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Repeal of the Indiana Inheritance Tax

For the first time in years Indiana no longer taxes individuals upon their death.  Indiana previously collected an inheritance tax from the estates of deceased people when their estate was probated.  The tax was assessed and exempted based upon the relationship between the deceased individual and the inheriting individual.  We previously had three classes of exemptions.  In 2012, the Indiana General Assembly increased the exemption for the closest related relatives with a schedule to phase out the inheritance tax over ten years.  However, the 2013 General Assembly took the matter a step further.  The Indiana Inheritance Tax was abolished by Governor Pence signing House Enrolled Act 1001 on May 8, 2013.

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The repeal was made retroactive to January 1, 2013.  This has forced the Indiana Department of Revenue to implement steps to issue refunds for taxes paid before the abolishment of the tax and no longer assessed as a result of the repeal.  The repeal has also resulted in numerous other changes to local government policies, as individuals no longer need to have a filed Consent to Transfer form (IH-14) to move assets or monies from bank accounts.  This change in legislation also has a minor change in the probate process, as the courts no longer need to address taxation in attorney and personal representative filings.  This repeal does not affect taxes that may be due for individuals dying prior to January 1, 2013, but may impact decisions that you make in your individual and joint estate plans.  Additional information regarding the Inheritance Tax and its repeal can be found at www.in.gov/dor/3807.htm.

Please note that the Indiana Inheritance Tax repeal does not impact the Federal Gift and Estate Tax or the Federal Generation Skipping Tax.  The abolishment of this tax also does not impact responsibilities of personal representatives to file final income tax returns both with the Internal Revenue Service and the Indiana Department of Revenue.  As with any taxation question, you should consult with an attorney or accountant familiar with Indiana and federal tax laws for tax advice.

U.S. Treasury Department Circular 230 Notice:  Any tax advice that may be contained in this communication and its attachments is not intended to be, and cannot be, used for the purpose of (i) avoiding tax-related penalties under Section 6662(a)(2) of the Internal Revenue Code for underpayment of federal taxes, or applicable state or local tax law provisions or (ii) promoting, marketing, or recommending to another party any tax-related matters addressed herein.  This communication is informational only and should not be construed as advice.