Score a victory for farm families and small business owners that worry about estate planning. The federal cloud still remains, but action by the Indiana General Assembly went a long way toward reducing the burden on future generations as far as paying Indiana inheritance taxes.
"We consider this an important piece of legislation," says Kent Yeager of Indiana Farm Bureau, Inc. Farm Bureau lobbied hard for passage of this bill. Yeager explains that the federal tax is on the estate, but the state's inheritance taxes ate on the beneficiary that receives the money, not the estate of the person that dies.
"The legislation provides for an immediate increase in the exemption limit before you fall under that tax," he says. The amount was $100,000 per individual. Under the new legislation, it will be $250,000 per person. That will make a big difference in the number of people affected by the law in the first place. For those who still must pay, the big upfront exemption will help lower the burden.
The other piece of the legislation is the phase-out of state inheritance tax altogether over 10 years, Yeager notes. The current rate is 10% on qualified dollars. It will drop over time.
American Farm Bureau works on making the estate tax situation more bearable at the federal level. Still, Yeager believes reducing and eventually eliminating the inheritance tax in Indiana will be a great relief for future generations in farm families.
"That's why we consider it a big victory," he says.Even if your inheritance falls under the current $100,000 amount, and the upcoming new exemption of $250,000, it still requires attorneys and court documents to prove to the state that you don't owe tax. It involves time and resources. Once the tax is phased out, those steps will no longer be necessary for estates that fall below the federal limits.