Creating an estate plan is complicated enough on its own. The last thing that you want is for your plan to create a burden for your heirs. You may be wondering how inheritance taxes may impact your loved ones. Is there an estate tax in Missouri? How much can you inherit without paying taxes?
Inheritance Tax vs Estate Tax
Inheritance tax and estate tax are sometimes used interchangeably, but they’re actually very different. Commonly referred to as “death tax,” each type of tax applies to different parties.
Inheritance Tax
An inheritance tax is paid by the heir on assets received after the distribution of the estate.
Estate Tax
Estate taxes are based on the total value of all assets in the estate and are paid directly from the estate.
Missouri Inheritance Tax
There is no inheritance tax in Missouri. That means that you won’t owe state taxes on any assets inherited in the state. However, you may owe taxes on assets inherited from one of the six states that does utilize inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Estates and Taxes: Circumstances that Require Taxes on Estates
Although the state doesn’t impose an inheritance tax on assets from an estate, there are some situations that require taxes to be paid.
- Estates worth $13.61 million or more must pay federal estate taxes.
- Some states require an inheritance or property tax, and you must pay taxes if you own property in one of those states.
- Some estates may be required to pay a federal gift tax up to 40% if the lifetime gift exceeds the lifetime exemption limit.
- Owed income tax can be paid from a decedent’s estate.
Although inheritance taxes aren’t a concern for those in Missouri, it’s still important to look into estate planning strategies that can minimize the estate’s tax burden from income tax, property tax, and other taxes. Certain aspects of estate plans such as trusts are one method of reducing taxes on an estate, but they can only cover certain types of assets. Other strategies can significantly reduce the tax liability of an estate.
Forming an estate plan with a valid will and other estate planning documents can also greatly reduce the impact of probate. If someone dies without a will in Missouri, his or her estate is subject to the probate process, which can be lengthy and expensive. The most effective method to reduce the amount of taxes paid on an estate and avoid the hassle of probate is to consult with a professional. An estate planning attorney can help you form an estate plan that eases the tax burden while honoring your wishes.
Missouri Estate Planning Services
Navigating the world of estate and inheritance tax law is complicated. The law team at Mark Harford Law specializes in estate planning in Missouri, providing personalized services with custom estate plans for each of our clients. Our experienced attorneys understand local and federal tax laws and how they relate to your estate, building you a plan that makes the most of your assets. Contact us today to schedule a consultation with attorney Mark Harford.