inheritance tax

noun

Definition of inheritance tax

1 : a tax on a decedent's net estate that is levied after the estate is transmitted to the inheritors
2 : death tax especially : estate tax

Examples of inheritance tax in a Sentence

Recent Examples on the Web

Reforms in 2009 excluded business wealth from inheritance tax. The Economist, "The Mittelstand’s corporate success comes at a cost," 1 Aug. 2019 The ones that can leave money have often benefited from complex provisions of the tax codes, including the reduction to zero of inheritance taxes for most people. Michelle Singletary, Washington Post, "Gloria Vanderbilt reportedly did not leave her heirs much money. Maybe you should follow her lead.," 24 June 2019 Finally — for today! — the May election in Australia was marred by a false propaganda campaign suggesting the Labor Party planned to implement an inheritance tax. Casey Newton, The Verge, "Why we like fake stuff on Facebook," 2 Aug. 2019 On Wednesday evening, the day of the debate, the de Blasio campaign laid out a series of tax proposals, including a wealth tax, an income tax, an inheritance tax, a corporate tax, a CEO pay ratio tax, a Wall Street tax, and more. Emily Stewart, Vox, "Bill de Blasio’s new plan to “tax the hell” out of rich people, explained," 1 Aug. 2019 In 2006 the Stiftung Familienunternehmen, a foundation for family firms, lobbied so hard and loudly for lower inheritance taxes that its efforts backfired and the entire reform collapsed. The Economist, "Germany’s business barons are finding it harder to keep a low profile," 15 June 2019 Only the six states mentioned in the previous column — Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania — have an inheritance tax, which is levied on the person who inherits. Liz Weston | Nerdwallet.com, oregonlive.com, "Liz Weston: Estate and inheritance taxes are not the same," 16 June 2019 Only the six states mentioned in the previous column — Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania — have an inheritance tax, which is levied on the person who inherits. Liz Weston, latimes.com, "How to boost your credit score before you buy a house," 9 June 2019 According to the Tax Foundation, 17 states (plus Washington, D.C.) have estate or inheritance taxes, or both. Laura Saunders, WSJ, "It’s Time to Start Paying Your Taxes Like a Billionaire," 30 Nov. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'inheritance tax.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of inheritance tax

1841, in the meaning defined at sense 1

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Dictionary Entries near inheritance tax

inheritable

inheritage

inheritance

inheritance tax

inhesion

inhibin

inhibit

Statistics for inheritance tax

Last Updated

12 Sep 2019

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The first known use of inheritance tax was in 1841

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More Definitions for inheritance tax

inheritance tax

noun

Financial Definition of inheritance tax

What It Is

An inheritance tax, also called an estate tax, is a tax assessed on all or a portion of an inherited estate. Life insurance, pensions, real estate, cars, belongings and debts are all part of one's estate. "Death tax" is generally a pejorative term for this concept.

How It Works

Inheritance tax rates vary, and only the portion of an estate value above a certain threshold is taxed at rates as high as 50%. These "thresholds" often change yearly. Many states used to receive a portion of the estate taxes recovered by the federal government, but now many states levy their own estate taxes instead. Each state sets its own estate tax rates and exclusions.

Inheritance taxes usually apply to assets inherited by heirs, but they usually don't apply to assets inherited by spouses. Inheritance taxes on small businesses and farms left to heirs also face unique estate tax treatment.

Step-ups, which refer to an increase in the price at which an investment was purchased, reduce tax bills because the IRS essentially pretends the original cost of an asset is the market value when you inherit the assets. Thus, heirs can sell those investments immediately and might pay little or no income tax.

Why It Matters

Inheritance taxes are not the same as probate fees, which can also cost thousands of dollars. Settling an estate may also involve executor fees, court fees, recording fees and attorney fees. In many cases, inheritance taxes and fees must be paid as the estate is probated, meaning that the heirs will need to come up with the money just about immediately after a person's death. In many cases, the heirs either have to sell the assets they've inherited just to pay the taxes and fees or they have to borrow money to do so. Part of estate planning, therefore, is preparing for the taxes due upon one's death, and where one lives can have a significant impact on the amount of estate tax his or her heirs pay.

Many people attempt to reduce the size of their estate while they're still alive by giving away portions of their estate. This can be done without triggering estate taxes as long as the gifts are below the gift-tax exemption limit. Establishing a trust often reduces estate taxes because it allows a person to transfer legal title of his or her property to another person while he or she is still alive. It also gives the trustee (the person acting on behalf of the deceased person, sometimes called the decedent) the authority to distribute assets immediately to the beneficiaries based on the terms of the trust. No court is involved, so there are no probate fees and no public record of the value of the estate. Many financial advisors urge clients to have trusts, especially those who live in states where probate fees are especially high or if the client owns a home or real estate. Trusts are not for everyone, however, so it is important to seek proper financial advice.

Source: Investing Answers

inheritance tax

noun

Legal Definition of inheritance tax

: an excise tax that is levied upon the privilege of receiving property as heir or next of kin under the law of intestacy and that is measured by the value of the property received — compare estate tax

More from Merriam-Webster on inheritance tax

Britannica.com: Encyclopedia article about inheritance tax

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