You have worked incredibly hard throughout your lifetime to be able to live comfortably now. If you have significant wealth, you even may be able to leave some assets to your kids. Still, even if your children are not hurting financially, you do not want to strap them with an oversized tax bill.
According to the Georgia Department of Revenue, many residents of the state use the terms “estate tax” and “inheritance tax” interchangeably. This can be confusing, though, as these types of tax are different.
How does inheritance tax differ from estate tax?
The main difference between inheritance tax and estate tax is the individual or entity that pays the tax. With an estate tax, the estate pays an amount to the government before distributing assets to the heirs and other beneficiaries. Generally, the estate’s administrator oversees the proper payment of the estate tax.
When it comes to inheritance tax, the individual who receives the inheritance pays the tax. In places that require heirs to pay inheritance tax, heirs often must work with lawyers and accountants to ensure they pay the correct tax. As you may suspect, this can become quite technical and complex.
Does Georgia have an inheritance tax?
Fortunately, unlike some other states, Georgia does not have an inheritance tax. This means your children should not have to worry about paying an inheritance tax to the state government. Nevertheless, there may be other federal or state tax obligations with which your kids must comply.
If you worry about strapping your adult children with a costly tax bill, you should be careful about how you structure your estate plan. Ultimately, getting started as early as possible ensures you have sufficient time to work out the tax-related details. for yourself and your children.