FAQ Friday: Taxes
Friday, October 10th, Attorney, Candice Joy, discusses four types of taxes in Estate and Trust Planning.
Gift, Income, Estate or Inheritance taxes are the 4 taxes usually applicable in estate and trust planning.
Inheritance tax is 10%, but it rarely affects our clients. There won’t be any inheritance tax if the person receiving the money is a direct family member such as siblings, parents, children and their children (even stepchildren) etc. However, if the money is left to a friend, nephew, cousin or a significant other who isn’t a registered domestic partner or married partner it would apply.
Estate tax is another one that isn’t often affecting our clients. In Maryland, the threshold is $5,000,000 and federally the threshold is $13,990,000 so it will only kick in if the estate is worth more than one or both of those numbers.
You don’t need to worry about gift tax as long as your gifts are under $19,000 per giftee, per year. You would need to file a gift tax return if you gift above that. Married couples can combine their gifts.
Income tax comes with an irrevocable trust. If the trust earns income, that would trigger the need to file an estate income tax return. Also, when the grantor has passes, an individual income tax return is needed.
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