What is the inheritance cycle?
The inheritance cycle is the process by which the heir apparent receives his or her entitled share of the inheritance. There is no will and the amount of the estate exceeds the debts and liens against it. This inheritance is determined at the time of the decedent’s death and is not defined in a will or other arrangement. These individuals are beneficiaries, not heirs.
What is the difference between estate tax and inheritance tax?
An estate tax is assessed on the estate as a whole and the inheritance tax will be assessed on the share of property gained by the individual from the state. Some states will have both an estate and inheritance tax and some states have done away with these taxes all together. The federal government currently taxes all estates valued over $5 million. Gains from estates accrued by spouses and charities are not subject to these taxes
What are states that impose inheritance or estate taxes?
• Iowa – inheritance tax is the recipient is not a direct descendant
• Kentucky – inheritance and estate tax depending on the descendant with less direct relatives paying a higher rate. • Maryland
• New Jersey
• Pennsylvania – there is a flat tax estate tax rate. Transfers to grandparents, parents, or lineal descendants are taxed at 4.5%. Transfers to siblings are taxed at 12%. Transfers to any other persons are taxed at 15%.
What are the criticisms of the inheritance cycle?
The very existence of estate taxes are due to the notion that wealth is transferred from generation to generation, leading to the rapid accrual of wealth and provides the generation receiving the inheritance with the opportunity to become more socially and economically mobile. Due to federal estate tax exemptions, most Americans will not pay estate taxes and these taxes are intended to cut into the transfer of wealth for “old money” families. Critics of estate taxes claim that the taxation of valuable estates prevents individuals from investing more heavily as well as providing an incentive to conceal assets.