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Death taxes: What you need to know about taxation

Death taxes seem ominous, and in a way, they are. They're taxes imposed by the government against someone's estate once they pass away.

These taxes are levied against the beneficiary who receives the decedent's property. The estate may also be taxed directly prior to transferring the inherited property to the heirs.

You may know the death tax by other names such as the estate tax, death duties or the inheritance tax. The inheritance tax is not imposed by the federal government. Normally, it's the state that levies the taxes.

Is there anyone who is immune from paying inheritance taxes?

The surviving spouse of the decedent is exempt from paying inheritance taxes. Sometimes, children and grandchildren don't face taxes, either, though some states do still levy a tax against them.

Keep in mind that the majority of people won't pay a death tax, because the estate won't surpass the federal estate tax amount of $11.4 million in 2019. If the estate is worth more than $11.4 million, only the money that exceeds that amount will be taxed at a rate of 40%.

Is there a way to reduce the value of an estate?

Yes, you can look into things like the unlimited marital deduction, which allows you to gift or transfer unrestricted amounts of assets to your spouse at any time without taxes, or trusts, which can sometimes shield your estate from taxation. Your attorney can talk to you more about how you can reduce the value of your estate if it is going to exceed the $11.4 million minimum at any time.

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