Friday August 01 , 2014
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June 2013 "Death of the Indiana Inheritance Tax"

Jennifer & Jeff Hawkins

DEATH OF THE INDIANA INHERITANCE TAX

By Trust, Estate, and Elder Law Attorneys Jennifer & Jeff Hawkins

Many of our articles over the past 11½ years have addressed Indiana inheritance tax consequences of various estate plan provisions. We reported last year that the Indiana General Assembly passed gradual inheritance tax repeal. We are pleased to report now that our legislators and Governor finished the job during this past legislative session with a budget bill that repealed the tax retroactively to January 1, 2013.

The tax repeal does not include the United States gift, estate, and generation-skipping transfer taxes. Those taxes still have a $5.12 million exemption per gift, estate, and generation-skipping transfer, and the gift tax still has a $14,000.00 annual exclusion for each beneficiary (formerly $10,000 per annual gift). Most people only have federal transfer tax issues if the total value of wealth that they have now and have given away exceeds $5.12. Check with a skilled trust & estate lawyer to make sure that you do not have federal transfer tax issues.

The tax repeal opens up new estate planning opportunities for many Hoosiers. For example, the repeal allows tax-free distributions to spouses of nieces, nephews, and cousins. Previously, nieces, nephews, and cousins only had a $500 exemption and a starting tax rate of 7%, and their spouses only had a $100 exemption and a starting tax rate of 10%. Again, the tax repeal eliminates all such concerns.

Many good estate planning reasons remain like asset protection from high nursing home costs. Also, as the economy continues to suffer and the government appears unable to help people sufficiently, everyone should consider adding a charitable gift to an estate plan to help support the communities in which we live and raise our families.

People should update their wills and trusts now to enjoy the new tax freedom. Anyone who has established a will or trust over the past 20 years should consult with a qualified estate and trust attorney or elder law attorney to consider whether old tax savings provisions should be adjusted to focus on nursing home expenses or other estate planning objectives. A lawyer with extensive experience in trusts, estates, and elder law may offer new ways to avoid financial risks and seize planning opportunities that most people could not imagine.

Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers, and Jeff is a Fellow of the American College of Trust and Estate Counsel (http://www.actec.org).

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