  Photo Credit: Unsplash.com Inheritance tax and estate tax can be confusing topics, and to make things even harder, the rules vary from state to state. In order to try and help you to improve your financial knowledge on this subject, we have compiled this blog post. Whether you're in the middle of getting your affairs in order or are just wanting to be prepared for the future, let's take a look at what you need to know about inheritance tax below. Estate tax vs inheritance tax The estate tax is a federal tax that is applied to the transfer of the estate of a person who has died in the United States. This would apply if an estate was transferred via a will or according to state laws of intestacy if there was no will (and it was worth enough). It could include cash, retirement accounts, businesses, real estate, or any other type of asset. There are also state-level estate taxes that apply alongside this in some regions. To make things even more confusing, certain states have inheritance taxes instead. In this case, the tax is payable by the person who inherits, rather than being applied as a levy, as is the case with the estate tax. This often means that inheritance tax is more confusing and challenging to work out as it has to be done by the individual. It can be easy to get mixed up between the two types, but there are some key differences. Inheritance and estate tax are both levied on property passed down from one generation to the next. The main difference between the two is that inheritance tax is levied on the beneficiaries of the estate, while estate tax is levied on the value of the estate itself. Beneficiaries of an estate are typically family members, while the executor of an estate is responsible for paying estate tax. Inheritance tax is usually lower than estate tax, but both can vary depending on the value of the property and the relationship between the deceased and the beneficiary. Understanding these key differences can help you to make informed decisions about how to best protect your assets. When is estate tax paid? As of 2022, the limit for federal estate tax is $12.06 million for individuals and $24.12 million for married couples. If your estate is worth more than this, it will be taxed on the amount that passes this threshold. This comes into force as soon as the person dies, so if you are planning your finances and want to ensure that your beneficiaries receive the maximum amount after you die, you may wish to start thinking about this early. There are 11 states that currently only levy estate taxes. These are: • Connecticut • Hawaii • Illinois • Maine • Massachusetts • Minnesota • New York • Oregon • Rhode Island • Vermont • Washington DC However, the thresholds for state-level estate taxes range massively, from $1 million in both Massachusetts and Oregon to $9.1 million in Connecticut, with varying rates. When do inheritance taxes apply? On top of this, there are inheritance taxes to consider too, although luckily, Maryland is the only state that levies both an inheritance tax and a state-level estate tax. The other states with inheritance tax laws are:
We recommend looking up the rules in your state to ensure you fully understand which taxes will apply. Financial advisors can help you if you are planning your estate to benefit your family when you pass or if you are a beneficiary trying to navigate the will and estate during the already difficult period of losing a loved one. 
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