Notes
Slide Show
Outline
1
North Carolina Transfer Taxes
  • Timothy A. Nordgren
  • BRADY, NORDGREN, MORTON & MALONE
  • (919) 573-1415
2
Inheritance Tax
  • Tax paid by beneficiaries based on the property they received.
  • Rates vary depending on relationship of beneficiary to decedent.
  • ABOLISHED in North Carolina in 1999.
  • Could be brought back in the event of budget shortfall.
  • Different from the Estate Tax, which is paid by the estate before property is distributed to the beneficiaries.
3
North Carolina Estate Tax
  • NC used to rely on the Federal “state death tax credit” for its estate tax revenue.
  • State Death Tax Credit was a percentage of Federal Estate Tax set aside for states.
  • EGTRAA (2001) phased out the state death tax credit forcing many states to modify their estate tax laws to make up for the resulting loss of revenue.
  • To date, new North Carolina estate tax law has matched increases in Federal Estate Tax Exemption to current $2,000,000 level.
4
NC Estate Tax (continued)
  • NC has refused to recognize elimination of state death tax credit.
  • Result for estates in excess of $2,000,000 is two calculations; the calculation of the federal estate tax under the new EGTRAA rules, and the calculation of the NC estate tax under the pre-EGTRAA rules providing for the state death tax credit.
  • NC estate tax is deductible against federal estate tax.
5
North Carolina Gift Tax
  • Separate from Federal Gift Tax.
  • NC is one of only a handful of states that has its own gift tax.
  • There is no gift tax on transfers between husband and wife or on charitable gifts (like Federal).
  • Can make gifts of up to $12,000 to an unlimited number of beneficiaries each year (like Federal).
  • Medical and educational expenses paid directly to the provider are also gift tax free (like Federal).
6
NC Gift Tax (continued)
  • The NC lifetime exemption for gifts in excess of the annual exclusion, and gifts not made for health/education, is only $100,000.
  • Federal gift tax exemption is $1,000,000.
  • $100,000 NC exemption applies only to gifts to Class A beneficiaries.
  • Identity of beneficiary irrelevant for purposes of using Federal gift tax exemption.
7
NC Gift Tax (continued)
  • NC Class A beneficiaries include children, stepchildren, grandchildren and parents.
  • NC Class B beneficiaries include siblings, aunts, uncles, nieces and nephews by blood.
  • NC Class C beneficiaries are all other beneficiaries.
8
NC Gift Tax (continued)
  • Federal gift tax rates do not depend on identity of the beneficiary.
  • NC Gift Tax rates vary depending on identity of beneficiary.
  • The maximum rates are as follows: 12% for Class A beneficiaries; 16% for Class B beneficiaries; and 17% for Class C beneficiaries.
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NC Gift Tax (continued)
  • NC gift tax, like the Federal gift tax, is paid by the person making the gift.
  • NC gift tax can present an unexpected tax liability for unsuspecting taxpayers.
  • NC gift tax can limit estate planning techniques that involve gifts intended to use Federal gift tax exemption.
10
Timothy A. Nordgren
BRADY, NORDGREN, MORTON & MALONE, P.L.L.C.
  • (919) 573-1415
  • Email: tim@timnordgren.com
  • Website: www.bradynordgren.com