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        Featured Post

          Paul Getty   Dec 02, 2024

        Important Steps to Take When Starting a 1031 Exchange Late in the Year

        Many real estate investors are aware of the two important deadlines that must be observed when completing a 1031 exchange: 1) 45-days after close of esc[...]

        1031 Exchange
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        Recent Posts

        Estate Planning Taxes

        Understanding the Difference Between Inheritance and Estate Tax

        By Paul Getty03, Aug 2023

        Several of our clients who are doing estate planning are often confused about inheritance and estate taxes, who is responsible for paying them, and which states impose these taxes. This post should help clarify any misunderstandings and help equip you to complete your estate plan in the most tax-efficient manner possible.

        The below map outlines the US states that have estate and/or inheritance tax. At this time, Maryland is the only state that has both. 

        DRAFT - 24990 FGG Blog Tax Map graphic (2)

        Estate Tax

        The estate tax is levied on the value of your estate when you pass away and applies to the assets you leave behind. Estate tax is applied at the Federal level and by certain states.

        The federal estate tax is subject to an exemption minimum of $12.92 million for an individual in 2023, so the tax won’t apply to the majority of taxpayers. The exemption limit typically increases each year to account for inflation.

        Only the following states and the District of Columbia levy an estate tax at the state level. Exemption limits and tax rates vary by state.

        • Connecticut
        • Hawaii
        • Illinois
        • Maine
        • Maryland
        • Massachusetts
        • New York
        • Oregon
        • Rhode Island
        • Vermont
        • Washington
        • Washington, D.C.

        Also, estate tax provides an unlimited marital deduction, allowing you to transfer (or “gift”) an unlimited amount of money to your spouse without tax.

        Inheritance Tax

        Unlike the estate tax, which applies to the decedent's estate, inheritance tax is levied against the beneficiary or the person inheriting the assets. There is no federal inheritance tax, and the tax is only applicable to residents in these states:

        • Iowa
        • Kentucky
        • Maryland
        • Nebraska
        • New Jersey
        • Pennsylvania

        The amount of inheritance tax due depends on how direct the relationship is between the decedent and the beneficiary. For example, a child or grandparent may be exempt from inheritance tax in a state, whereas a sibling beneficiary might be subject to the tax. Spouses are exempt from inheritance tax. 

        Also, while you may live in a state that has no inheritance tax, your beneficiary may live in a state that does, and they would be subject to the inheritance tax rules within that state.

        Work With Professionals

        We hope this brief overview helps you better understand how inheritance and estate taxes work and how they could apply to the settlement of your estate and beneficiaries. Estate planning is a complex process, and we encourage you to work closely with your estate planning attorney to create a plan that enables you to transfer wealth most taxably. 

        Please contact us for more information. 

         

        Paul Getty

        Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $3 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student, and senior housing. Paul’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, workouts, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals. Prior to founding First Guardian Group/FGG1031, Paul was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 35 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M. Paul holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered financial representative with LightPath Capital Inc, member FINRA /SIPC. Paul is a noted speaker, author, and actively lectures on investments, sales, and management related topics. He is author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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        1031 Risk Disclosure:

        • There is no guarantee that any strategy will be successful or achieve investment objectives;
        • Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
        • Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
        • Potential for foreclosure – All financed real estate investments have potential for foreclosure; ·Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;
        • Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
        • Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits

        No offer to buy or sell securities is being made. Such offers may only be made to qualified accredited investors via private placement memorandum. Risks detailed in a private placement memorandum should be carefully reviewed, understood and considered before making such an investment. Prospective strategies and products used in any tax advantaged investment planning should be reviewed independently with your tax and legal advisors. Changes to the tax code and other regulatory revisions could have a negative impact upon strategies developed and recommendations made. Past performance and/or forward looking statements are never an assurance of future results.

        Many of the investments offered will be only available to those investors meeting the definition of an Accredited Investor under SEC Rule 501(A) and offered as Regulation D private placement securities via a Private Placement Memorandum (“PPM”). Prospective investors must receive, read and understand all of the risks associated with buying private placement securities. Investments are not guaranteed or FDIC insured and risks may include but are not limited to illiquidity, no guarantee of income or guarantee that all tax advantages or objectives will be met and complete loss of principal investment could occur.

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