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From what I read, the implication I took away was that the inheritance taxes would be on the estate, not each individual. It makes a lot of sense that way.

Which is exactly why you should get professional help. "Making sense" and 25 cents would have gotten you on the bus when I moved to Chicago in 1966. The bus ride has gone up a bit, but in the tax world the value of the concept of making sense has remained stagnant.

For starters, you're intermingling three different types of taxes: estate, inheritance, and income. Estate tax is a transfer tax imposed on the estate. Income tax is imposed on the earner of the income. Inheritance tax (never one at the Federal level, disappearing at the state level, but AFAIK not extinct) is imposed on the heirs.

While you have to check each involved state for possible requirements, the norm is that estate tax is due only in the state of the decedent's domicile. Income tax is due in the earner's state(s) of domicile and in any state with income sourced in that state. So exactly where is an estate domiciled? Beats me; check the instructions. In the two cases in which I've had to deal with state estate income tax returns I had to file in only the state of the decedent's domicile, not in my home state, which was the mailing address of the estate.

Thank God I've never had to deal with inheritance tax.

Phil
Rule Your Retirement Home Fool
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