Three Types of Death Taxes

When someone dies they aren’t just facing the possibility of paying estate taxes. There are two other additional taxes to consider.

Here is a rundown of the taxes, and when you will want to consider planning to have to pay them.

1. ESTATE TAXES

The first type of death tax to be considered is the estate tax.

The estate tax is the tax owed upon the assets of the deceased person. Washington State is unique in that it has it’s own state estate tax (most states don’t).

The Washington State estate tax begins on all assets over $2.193 million dollars (as of 2018 – it goes up a little each year for inflation).

If you are married you can transfer all property to a spouse without having to pay an estate tax, no matter the size of the estate.

2. INCOME TAXES

When someone dies there is the potential that they will have to pay income taxes twice.

The first payment will be for income accumulated while they were alive.

The second payment will be for income accumulated after they died (the estate would pay this income tax).

For example, if the decedent owned a rental home and rent continued coming in after they died, the estate would have to pay tax on that income.

3. CAPITAL GAINS TAXES

This tax might not be readily apparent when considering death taxes, as most people know (or learn) about the step-up in basis at death.

The step-up in basis means any property transferred to an heir after death is done so with today’s value attached to it (instead of the value at which the decedent bought it) This often results in significant capital gains tax savings.

Nevertheless, if the estate holds onto a piece of property so long that it accumulates gain after death, the estate will be responsible for paying the tax on that gain.

That’s it. These are the three types of death taxes one faces.

If you’ve had someone pass away and need help, please give us a call or set up a time to talk with us. https://pain-free-probate.com/needprobate

Have you had someone pass away and you’re not sure whether or not you even need probate? I’ve put together a short infographic that will help you find out in less than 30 seconds. Just click the link below to instant answers.

https://pain-free-probate.com/doineedprobate

Cheers,

Christopher Small