Life Events

Taxes can touch your estate in several ways, and not all of them involve the same level of government. These answers give an overview of how the main taxes work so you know which questions to ask.

What is the federal estate tax?

The federal estate tax is a tax on the transfer of property at death. It applies only to estates above an exemption amount set by law, which has changed several times and may change again. Many families owe nothing, but the threshold is worth checking against current law rather than assuming. Transfers to a surviving spouse who is a US citizen generally qualify for an unlimited marital deduction.

Does Georgia have an estate or inheritance tax?

Georgia does not currently impose its own estate or inheritance tax. Other states do, so if you own property in more than one state, those rules matter. Confirm the current status with us or at dor.georgia.gov.

What is the gift tax and how does it connect?

Gifts above an annual per-person exclusion require a gift tax return, though filing usually does not mean tax is due. Taxable gifts reduce the lifetime exemption that would otherwise be available against the estate tax. The annual exclusion amount is adjusted periodically, so check the current figure at irs.gov.

What is "stepped-up basis"?

Generally, when heirs inherit property, its tax basis is adjusted to its value at the date of death. If they sell soon after, they may owe little or no capital gains tax on appreciation that built up during your life. Gifts made during life usually carry over your original basis instead, which is why giving away highly appreciated assets is not always the best move.

Are inherited retirement accounts taxed differently?

Yes. Traditional IRAs and similar plans do not get a stepped-up basis, and beneficiaries generally owe income tax on distributions. Current law often requires non-spouse beneficiaries to withdraw the account within a set number of years. Roth accounts are generally tax-free to beneficiaries if the rules are met.

Will my heirs owe tax on what they receive?

Federal law does not generally tax the recipient of an inheritance as income. The estate may owe tax before assets are distributed, and the heirs can owe income tax on retirement account withdrawals or on later gains.

What can I do to plan?

Keep beneficiary designations and titles current, understand what your estate is worth, review documents after major life events, and coordinate with an estate planning attorney. A periodic review is more useful than a one-time project.

We would be glad to review how these rules apply to you. Learn about our tax planning services or get in touch to start the conversation.