Louisiana no longer taxes inheritances. The federal government taxes inheritances when the net estate exceeds the applicable exclusion, which is shown in the following table:
|Year that Death Occured||Applicable Exclusion (In Millions)|
For married couples, if the estate of the first spouse to die is not large enough to use all of the applicable exclusion, there is a way that unused part of that exclusion can be transferred to the estate of the second spouse to die. To do that, it is necessary for a federal estate tax return for the estate of the first spouse to die to be timely filed. This means that it must be filed within 9 months of the date of death.
Louisiana has an Estate Transfer Tax for estates that are large enough to require a federal Estate (and Generation Skipping Transfer) Tax Return. Under the federal taxes, there is a credit for state death taxes that are paid, up to a certain amount. The Louisiana Estate Transfer Tax is designed to take advantage of the federal tax credit, and equals the amount of that credit. If the amount of Louisiana Inheritance Tax is larger than the federal death tax credit, there is no Louisiana Estate Transfer Tax.
The United States Estate (and Generation Skipping Transfer) Tax Return is commonly called the form 706 tax return. This tax is different from the Louisiana Tax Return because it is paid by the estate, not by the individual heirs. To calculate whether a return must be filed, you must first determine whether the decedent made any donations to any one person of more than the exempt amount in any one year. For calendar year 2009, that amount is $13,000. That amount will be added to the decedent's estate, and if that estate exceeds applicable exclusion the amount above the exclusion will be taxed at a much higher rate, anywhere from 38% to 55%. Amounts inherited by a surviving spouse are not taxed. We recommend that if a federal return must be filed, that a qualified C.P.A. or other tax professional file that return. If you do not have a C.P.A. or other tax professional, we can recommend one for you.