Planning the distribution of your estate can raise many questions, especially when it comes to potential taxes. If you reside in Missouri or intend to leave assets to beneficiaries there, you might wonder whether inheritance taxes will affect your estate.
Missouri does not impose an inheritance tax
Missouri does not levy an inheritance tax. Your beneficiaries will not be required to pay state taxes on assets they receive, whether it’s cash, real estate, or personal property. In addition, Missouri eliminated its estate tax in 2005, so your estate is not subject to state-level estate taxation.
Nonetheless, your estate may still be subject to federal estate tax if its value exceeds the federal exemption limit, which is adjusted annually. Currently, most estates fall well below this threshold, meaning federal estate tax typically does not apply.
Other states may enforce inheritance taxes
If you own property located in a state that imposes inheritance or estate taxes, those jurisdictions may apply their tax laws. For example, states such as Iowa, Kentucky, and Pennsylvania still collect inheritance taxes. Property or assets located in those states could result in tax obligations for your heirs.
Additionally, consider the residency of your beneficiaries. Some states tax their residents on inheritances received, regardless of where the estate is based. This underscores the importance of understanding both where your assets are and where your beneficiaries live.
Lifetime gifts can reduce estate tax exposure
One strategy to mitigate potential tax burdens involves distributing gifts during your lifetime. The IRS allows annual, tax-free gifts up to a specified limit per recipient. These gifts can reduce the overall size of your estate and help you remain under the federal exemption cap. Lifetime giving can also provide personal satisfaction, as you witness the benefits your gifts provide.
Familiarity with Missouri’s tax laws allows you to make more deliberate and effective estate planning decisions. Whether it involves asset distribution, lifetime gifting, or considering multi-state tax implications, an informed approach helps preserve the value of your legacy.