If you are preparing to create an
estate plan, or if you are an executor of a Tennessee estate, you will be interested
in knowing whether Tennessee has an estate or death tax.
Tennessee used to impose an estate tax, but it was
repealed in 2016. However, the estate tax still applies to any deaths that occurred in the
state prior to 2016.
Not many Tennessee estates have to pay the estate tax because the state
offers a generous exemption for deaths occurring in
2015: only those estates that are valued $5 million or more are subject to
the Tennessee estate tax.
Under Tennessee law, the “inheritance tax” was actually an
“estate tax,” a tax that was imposed on estates that were
valued over a certain dollar amount. In 2015, the Tennessee estate tax
applied to high value estates that were worth more than $5 million.
other states refer to “inheritance taxes,” they are not referring to the
total value of an estate. Instead, inheritance taxes are directly imposed
upon the beneficiaries or heirs of an estate. In those cases, the inheritance
tax varied depending upon how close of a relative the beneficiary or heir
was to the decedent.
Usually, a close relative, such as a spouse or a child of the decedent
would pay little to no inheritance tax, while more distant relatives or
nonfamily members would be subject to a higher rate.
Please be advised that the Tennessee estate tax for deaths occurring in
2015 is not the same thing as federal estate tax. For 2016, estates worth
$5.45 million are subject to the federal estate tax, and that amount increases
each year due to inflation.
Estate Tax for Deaths Occurring in 2015
For deaths occurring in 2015, the executor of the estate must determine
if they have to file an estate tax return. If the death occurred in 2015
and the estate was valued more than $5 million, the executor will have
to file a state inheritance/estate tax return. If the death occurred in
2016, the executor does NOT need to file an estate tax return.
Even if an executor has to file an estate tax return it does not mean that
the estate will owe taxes. After deductions for expenses, such as funeral
expenses and probate attorney fees are deducted, the estate may not owe any tax.
Additionally, when a decedent leaves assets to their spouse, those assets
are not taxed, regardless of how much is bequeathed.
Note: If an estate tax return is required for a death that occurred in
2015, it must be filed by the executor within nine (9) months of the decedent’s
death, or the executor must file for an extension. If any tax due is not
paid by the original deadline, interest accrues on the balance.
For further information about the Tennessee estate tax and the federal
estate tax, please
contact my Nashville probate firm for a