5 Frequently Asked Questions about Tennessee’s Inheritance Tax
The national debate about charging federal estate taxes has revealed some misconceptions about Tennessee’s laws. Many Tennesseans are surprised to hear that the state does have an inheritance tax. Here are the frequently asked questions about Tennessee’s inheritance tax.
1. How do inheritances get assessed for tax purposes?
Tennessee will require the executor of an estate to review every asset, i.e. real estate, securities, business interests, etc. that person owned on the date of death. Depending on the size of the estate, the person may want to engage the services of a real estate appraiser to assess the market value of the property.
2. Who has to file?
Inheritance tax is paid at the estate level before inheritance is distributed, so once someone receives an inheritance they do not need to pay additional taxes.
3. How does a return get filed?
The Tennessee Department of Revenue has two forms – one for estates that are less than $1 million and one for estates that are greater than $1 million. If you pass away in Tennessee with an estate less than $1 million, there is no inheritance tax. The executor will determine which form is necessary and go from there. Appraisals and other relevant documents will need to be attached. The deadline for filing is nine months after someone has passed away.
4. What about tax on property?
Tennessee looks at different types of property – tangible and intangible. Both factor into determining what your inheritance tax is. Joint property also is included in the assessment. The executor will determine what interest the deceased had in that property.
5. How can I reduce my tax burden?
Tennesseans can make systematic gifts during their life to reduce inheritance taxes, but rules dictate how much someone can give away during a calendar year. A husband and wife can move assets to each other without any issue, but gift taxes come into play if one of them gives more than $13,000 to a child or anyone else during a calendar year. If you have a taxable estate, you can establish trusts that would go into effect after your death and reduce or even eliminate the tax completely.
For detailed answers to all of these questions, listen to the podcast below.
You can reach Chris at 615-849-4209 or by e-mail at email@example.com.