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Kentucky shown to be one of 6 states with inheritance taxes

If you're the administrator of an estate, then hopefully you're aware of the different tax obligations you are responsible for addressing before it can be closed. The federal government, for its part, imposes federal estate taxes and in 14 states throughout the country, they impose a death tax as well. Six states also impose a required inheritance tax. Kentucky is one of them.

In terms of this estate tax, it requires that the heirs of the deceased pay taxes on any property, money or other assets passed down from one generation to another. The maximum estate tax rate that an heir can be asked to pay on the federal level is 40 percent. That rate, however, is reserved for estates that maintain the highest tiered value of holdings. Among the 2.6 million Americans who died in 2013, only the equivalent of 4,700 paid that rate.

Among the states that have estate taxes, rates can reach as high as 12 percent. These are taken out of the proceeds even before inheritance is either transferred or paid to the heirs.

In the case of Kentucky, it is one of six states that requires its residents to pay an inheritance tax. Kentucky offers a nominal $500 exemption and taxes all other assets at a rate of 16 percent.

While moving outside of one of these six states that charges an inheritance tax may be a particularly money-saving choice for some individuals with means, many probate judges will look to see that an individual established one's residency long before death.

A probate or estates administration attorney well versed in the ins and outs of how the legal system works may be able to shed light on ways to minimize an heir's tax burden.

Source: fortune.com, "These are the 14 states with the worst ‘death taxes’," Jeff Bukhari, April 24, 2017

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