Inheritance Trust Tax for 2011, 2012
An inheritance tax, which is also known as an estate tax or death tax, occurs upon the death of an individual.
It’s the taxing of an inheritance, or total value of money or property, of the person who died. The rules concerning the taxing of different assets of the deceased vary from state to state.
Setting up a trust is a good way of lessening the amount of inheritance tax that will be due when you die. The kind of trust that you should set up depends on individual circumstances. For those of us in the United States, an inheritance tax is required on estates that are worth $5 million or more. However, the passing of an estate to a spouse is exempt to this tax.
It’s typical for an individual to pay 4.5% on an inheritance from a family member. This rate can increase to 10% or even 35% for inheritance distributed to friends.
A trust doesn’t have to pay income tax on income that is distributed to the beneficiaries. It does have to pay tax on undistributed income. The trustee is free to distribute trust income to as many beneficiaries as possible, and in any advantageous amount based on the recipients' personal marginal tax rates. Distributing trust income before taxes are due can prevent having to pay taxes on the trust income at all.
The rules of inheriting a trust can and do get very complicated. The best way to really learn more about your specific situation is to consult tax experts or experienced taxpayers through a reputable tax service like TurboTax Online.
If you haven’t noticed yet, finding highly specific trust inheritance information on the internet is very hard to do, and this why taking your questions to actual people is going to be the most reliable method of research.
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