In addition the federal estate tax, which I have previously blogged about, some states also have an additional "Inheritance Tax." Indiana is one of those states.  The Indiana legislature recently repealed the inheritance tax for any deaths occurring after December 31, 2021, and enacted increases in the exemption amounts retroactive to January 1, 2012.

Indiana's complex system of inheritance tax grants exemptions in amounts depending on the relationship of the beneficiary, with the more closely related heirs having a higher exemption amount. Spouses, as with the federal system, are tax free.

The new changes in Indiana, according to the article listed above, are as follows:

  • In a common inheritance arrangement, where the second spouse to die leaves assets to children, the amount each child is entitled to receive inheritance-tax-free is now $250,000, up from $100,000.
  • Under the new law, spouses of children are now entitled to the $250,000 exemption (they used to be considered Class B beneficiaries, entitled to a mere $500 exemption).  That $500 exemption for nieces and the like and another $100 exemption level for “others” were not raised.

Currently, 22 states and the District of Columbia have such separate inheritance taxes. Here is an in depth article discussing the different systems, and with a map of the U.S. entitled "where not to die in 2012."

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