Inheritance Tax

Inheritance tax, estate tax and death duty are the names given to various taxes which arise on the death of an individual. It is a tax on the estate, or total value of the money and property, of a person who has died. In international tax law, there is a distinction between an estate tax and an inheritance tax: an estate tax taxes the personal representatives of the deceased, while an inheritance tax taxes the beneficiaries of the estate. However this distinction is not always respected. For example, the "inheritance tax" in the UK is a tax on personal representatives, and is therefore, strictly speaking, an estate tax.

•

In some jurisdictions, such taxes are known as inheritance tax:

○ ○ ○

The Republic of Ireland (where it is a tax on beneficiaries).

The United Kingdom: see Inheritance tax (United Kingdom).

Some states of the United States: see Inheritance tax at the state level:

•



IA - Iowa



IN – Indiana



KY - Kentucky



In Kentucky, the inheritance tax is a tax on a beneficiary's right to receive property from a decedent's estate. It is imposed as a percentage of the amount transferred to the beneficiary. Currently, transfers to "Class A" relatives—spouses, parents, children, grandchildren, and siblings—are exempt from inheritance tax. Transfers to "Class B" relatives—nieces, nephews, daughters- and sons-in-law, aunts, uncles, and greatgrandchildren—are taxed at a lower rate than transfers to "Class C" recipients, defined as anyone not falling within Class A or B.



MD - Maryland



NE – Nebraska



NJ - New Jersey



OK – Oklahoma



PA – Pennsylvania



TN - Tennessee

In some jurisdictions the term used is estate tax:

○

The United States: see Estate tax in the United States. 

•

Many states within the United States. Kentucky imposes an estate tax in addition to its inheritance tax.

In some jurisdictions the term used is death duty, and for historical reasons that term is used colloquially although it is no longer correct legally - in the United Kingdom and some Commonwealth nations.

•

In some jurisdictions the term is estate duty:

○

Hong Kong. See Estate Duty Ordinance Cap.111. The tax was effectively abolished in 2006 by

•

limiting its application to deaths occurring before 11 February 2006.

In some jurisdictions, death gives rise to a charge to stamp duty:

○

Bermuda

•

In some jurisdictions, death gives rise to a charge to capital gains tax:

○

Canada. See Taxation in Canada.

• •

Where a jurisdiction has capital gains tax and inheritance tax (for example the United Kingdom) it is usual to exempt death from the capital gains tax.

In some jurisdictions death gives rise to the local equivalent of gift tax (see Austria, below, for example). This was the model in the United Kingdom during the period before the introduction of Inheritance Tax in 1986, where estates were charged to a form of gift tax called Capital Transfer Tax. Where a jurisdiction has a gift tax and an estate tax (for example the United States at federal level) it is usual to exempt death from the gift tax. Also, it is common for inheritance taxes to share some features of gift taxes, by taxing some transfers which happen during lifetime rather than on death. The United Kingdom, for example, taxes "lifetime chargeable transfers" (usually gifts to trusts) to inheritance tax. Non-English speaking jurisdictions naturally use non-English terminology:

○

Belgium, a multilingual nation, uses the terms droits de succession ("rights of succession") and

successierechten, taxes on beneficiaries which are collected at the federal level but distributed to the regional level.

○ ○ ○

Czech Republic charges daň dědická, taxes on beneficiaries.

Finland has perintövero (Finnish) or arvskatt (Swedish)

France uses the term droits de succession ("rights of succession"), taxes on beneficiaries.

○ ○

Germany charges Erbschaftssteuer, a tax on beneficiaries.

Italy initially abolished its tassa di successione in 2001, then re-introduced it for large estates in

2006. The exempt amount in the case of spouse and children is Euro 1,000,000 each. Maximum rate is 8%.

○ ○ ○

Israel abolished its inheritance tax in 1981.

The Netherlands charges successierecht, a tax on beneficiaries.

Switzerland has no Erbschaftssteuer / impôt successoral / imposta di successione at national

level. However in the various cantons, three possibilities (a tax on the estate, a tax on the beneficiaries, or no tax) exist. •

Some jurisdictions have never had estate or inheritance taxes, or have abolished them:

○

Austria abolished the Erbschaftssteuer in 2008. This tax had some of the features of the gift tax,

which was abolished at the same time

○ ○ ○ ○

Australia abolished the estate tax federally in 1979.

New Zealand abolished estate duty in 1992.

Sweden abolished its inheritance tax in 2005.

India enforced estate duty from 1953 to 1985. Estate Duty Act, 1953 came into existence w.e.f. 15

Oct 1953 till E.D.(Amendment) Act 1985 discontinued levy of estate duty on deaths occurring on or after 16 Mar 1985.

○ ○

British Virgin Islands

Gibraltar

○ ○

Singapore abolished estate tax in 2008, for deaths occurring on or after 15 Feb 2008

Some states of the United States: see Inheritance tax at the state level: 

LA - Louisiana - In place through 2003



NH - New Hampshire - In place through 2003

The three inherent power of the state are as follows: 1. Police Power - is the power of the state to regulate freedoms and property rights of individuals for the protection of public safety, health, and morals or the promotion of the public convenience and general prosperity. 2. Eminent Domain - is the power to take private property for public use upon payment of just compensation. 3. Power of Taxation - is the power of the state to impose tax on individuals and properties to support the government. These powers are inherent and do not need to be expressly conferred by the constitutional provision on the state. They are suppose to co-exist with the state. the moment the state come into being, it is deemed invested with these three powers as its innate attributes. Briefly, the police power is the power of the state to regulate liberty and property for the promotion of the general welfare. The power of eminent domain enables the state to forcibly aquire private property, upon payment of just compensation, for some intended public use. by the power of taxation, the state is able to demand from the members of society their proportionate share or contibution in the maintainance of the government. Similarities: The three inherent of the state are similar in the following respects: 1. They are inherent in the state and maybe exercise by it wiouth need of express constitutional grant. 2. They are not only necessary but indespensable. the state cannot continue or effective unless it is able to exercise them. 3. They are methods by which the state interferes with private rights. 4. They all presuppose an equivalent compensation for tyhe private rights interfered with. 5. They are exercise merely by legislature. Differences: The three inherent powers of the state differ from each other in the following ways: 1. The police power regulate both liberty and property. the power of eminent domain and the power of taxation affect only property rights. 2. The police power and power of taxation maybe exercise only by the government. The power of eminent domain maybe exercise by private entities. 3. The property taken in the police power is destroyed because it is noxious or intended for noxiousr purpose. The property taken under the power of eminent domain and the power of taxation is intended for a public use or purpose and is therefore wholesome. 4. The compensation of the person subjected to the police power is the intangible altruistic feeling that he has contibuted to the several welfare. the compensation involved in the other powers is more concrete, to wit, a full and fair equivalent to the property expropriated or protection and the public improvement for the taxes paid. Limitations: Although inherent and indespensable, the fundamental powers of the state are not without restrictions-as ours is a government of limited powers, even these prerogatives may not be exercise arbitrarily, to the prejudice of the bills of rights. The presumption in libertarian societies is in favor of private rights and against attempt on the part of the state to interfer with them, " Constitutional provision for the security of persons and property should be liberally

construed." Hence, the exercise of these fundamental powers is subject at all times to the limitation and requirements of the constitution and may in proper cases be annulled by the courts of justice ESTATE TAX Non-resident foreigners pay estate tax only on property located in the Philippines. The taxable inheritance is arrived at after deducting all expenses, losses, debts, and taxes related to the property (all proportionate to the ratio of the Philippine gross estate to his total estate) as well as the surviving spouse’s net share. Estate tax is levied at progressive rates.