What are the differences between inheritance tax and estate tax?

What are the differences between inheritance tax and estate tax?

Inheritance tax is paid by the beneficiaries receiving the assets, while estate tax is paid by the deceased's estate before distribution.

Are both taxes applicable in every state?

No, not all states impose both taxes. Some states have inheritance tax, some have estate tax, and others have neither.

How are the tax rates determined for each?

Tax rates can vary based on the value of the estate or inheritance and the relationship of the beneficiary to the deceased.

Can you give me an example of how each tax works?

Sure! For estate tax, if an estate is valued at $5 million, the estate may owe taxes before distribution. For inheritance tax, if a beneficiary inherits $1 million, they may owe taxes based on their relationship to the deceased.

What should I do if I think I owe one of these taxes?

It's best to consult with a tax professional or estate planner who can provide guidance based on your specific situation.