In 2021, the District of Columbia and twelve (12) states impose an estate tax and six (6) states impose an inheritance tax on their residents or on non-residents who own real or personal property within the state.
What is an estate tax?
Broadly speaking, an estate tax is imposed on the property (“estate”) owned by a decedent. The tax assessed is a rate, which may be flat or marginal, regardless of the relationship of the decedent and his/her beneficiary.
What is an inheritance tax?
Inheritance tax is assessed on the property passing to each beneficiary of the estate. The tax rate varies depending upon the relationship of the decedent to the beneficiary.
The nearer the relationship of the beneficiary to the decedent, the lower the tax rate. Bequests to spouses, children, grandchildren, parents, and charities may or may not be subject to inheritance tax, and if taxed, they will be subject to the lowest tax rates. Bequests to persons less closely related to the decedent, however, are taxed at higher tax rates.
Which jurisdictions impose an estate tax?
As of 2021, the jurisdictions that impose estate tax include:
- District of Columbia
- New York
- Rhode Island
Which jurisdictions impose an inheritance tax?
As of 2021, the jurisdictions that impose inheritance tax are:
- New Jersey
* Maryland imposes both estate and inheritance tax, but the estate tax is a credit against the inheritance tax so the total liability is the greater of the two taxes.