Ask the Experts!
The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers. Here’s the question of the day.
Question: Can you explain how Tennessee has recently changed its gift and inheritance tax structure?
Answer: On Monday, May 21, 2012, Tennessee Governor Bill Haslam signed into law two bills that changed Tennessee gift and inheritance taxes.
The first bill repeals the Tennessee gift tax. Tennessee was one of the last states to retain a stand-alone gift tax. Prior to the passage of the repeal, Tennessee imposed a tax at the graduated rate of 5.5% to 16% on gifts from one individual to another in excess of $13,000 in any calendar year. The repeal is effective for gifts made on or after January 1, 2012.
Connecticut is now the only state remaining that imposes a state gift tax.
The second bill phases out the Tennessee inheritance tax. This tax is currently imposed on decedent’s estates that exceed the maximum single inheritance tax exemption amount ($1 million in 2012) at a graduated rate from 5.5% – 9.5% for Class A beneficiaries. The new law increases the maximum allowable inheritance tax exemption amount from $1 million to $1.25 million for those dying in 2013; to $2 million for those dying in 2014, and to $5 million for those dying in 2015. For those dying in 2016 and thereafter, no inheritance tax will be levied.
The changes in the law, coupled with the current federal gift tax and estate tax lifetime exemption of $5.12 million, bring new gifting and estate planning opportunities to Tennessee residents beginning in 2012.
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