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Can estate taxes diminish the legacy of those who die in Nevada?

On Behalf of | Jun 18, 2023 | Estate Planning

When someone dies, the property that they own becomes their estate, and probate proceedings are often necessary to transfer ownership of those assets to others. People may have planned carefully for the distribution of their resources so that specific loved ones inherit from their estate and/or that support for a charitable cause that is significant to them is passed along.

However, certain financial obligations take precedence over an individual’s intentions when they die. Both debts and taxes can consume the property in someone’s estate before it passes to their selected beneficiaries. Does Nevada levy an estate tax that will require payment before people inherit from an estate?

Nevada does not collect a state estate tax

Like most other states in the country, Nevada does not assess or collect an estate tax. Regardless of how much property someone has in their name when they die, Nevada will not demand a portion of the estate’s assets during probate. Similarly, Nevada does not collect an inheritance tax that beneficiaries might pay based on what they receive from the estate.

Although there may not be state estate taxes due, there could be federal estate tax obligations. The total value of the estate will determine whether or not there are federal tax responsibilities. Only the largest estates with a value of more than $12,920,000 are subject to federal estate taxes. Individuals with large personal portfolios can plan to diminish their personal holdings prior to their passing to minimize or sometimes even eliminate federal estate taxes.

There are some taxes the estate must pay

Regardless of the size of the estate, there may be other tax responsibilities. There could be income taxes due. The executor of the estate may need to file an income tax return on behalf of the decedent. If they liquidate any estate property, possibly by holding an estate sale, they may also need to file an income tax return on behalf of the estate itself.

Carefully establishing the financial responsibilities of the estate, including the debts it must pay and the taxes it must cover, can be a very important part of the estate administration process.