inheritance tax

 

assessment made on the portion of an estate received by an individual; it differs from an estate tax, which is a tax levied on an entire estate before it is distributed to individuals. The inheritance tax is usually progressive and is determined by the amount of property received by the beneficiary, as well as by his or her relationship to the deceased. Strictly speaking, it is a tax on the right to receive the property; the estate tax can be characterized as a tax on the right to transmit the property. All states impose either an estate tax or an inheritance tax, some states employing both. A related federal levy is the gift tax, designed to prevent people from avoiding inheritance and estate taxes by giving away property before death.

In the United States, the federal government levied inheritance taxes during the Civil War period and again during the Spanish-American War; since 1916, however, a progressive estate tax has been imposed. The U.S. tax law of 1981 greatly reduced estate and gift taxes by raising exemptions (from $175,000 to $600,000) and lowering rates, and a 2001 law calls phase out the federal estate tax by 2012; estate taxes in 40 states that are based on the federal tax credit for state estate taxes would be phased out in 2006.

Estate tax and Death duty redirect here.

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Inheritance tax, estate tax and death duty are the names given to various taxes which arise on the death of an individual. In international tax law, there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate. However this distinction is not always respected. For example, the death tax in the UK is called "inheritance tax" but it is a tax on personal representatives, and is therefore, strictly speaking, an estate tax.

• In some jurisdictions, such taxes are known as inheritance tax:
  • The Republic of Ireland (where it is a tax on beneficiaries).
  • The United Kingdom: see Inheritance tax (United Kingdom).
  • Some states of the United States: see Inheritance tax at the state level:
    • Nebraska
    • New Jersey
    • Pennsylvania
    • Tennessee

• In some jurisdictions the term used is estate tax:
  • The United States: see Estate tax in the United States.
  • Some states of the United States: see Inheritance tax at the state level:
    • Missouri
    • Virginia
    • Washington
    • West Virginia
    • Wisconsin
    • Wyoming

• In some jurisdictions the term used is death duty, and for historical reasons that term is used colloquially - although it is no longer correct legally - in the United Kingdom and some Commonwealth nations.

• In some jurisdictions the term is estate duty:
  • Hong Kong. See Estate Duty Ordinance Cap.111. However the tax was abolished in its entirety in the Budget Speech in 2006.

• In some jurisdictions, death gives rise to a charge to stamp duty:
  • Bermuda

• In some jurisdictions, death gives rise to a charge to capital gains tax:
  • Canada. See Taxation in Canada.

Where a jurisdiction has capital gains tax and inheritance tax (for example the United Kingdom) it is usual to exempt death from the capital gains tax.

• In some jurisdictions death gives rise to the local equivalent of gift tax (see Austria, below, for example). This was the model in the United Kingdom during the period before the introduction of Inheritance Tax in 1986, where estates were charged to a form of gift tax called Capital Transfer Tax. Where a jurisdiction has a gift tax and an estate tax (for example the United States at federal level) it is usual to exempt death from the gift tax. Also, it is common for inheritance taxes to share some features of gift taxes, by taxing some transfers which happen during lifetime rather than on death. The United Kingdom, for example, taxes "lifetime chargeable transfers" (usually gifts to trusts) to inheritance tax.

• Non-English speaking jurisdictions naturally use non-English terminology:
  • Austria charges Erbschaftssteuer, which has some of the features of a gift tax.
  • Belgium, a multilingual nation, uses the terms droits de succession and successierechten, taxes on beneficiaries which are collected at the federal level but distributed to the regional level.
  • Czech Republic charges daň dědická, taxes on beneficiaries.
  • France uses the term droits de succession, taxes on beneficiaries.
  • Germany charges Erbschaftssteuer, a tax on beneficiaries.
  • The Netherlands charges successierecht, a tax on beneficiaries.
  • Switzerland has no Erbschaftssteuer / impôt successoral / imposta di successione at national level. However in the various cantons, three possibilities (a tax on the estate, a tax on the beneficiaries, or no tax) exist.

• Some jurisdictions have never had estate or inheritance taxes, or have abolished them:
  • Australia
  • British Virgin Islands
  • Some states of the United States: see Inheritance tax at the state level:
    • New Mexico
    • South Dakota
    • South Carolina
    • Utah
  • Vanuatu

This page is a modified disambiguation page, which distinguishes not just between pages which would otherwise have the same name, but also between similar legal concepts which have different names in different jurisdictions.

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