Georgia Inheritance & Estate Tax: The ‘Surprising’ Rules

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Paul Sundin, CPA

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Georgia does not have an inheritance tax. However, it does not mean that any resident of the state is ultimately free from any kind of tax due when they inherit property in Georgia.

In this article, we shall discuss everything you need to know about taxation laws for Georgia residents and ways to legally and easily reduce the possible taxable part of your estate.

What kind of taxes do heirs from Georgia pay?

There are two kinds of taxes that any American citizen may face when they inherit property. Those are the inheritance tax and the estate tax. They are also sometimes referred to as “Death Taxes” as they apply to the property of the recently deceased before and after it has been transferred to heirs.

As of 2014, Georgia does not have an estate tax either. However, it does not liberate Georgia residents from the Federal Estate Tax if the inheritance exceeds the exemption bar of $12,06 million.

Suppose the deceased Georgia resident left their heir a $13 million worth of an estate. In this case, $940,000 would be subject to a Federal Estate Tax. This tax has a progressive scale, which may reach up to 40% and therefore significantly reduce the overall final worth of your heirdom.

Thorough estate planning guided by a professional advisory can help you legally reduce the taxable part of preserving your legacy.

How to reduce the taxable part of my estate in Georgia?

Georgia also has no gift tax. Therefore, to protect your sufficient estate from severe taxation, you can simply gift away its taxable part to the heirs presumptive long before your death.

The Federal Gift Tax has an exclusion bar of up to $16,000 per done per year. It means that any Georgia resident can make up to $16,000-worth gifts to as many people as they wish during a year without the need to report a taxable gift and file the tax return form.

A married couple can join their forces and make up to $32,000-worth gifts. The same principle is true for the lifetime exemption rate, which means that a married couple can legally protect up to $24,12 million from the Federal Estate Taxation.

By the way, there are certain types of gifts that are not considered taxable even if they exceed the $16,000 bar. Those are:

  • Gifts between two spouses who are both US citizens;
  • Donations made to IRS-approved funds;
  • Payments for education and medical treatment once are transferred directly to the organization or institution that provides them.

In other words, by contributing to your children’s or grandchildren’s education, you don’t only invest in their future but also protect their future inheritance.

The bigger your estate is and the fewer heirs you have, the earlier you may have to start the estate planning procedure in Georgia. In some cases, it may take decades to legally and “painlessly” protect your estate from the Federal Estate Taxation. 

However, both Georgia’s local tax policy, as well as federal tax exemptions, allow anyone to avoid the severe fiscal burden and secure their heirs` future.

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