As the leaves begin to change colors and the air turns crisp, we approach a festivity commemorated in many cultures worldwide. Day of the Dead, or Día de los Muertos, is a holiday that originated in Mexico and is celebrated all over Latin America that honors and remembers departed loved ones and reunites the living and dead. The two-day occasion – November 1 to November 2 – features the creation of home altars to remember the dead and recognize their impact on us.
As the Day of the Dead gets closer, we’re thinking about how to leave a lasting legacy for those near and dear to our hearts. One aspect that may not be top of mind amid the autumnal event is the concept of an inheritance tax. In many cultures, leaving an inheritance for loved ones after passing away is customary. However, this inheritance tax must be paid in some states before they are distributed.
What is an inheritance tax? The inheritance tax is a tax on money and/or assets received by a beneficiary from the estate of the deceased. One interesting aspect of the inheritance tax is how the tax rates are calculated. Six states still collect an inheritance tax. They are Iowa (currently in the process of phasing it out), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. In all states, transfers of assets to a spouse are exempt from the tax. In some states, transfers to children and close relatives are also exempt.
An inheritance tax can help fund essential services like education, healthcare, and infrastructure. They also help ensure that our communities are strong and thriving for generations to come.
Another way to ensure that your legacy lives on is to plan your estate, including creating a will or trust that outlines the allocation of your assets after you pass away. By doing this, you can ensure that your loved ones are taken care of and that your assets are distributed according to your wishes.
It is also important to consider the impact of an inheritance tax on your estate planning. Depending on where you live, there may be a tax on the assets you leave behind. This tax can vary depending on the value of your estate and the laws in your state.
While an inheritance tax may seem like an unnecessary burden, there are ways to minimize its impact on your estate planning. One way to do this is to work with an estate planning attorney who can help you navigate the complex laws and regulations surrounding inheritance taxes.
Whether it is through financial support or simply sharing memories and stories, we can ensure that our loved ones are remembered and celebrated long after we are gone. By planning our estates carefully and working with professionals, we can ensure that our legacy lives on for generations to come.
But don’t worry about knowing the tax rules above. Meet with a TurboTax Full Service expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.