Hyden, Miron & Foster, PLLC Law Blog

Monday, April 17, 2017

Will I Pay Federal Or State Tax On My Estate In Arkansas?

Taxes are part of life. You may have paid them all your life but do your beneficiaries and your estate have to? Talking to a tax law attorney experienced in estate planning can save you and your beneficiaries time and money in the long run.

What You Should Know About Estate Taxes

Estate tax is levied on estates and is based on the total value of the properties forming the estate. It may either be levied by the federal government or the state.

Estate Tax In Arkansas

Most of the states in the United States do not charge estate tax. Arkansas is one of them. This means that estates in Arkansas do not owe any estate tax to state agencies. If you own property in Arkansas and your beneficiaries inherit your property, they will not owe any estate tax to the state.

Federal Estate Tax

The federal estate tax is calculated from the total amount of a person’s estate. However, not every estate is eligible to pay. The federal government gives relief in the form of a basic tax exemption. Currently, the exemption stands at $5.45 million. Therefore, only estates whose value exceeds $5.45 million will owe federal estate tax.

In reality, very few estates pass that threshold. In fact, only an estimated two out of every 1,000 estates owe federal estate tax.

What About Inheritance Tax In Arkansas?

While estate tax is levied on an estate, inheritance tax is levied on beneficiaries inheriting property that was part of the estate.

Arkansas does not collect inheritance tax. This means that a beneficiary inheriting property in Arkansas will not owe any inheritance tax.

However, residents of Arkansas will have to pay inheritance tax if they inherit property from states that collect the tax. States such as Iowa, New Jersey, Kentucky and Pennsylvania collect inheritance tax. Therefore, is a resident of Arkansas inherits property from either one of these states he/she will have to pay inheritance tax.

The amount of inheritance tax payable will depend on factors such as:

  • The value of the property
  • The relationship of the beneficiary to the deceased. Surviving spouses, for example, do not pay inheritance tax. Children and other beneficiaries face different tax laws depending on the state.
  • Any exemptions allowed by the state.

What All This Means

If your whole estate is in Arkansas and its total value does not exceed $5.45 million, you do not have to worry about estate or inheritance tax, as you will not owe any.

If the value of your entire estate in Arkansas, or in Arkansas plus in any other state, exceeds $5.45 million, you owe federal estate tax.

If part of your estate is in a different state, it is important to study the tax laws of that state to know whether estate or inheritance tax is collected.

Contact the Arkansas estate attorneys at Hyden, Miron & Foster, PLLC today to assess the tax burden of your estate inclusive of properties located in other states.


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