A Guide to Inheritance & Estate Tax in North Dakota

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Paul Sundin, CPA

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Since 1927 residents of North Dakota don’t have to worry about inheritance and estate taxes, often referred to as “Death Taxes.” It means that in most cases, you won’t be responsible for any kind of tax due if you inherit a property in Peace Garden State.

Nevertheless, there are still cases when a North Dakota resident may have to deal with “Death Taxes.” Even though those cases are fairly rare, they often catch people by surprise, causing them a lot of trouble.

In this article, we shall describe all the peculiarities of inheritance taxes in North Dakota and cases when you may need to take certain steps to preserve your heirdom.

Taxes for North Dakota heirs

While most states have canceled local inheritance taxes, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania still levy them. Even if you have never lived in any of those 6 states, you will become responsible for their local “Death Taxes” if you inherit a property from there.

An estate tax is another concern for heirs as it reduces their heirdom before they receive it. While North Dakota does not have its local estate tax, Federal Estate Taxation remains relevant for all US citizens and their properties.

The Federal Estate Tax comes into action when the overall worth of the inheritance exceeds the exemption level of $12,06 million. It is important to remember that the estate includes all kinds of property, cash, stocks, and all other assets of the recently deceased.

If the overall value of your heirdom is higher than the Federal Estate Tax exemption set for the year of your death, it will become a subject of taxation with up to a 40% rate.

To preserve your legacy and ensure the future of your beloved ones, it is essential to take action as soon as possible and start thorough and accurate estate planning.

The benefits of North Dakota gift taxes.

North Dakota has no gift taxes. Therefore, the easiest way to reduce the estate’s taxable part for North Dakota residents is to simply gift away shares of their property to heirs in advance.

While the Federal Gift Tax remains relevant for all US residents, it has a pretty generous exclusion rate of $16,000 per recipient per year. In other words, you can make up to $16,000 in gifts to as many people as possible without having to report them to IRS or affecting the lifetime exemption of $12,06 million.

A North Dakota resident who has $13 million worth of estate would have to gift away the exceeding $940,000 to withdraw it from the Federal Estate Tax. Once you are not married and don’t have many heirs, this procedure can take several decades, and therefore the earlier you get down to estate planning, the bigger share of your estate will be protected from Federal Taxation.

Considering the fact that a married couple can “double their forces,” they can legally preserve up to $24,12-worth, gifting away $32,000 per heir every year.

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