How To Avoid Paying An Inheritance Tax

Over the years, state legislators have passed laws  the  designed to lessen, if not outright remove, the the financial burden imposed by inheritance taxes. While some laws are unique to each state, others are fairly similar across the board.

Understanding Inheritance Taxes

The inheritance tax is a state tax that is levied when a person receives an inheritance, provided the value of the inheritance exceeds $1.5 million. The amount the person has to pay depends on his or her relationship to the deceased. Inheritance tax should not be confused with the estate tax, which is levied against the broker or any other legal representative of the deceased who handles the inheritance.

Splitting the Inheritance

People can spare their beneficiaries from having to pay an inheritance tax if they split the inheritance into several pieces. Each piece would go to different beneficiaries. For example, someone who has several children and grandchildren may want to will each one a portion of the inheritance. The portions don't have to be equal, but so long as they are below $1.5 million, the beneficiaries wouldn't have to pay the inheritance tax.