living trust, as this could work against your loved ones when you pass on.
If you have any additional questions or concerns in regards to inheritance and estate taxes, we are here to provide the guidance you require. Once you reach out to us, you’ll feel much better about the steps you are taking.