Inheritance Tax vs. Estate Tax
Aspect |
Inheritance Tax |
Estate Tax |
---|---|---|
Definition |
Inheritance tax is a levy imposed on assets inherited by beneficiaries after someone’s death. |
Estate tax is imposed on the total value of an estate before its distribution to heirs. |
Timing |
Inheritance tax is applied to the assets after it is received by beneficiaries. |
Estate tax is imposed on the estate’s total value before distribution to heirs. |
Taxable Entities |
Inheritance tax is based on the amount received by beneficiaries. |
Estate tax is based on the total value of the estate before distribution. |
Planning Strategies |
Strategies to minimize inheritance tax may include lifetime gifting, establishing trusts, and utilizing tax-free allowances. |
Estate planning strategies for estate tax reduction may involve trusts, life insurance, and charitable donations. |
Impact on Beneficiaries |
Beneficiaries bear the tax burden according to the assets they receive through inheritance. |
The estate itself is responsible for paying estate tax, potentially reducing the overall amount available for distribution to heirs. |
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