Hyden, Miron & Foster, PLLC Law Blog

Wednesday, July 17, 2019

Does Arkansas have an Inheritance Tax?

Inheritance Tax

With regards to estates, there are several different types of taxes that you should be aware of. An estate tax is one that is levied on the estate of an individual who recently passed away. The tax is applied prior to the estate assets being distributed to the heirs. Arkansas, along with 37 other states, does not have a state estate tax, but there is a federal estate tax that may apply if the value of an estate reaches a certain threshold.

There is also the gift tax to consider. Arkansas does not have a gift tax, but there is a federal gift tax. You are able to give a gift of up to $15,000 per year per gift recipient without federal tax consequences. However, if you were to gift a sum that exceeded $15,000 to one person, you must report this to the IRS. Any gifted amount that exceeds the tax exclusion will count against the allotted lifetime gift tax exemption of $11.8 million. It will also result in your federal estate tax exemption decreasing.

Lastly, an inheritance tax is one that is paid for by the beneficiaries. Therefore, it is a tax assessed to a person in receipt of assets of an estate, not the estate itself. The beneficiaries are responsible for paying the inheritance tax on money or assets they receive from the estate.

Does Arkansas have an Inheritance Tax?

Arkansas does not have an inheritance tax. This does not mean, however, that Arkansas residents will never have to pay an inheritance tax. The inheritance laws of another state may apply to you if you inherit money or property from a person that lives in a state that has an inheritance tax. The laws regarding inheritance tax do not depend on where you as the heir or beneficiary live. The applicable laws depend on where the decedent lived or where the owned property is located. This is why it is important that, should you receive an inheritance from a person living out of the state of Arkansas, that you check the laws of that state to see if you owe inheritance tax. Only Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania have a state inheritance tax.

The federal government does not impose an inheritance tax. Furthermore, under most circumstances, the IRS will not tax an inheritance as income. There are, of course, exceptions to this. If you are the beneficiary of a retirement account such as a 401(k), withdrawals made from these accounts will be taxed as income by the IRS. Additionally, if you inherit income or interest generating assets, the income or interest will generally be taxable. This is not just true at the federal level, but the state one as well.

Arkansas Estate Planning Attorneys You Can Trust to Protect Your Best Interests

There are many different considerations to weigh in estate planning. This includes the potential tax consequences involved. At Hyden, Miron & Foster, PLLC, we know that estate planning done right is multi-faceted. We take into account important factors that will help protect the best interests of you and your loved ones. Contact us today.

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