In May 2013, Governor Pence signed legislation that effectively repealed Indiana’s inheritance tax for the estates of individuals who pass away in 2013 and beyond. The repeal eliminates a complex form of estate planning, and provides a huge relief to Hoosier families grieving the loss of a loved one.
What if someone passed away before January 1, 2013?
Unfortunately, the inheritance tax still applies to the estates of individuals who passed away in 2012 and before. The previous Indiana inheritance tax rules are contained in the Indiana Code and they are very complex. For these estates, you may benefit from consulting with an experienced attorney and a knowledgeable CPA.
Are there any other taxes I need to know about?
The federal estate and gift tax is still in place. It is a one-time taxation based on the gross amount of an individual’s estate at the time of death. Fortunately, the exemption from federal estate and gift tax was raised to $5,250,000 in 2013. The exemption is doubled for married couples. The combination of the Indiana inheritance tax repeal and the increased federal estate and gift tax exemption allows a knowledgeable and creative estate planning attorney to ensure that a married couple’s (or individual’s) assets are sustained for many generations.
Does this mean I no longer need a will?
NO!!! Although the repeal of Indiana inheritance tax will certainly make estates more manageable in the probate process, the value of having a will and advance directives in place has not changed and is extremely important. A will still allows you to distribute assets according to your specific wishes, name a personal representative and successors, name guardians and establish testamentary trusts for minor children. Furthermore, properly executed advance directives allow you to name powers of attorney for financial and health care decisions in the event of your incapacitation. For more information on wills, click here.
What if I own property in another state?
If you own real estate or other assets located in another state, it is extremely important to consult with a knowledgeable attorney to determine whether your estate plan addresses all of your potential death tax liabilities.
How does this affect the probate process?
In previous years, the personal representative (or executor) was responsible for filing the Indiana inheritance tax return—not anymore. This change will make the probate process much quicker and less expensive in many cases. It is important to remember, however, that the personal representative still plays an important role and has a whole host of duties and responsibilities with regard to the estate.