There is no shortage of complaints against estate taxes and there is no shortage of misconceptions about how the estate tax system actually operates but recently Yahoo! Finance cleared up some common misconceptions in "4 Things You Probably Don't Understand About Estate Taxes," including:
- Your heirs do not pay the estate tax. Any amount due is taken out of your total estate before anything is distributed to your heirs. This often lowers the amount that heirs receive.
- Each Spouse has a separate estate tax exemption. They do not share their exemptions until one of them passes away and the survivor has the option of electing to use the deceased spouse's exemption later.
- In some states your estate can be subject to a state estate tax that has different exemption rates than the federal estate tax.
- There are a few states where your heirs might have to pay a tax on their inheritance. This is called an inheritance tax and is not the same as an estate tax.
An estate planning attorney can guide you in clearing up any misconceptions you may have on the estate tax system.
Reference: Yahoo! Finance (March 28, 2016) "4 Things You Probably Don't Understand About Estate Taxes."