One of the biggest concerns among those who inherit assets from an estate is what they’ll owe in taxes. Estate tax laws may seem complex because they differ based on where you live, and it’s no surprise that heirs look for ways to avoid inheritance taxes. As a Missouri-based estate planning firm, we get questions about how to avoid inheritance taxes in Missouri. Although estate taxes can be complex, we’ve simplified inheritance taxes below with everything you need to know if you receive an inheritance.
What is Inheritance Tax?
An inheritance tax is a tax paid by the beneficiary on inherited assets. When a person dies in Missouri, either with or without a will, his or her assets are distributed to beneficiaries. In states with no inheritance tax, the beneficiaries aren’t required to pay taxes on their inheritance. Other taxes should be handled by the estate before the distribution of assets, such as income tax or capital gains taxes.
An inheritance tax is different from an estate tax because estate taxes are paid directly from the estate before the inheritance is transferred to the beneficiaries. Different states have different laws regarding inheritance tax rates, and not all states have an inheritance tax to begin with. However, if you inherit assets from a person who lives in a state with inheritance tax, you will be forced to pay taxes on all inherited assets. There are only six states that impose an inheritance tax, while there is a federal estate tax if the entire estate reaches the threshold.
Does Missouri Have an Inheritance Tax?
There is no estate tax in Missouri. Anyone who inherits money, property, or other assets from someone who dies in Missouri is not required to pay taxes on the inheritance. There is no federal inheritance tax, either, although estates worth over $13.6 million are required to pay federal estate taxes.
Avoiding Taxes and Preserving Value with Estate Planning Strategies
As mentioned earlier, there are still taxes that must be paid from the estate regardless of the size of the estate. Although there is no Missouri estate tax, there are other federal and state taxes that must be paid from the estate under certain circumstances. With the right estate planning strategies and methods, though, some taxes may be avoided, keeping inheritances intact. Some ways to lessen the tax burden of an estate include certain types of trusts, gifts, and charitable donations, but the types of methods a person may choose is highly personal and unique to each individual.
Choosing the right estate planning strategy for you can get complicated. There are state and federal laws to take into account as well as creating a plan that avoids many of the headaches of probate. If you want to take another look at your estate plan or aren’t sure where to start, the team at Mark Harford Law can help. We are well-versed in Missouri estate laws and have vast experience with creating customized estate plans for our clients. No matter how big or small your estate is, we can assist you through the complicated process so you can ensure that your legacy is preserved. Contact us today to schedule a consultation with a member of the Mark Harford Law team.