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Category : Law and Taxation |
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Article:
v1-LT-00007
Estate Tax
Estate taxes are those taxes, which are levied on the transfer of property from one person to another, after his death. It can be his or her assets, either personal or related with the business. These assets could be inherited by his or her heirs, legatees or devisees. The difference between an estate tax and an inheritance tax, is that in an inheritance tax, one can inherit anything from the deceased person, whether it is his property, money or anything else.
An estate tax is levied when one is inheriting the deceased person's property only. This might include his furniture, house, building, office etc. An estate tax is levied on the following conditions:
Resident of the state
If the deceased person was a resident of the state, then his property while being transferred to another, will have to be taxed before going into the hands of the heir.
Property of the state
If the property belongs to the state, but the deceased person was not related to the state, that property will still be taxed before going into the possession of the heirs.
The History of Estate Tax
In the United Kingdom, death duty was introduced in 1796 as an estate tax on certain values called legacy, successions and estate duties. The value later changed, and the scope of estate duty was extended. Properties over £20 were taxable, but rarely duty was collected on property under £1500.
This was later changed into capital transfer, which was later replaced by inheritance tax in 1986.
How it is levied
As the deceased person's whole worldly property is to be inherited by someone, such as his houses and other property, which has any material existence, many people can fall foul of this tax. After a person's death, there is a period of 12 months during which, the lawyers and all assess the worth of the estate, and consider the challenges.
If there is sufficient cash to pay, that is the lawyer's fees and estate tax, then the property must be sold.
In order to avoid this taxation, many people practice the following things:
- Before death they give their money in a trust.
- They give money to the inheritor before their death.
- Sometimes they transfer the asset to their spouse.
Generally gifts made before seven years of death are not exempted to taxation. Remember, in the United Kingdom, there is no such thing as estate tax. It is known as inheritance tax.
In the United States, it is known as estate tax. It is levied on the estate after deducting certain values. After the deductions are made, the value is called the net value of the estate. The tax is paid by the executor of the estate who is responsible for filing a return for the internal revenue service. The internal revenue service is a United States organization, which is responsible for collecting taxes.
The estate tax rate may differ from country to country, and it is also dependant on the rules and regulations prevailing within the state.
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