In this week’s blog post in our ongoing series on basic estate planning questions, we are going to look at estate taxes in North Carolina. As with any other estate planning issue, it’s always important to ask your lawyer about any specific questions you might have. Until then, here are some common questions about estate taxes in North Carolina, why they matter, and what you can do about them.
Who has to pay estate taxes in North Carolina?
Estate taxes are federal taxes, and apply evenly throughout the country to everyone who dies leaving behind an estate. The estate you leave behind has a value. When calculating estate taxes, your estate representative will have to determine the total value of your estate. If it’s over a certain amount, your representative will have to pay at least a portion of its value in the state taxes.
How large of an estate do I have to leave behind to pay estate taxes in North Carolina?
That depends on when you die and the circumstances under which you die. For people dying in 2014, estates worth more than$5.34 million will have to pay a portion of their value as an estate tax. Note however, that this $5.34 million individual exemption amount is up from the 2013 amount of $5.25 million. This is because the IRS adjusts the number every year to reflect the effects of inflation.
So, assuming there aren’t significant changes in the law and you die 10 years from now, the total amount of your individual exemption will be significantly higher than it is today.
I’ve heard that estate taxes in North Carolina are less of a concern if you are married. How is this true?
In addition to the individual exemption amount that applies to any estate left behind by a deceased person, there is also the concept of portability. Portability applies to married couples, and it effectively allows them to double the amount of the estate they are allowed to exempt.
Portability allows a surviving spouse to use the unused portion of a deceased spouses individual exemption. This basically means that, if you are married couple, you can protect almost $10.7 million from federal estate taxes.
What if I have more than the exemption amount? Will I have to pay estate taxes in North Carolina?
Possibly, but only if you fail to act. If you have an estate worth more than the individual exemption amount, or worth more than the combined amount for married couples, there are steps you can take to reduce, if not completely eliminate, the taxes your estate will have to pay. However, to be sure you protect your estate from any applicable taxes, you need to speak to us as soon as possible.