Understanding Gift and Estate Taxes in North Carolina

If you are interested in estate planning, you are probably looking at ways to decrease your tax liability. An essential aspect of estate planning involves tax planning. Your estate planning lawyer can help you discover ways to protect your assets and potentially decrease your tax burden now and in the future. Even though North Carolina does not have a state-level estate tax, the federal government does. If you think you need assistance with estate planning or other types of tax planning, the skilled estate planning lawyers at Arnold & Smith, PLLC, are here to help. Contact us today to schedule your free initial consultation.

California is one of 38 other states that do not have an estate tax. Before 2013, North Carolina did have an estate tax, but it was repealed in July 2013. The repeal of the estate tax applied retroactively to all deaths from January 2013 onward. In other words, North Carolina will not tax your estate when you pass away.

An estate tax is also called a death tax. The government will levy an estate tax against the state of a recently deceased individual before his or her heirs receive the money or property in the estate. There is a federal estate tax, and some states also issue an additional state-level estate tax. North Carolina is one of many states that do not have an estate tax.

An estate tax is different from an inheritance tax. Inheritance taxes are not living on the estate itself. Instead, they love against the heirs after they receive money from their loved one’s estate.

North Carolina does not have an inheritance tax. However, the inheritance tax imposed by another state could come into play for North Carolina residents. For example, if a North Carolina resident inherits property in Kentucky, Kentucky inheritance tax will apply even though the beneficiary does not live in Kentucky. Additionally, there is no gift tax in North Carolina. North Carolina residents only need to be concerned with the federal gift tax, which will apply for gifts of $14,000 or more.

Even though North Carolina does not have its estate tax, residents are still subject to the federal estate tax. The majority of estates will not have to pay a federal estate tax. The federal estate tax only applies to estates worth over 11.7 million. The estate tax threshold is double for married couples, and you will be exempted from state taxes unless your estate is valued at 23.4 million or more. Your state tax can significantly affect your beneficiaries, but it is best to plan ahead to reduce your liability when possible.

The amount of federal estate tax you will need to pay depends on the total taxable amount. If your estate is valued at $1 million or more than the threshold, it will be taxed at a rate of 40 percent. When your state is more valuable than the threshold amount, you will have to pay a base tax and an additional percentage tax on the taxable amount. For example, if your state is one million dollars over the threshold, you will pay $345,800 stocks and 40% of the taxable amount.

If the value of your estate is in the ballpark of the estate tax threshold limit, we recommend discussing your case with an experienced attorney. Using available legal strategies could help your ears inherit a much higher amount of compensation. You may need to separate income taxes for the deceased estate and the deceased individual when the estate generates income over the IRS limits.

Or you may want to start giving some of the estate’s money away by making a charitable donation and deducting it at tax time. Be sure you donate in the estate's name. Another option is to give the estate to beneficiaries whose inheritance would otherwise be taxed. You can give away $15,000 a year within the annual gift-tax exclusion, meaning the beneficiaries will not have to pay tax on a gift valued under $15,000.

Are you interested in avoiding federal estate taxes? Would you like your beneficiaries and heirs to receive the most possible amount from your state? If so, the estate planning lawyers at Arnold & Smith, PLLC, are here to help. Contact us today to schedule your free initial consultation.