Estate Taxes

What taxes are imposed on Tennessee estates?

There are two things we can never escape – death and taxes. With Tennessee estates, it's generally the personal representative's responsibility to file the final state and federal income tax returns for the deceased and these are typically due by April 15 of the year following the decedent's death. The estate may also be required to file income tax returns depending on its size.

A federal estate tax return will be required on very large estates. For deaths occurring in 2014, the federal estate tax applies to estates valued over $5,340,000, up from $5.25 million in 2013. The federal estate tax is a tax on your right to transfer property upon your death.

This tax consists of everything that you own or have certain interests in upon the date of your death. The fair market value for these items is used, and not necessarily what you paid for them when they were originally acquired. The total of these items make your "gross estate," which includes cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. Since the federal estate tax return only applies to estates worth more than $5,340,000, over 99% of estates won't owe federal estate tax.

Tennessee Inheritance Tax

In Tennessee inheritance is imposed on decedents' estates that exceed the maximum single exemption. The inheritance tax due is due on the net estate as defined in the Tennessee Code Annotated. It is based on the difference between the inheritance tax and the "state death tax credit" allowed on the federal estate tax return. The Tennessee inheritance tax is imposed upon estates worth over $2,000,000 in 2014 and $5,000.000 in 2015.

In the case of decedent's dying in 2016 or any subsequent year thereafter, no tax shall be imposed as this tax is being phased out and will be gone as of January 1, 2016. Tennessee estates over the exemptions listed above for 2014 and 2015 respectively are taxed at a rate of:

First $40,000 – 5.5%

Next $40,000 to $240,000 – 6.5%

Next $240,000 to $440,000 – 7.5%

$440,000 or more – 9.5%

Tennessee's inheritance tax is due nine months after the death of the decedent; however, an extension of up to one year may be granted providing certain conditions are met.

Contact a Murfreesboro Probate Attorney

Understanding tax laws can be complicated, especially for personal representatives who are unfamiliar with the laws pertaining to estate taxes. If you have been appointed to settle an estate, I urge you to contact me at the LaRoche Law Office for advice on all of the applicable state and federal tax requirements!