Estate planning is not something anyone really likes to think about. After all, thinking about one's own demise isn't pleasant. If you're not a legal guru, you may have a lot of difficulty understanding the complex legalese that goes into estate planning. Experienced estate planning attorneys can provide valuable advice as you determine who your heirs are, how your assets are to be distributed and who can make decisions over your finances and health care if you are incapacitated.
It's important to understand the implications that an inheritance can have on someone's life. While an estate of up to $5.25 million can be left to anyone without him or her incurring federal estate taxes, a spouse may leave an unlimited amount of one's assets to a surviving spouse. The surviving spouse would not be accountable for federal estate or gift taxes, either. However, when the surviving spouse passes, there could be estate and gift taxes due.
Pennsylvania and Maryland both have inheritance taxes. The amount of these taxes varies, depending on which state you reside in. For those inheriting assets or money while living in a state without inheritance taxes, there still could be money owed if the person who passed away lived in a state that had these taxes.
Most people won't end up having to pay federal taxes, but it's a different story when it comes to state estate taxes. There are 15 states, as well as the District of Columbia, that currently have state estate taxes. Many people plan which state they will live in because of such taxes. Maryland's state estate taxes are 16 percent. Pennsylvania does not have state estate taxes.
No matter where you live, it's good to know what the estate and inheritance taxes are. When someone passes away, there can be a lot of acrimony over wills, trusts and other estate planning. There can be will contests, asset transfer disputes and a long list of potential other problems. These are things to keep in mind as you designed your estate plan, but remember: If your heirs will fight over your will or assets, it's best to make sure your wishes are laid out in stone.
chicagotribune.com, "Understand laws to minimize estate tax for your heirs" Elliot Raphaelson, Nov. 19, 2013