Inheritance tax

An inheritance tax (also known as an estate tax or sarcastically as the death tax) is a tax which arises on the death of an individual. It is a tax on the estate, or total value of the money and property, of a person who has died. In international tax law, there is a distinction between an estate tax and an inheritance tax: an estate tax taxes the personal representatives of the deceased, while an inheritance tax taxes the beneficiaries of the estate. However this distinction is not always respected. For example, the "inheritance tax" in the UK 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:
    • IA - Iowa
      • In Iowa, inheritance is exempt if passed to a surviving spouse, children, grandchildren, parents, grandparents, or other "lineal" descendants. Other recipients are subject to inheritance tax, with rates varying depending on the relationship of the recipient to the deceased.
    • IN - Indiana
    • KY - Kentucky
      • In Kentucky, the inheritance tax is a tax on a beneficiary's right to receive property from a decedent's estate. It is imposed as a percentage of the amount transferred to the beneficiary. Currently, transfers to "Class A" relatives—spouses, parents, children, grandchildren, and siblings—are exempt from inheritance tax. Transfers to "Class B" relatives—nieces, nephews, daughters- and sons-in-law, aunts, uncles, and great-grandchildren—are taxed at a lower rate than transfers to "Class C" recipients, defined as anyone not falling within Class A or B.
    • MD - Maryland
    • NE - Nebraska
    • NJ - New Jersey
    • OK - Oklahoma
    • PA - Pennsylvania
    • TN - Tennessee

• In some jurisdictions the term used is estate tax:
  • The United States: see Estate tax in the United States.
    • Many states within the United States. Kentucky imposes an estate tax in addition to its inheritance tax.
• 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. The tax was effectively abolished in 2006 by limiting its application to deaths occurring before 11 February 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:
  • Belgium, a multilingual nation, uses the terms droits de succession ("rights of 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.
  • Finland has perintövero (Finnish) or arvskatt (Swedish)
  • France uses the term droits de succession ("rights of succession"), taxes on beneficiaries.
  • Germany charges Erbschaftssteuer, a tax on beneficiaries.
  • Italy initially abolished its tassa di successione in 2001, then re-introduced it for large estates in 2006. The exempt amount in the case of spouse and children is Euro 1,000,000 each. Maximum rate is 8%.
  • Israel abolished its inheritance tax in 1981.
  • 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:
  • Austria abolished the Erbschaftssteuer in 2008. This tax had some of the features of the gift tax, which was abolished at the same time.
  • Australia abolished the estate tax federally in 1979.
  • New Zealand abolished estate duty in 1992.
  • Sweden abolished estate tax in 2005.
  • India enforced estate duty from 1953 to 1985. Estate Duty Act, 1953 came into existence w.e.f. 15 Oct 1953 till E.D.(Amendment) Act 1985 discontinued levy of estate duty on deaths occurring on or after 16 Mar 1985.
  • British Virgin Islands
  • Gibraltar
  • Singapore abolished estate tax in 2008, for deaths occurring on or after 15 Feb 2008
  • Some states of the United States: see Inheritance tax at the state level:
    • LA - Louisiana - In place through 2003
    • NH - New Hampshire - In place through 2003

See also

• Transfer tax