Hyden, Miron & Foster, PLLC Law Blog

Wednesday, May 22, 2019

Arkansas Estate and Gift Taxes

Giving or receiving an inheritance or a gift is often talked about during the estate planning process. It is often forgotten, however, that these types of transfers may carry tax consequences for those who are giving and those who are receiving. A gift tax may be levied on a person who receives a gift while the giver of the gift is still alive. An estate tax may be levied on a person who owned property in the state where they lived. An inheritance tax may be levied on someone who inherited property that is located in a certain state. All of these taxes largely depend on state laws, but there are also federal tax considerations to take into account. Taxes can have big financial consequences and you will want to consider if your gift or inheritance will end up being a burden on your loved ones.

What Estate and Gift Taxes Apply in Arkansas?


First and foremost, residents of Arkansas are not subject to state mandated estate or inheritance tax. Arkansas does not impose these taxes on its residents. However, it is still possible that an Arkansas resident may be subject to an inheritance tax if he or she inherits property located in another state that does impose an inheritance tax. For inheritance tax purposes, it really matters where the property is located as opposed to where the heirs is located for tax purposes. If you do inherit property in a state that levies an inheritance tax, the amount of the tax liability will depend on the value of the property and how closely related you were to the decedent. A surviving spouse does not have to pay inheritance tax. Additionally, some states have exemptions for smaller inheritances.

There is still the matter of federal taxes to address. While Arkansas residents may not need to worry about a state imposed estate tax, there is still a federal estate tax which may apply. Fortunately, however, the federal estate tax really only applies to sizeable, high net worth estates. In fact, very few estates actually end up owing federal estate tax because there is a basic exemption of $10 million. This $10 million is indexed to inflation which currently puts it at $11,400,000. What all of this means is that only estates who exceed this millions of dollars exemption will be required to pay an estate tax. Those Arkansas estates who fall below this threshold will not owe any federal or state estate tax. Heirs will not be subject to an inheritance tax, with the one exception noted above, nor will they have to worry about income tax consequences. Inherited assets are considered to be “ordinary income” by the IRS and so income tax will not apply. There is an exception for an inherited retirement accounts and assets withdrawn from these accounts will be considered taxable income.

As far as gift taxes go, Arkansas also does not have a state gift tax. At the federal level, the federal gift tax makes an exclusion of $15,000 per year per gift recipient. This means that you may gift up to $15,000 per person per year without worrying about tax consequences. If you gift more than that amount to someone, you must report it to the IRS. Also, any amount that is gifted over the $15,000 exclusion will count against your lifetime gift tax exemption of $11.8 million. It will also decrease your federal estate tax exemption.

Estate Planning for the Best Interests of You and Your Loved Ones


Estate planning is so important, but it is complicated and can have far reaching consequences. That is why we offer individually tailored, comprehensive estate planning services at Hyden, Miron & Foster, PLLC. We take into account the unique needs of our clients. Contact us today.


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