From the Indiana Lawyer:
The Indiana Legislature passed a law during the 2012 session that will gradually phase out the state’s inheritance tax by allowing a credit against the amount of taxes owed.
The initial credit, beginning on July 1, will be 10 percent in 2013 and will increase by 10 percent each fiscal year, reaching 90 percent in 2021, and 100 percent in 2022. The new law also expands the definition of a Class A transferee to include the spouse, widow or widower of the transferor’s child or stepchild. That means people included in the expanded transferee category will be entitled to the same exemptions and lower tax rates that a transferor’s children enjoy.
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Beginning this year, the exemption for Class A beneficiaries was raised to $250,000, meaning that each child of a transferee can inherit $250,000 tax-free.
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Jeanne Longsworth, of the Fort Wayne firm Longsworth Law, concentrates her practice on wealth transfer, estate planning and associated areas of law.
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“I would say for the majority of clients I work with, the federal tax is the really burdensome one because of the rates,” she said.
Currently, federal law taxes estates at 35 percent, with the first $5 million exempt from taxation. But that is likely to change soon.
“All that goes out the window on January 1 if Congress doesn’t do something,” McConnell said. Without intervention, the exempt amount will be $1 million, and the tax rate will revert to 55 percent, as it was in 2001.
“It’s a train wreck – particularly for families with illiquid assets like farmland or businesses,” McConnell said. “The $5 million exempts from tax 98.5 percent of all Americans. But there are a lot of families whose estate, whose business, whose farm ground is exempt from tax today, but would be subject to tax in January if the exemption goes down to $1 million. It would just be a huge unfairness.”
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McConnell said the concept of portability will also disappear in 2013 without legislative intervention.
“Portability says that if you don’t use the entire exemption in the estate of the first to die, it’s portable and can be used in the second estate – meaning, that if dad did nothing, mom would have $10 million of exemption portability.”
That means that the mother would then be able to pass on to her children that entire $10 million tax-free.
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http://www.theindianalawyer.com/indiana-s-inheritance-tax-phasing-out/PARAMS/article/28759
