Louisiana might not impose its own estate tax, but residents of the Bayou State should still account for their heirs’ financial obligations.
State Succession Taxes
Prior to 2004, Louisiana used to levy two types of succession taxes:
- State inheritance taxes. Louisiana used to require that residents file a special estate tax return before initiating probate. Once the state Department of Revenue received this return, it would issue a certificate that had to be attached to the initial succession petition. However, the state inheritance tax was repealed in 2004, and residents no longer have to file returns before beginning probate.
- Estate transfer taxes. Louisiana once enforced an “estate transfer tax” if the deceased person’s assets were worth more than $10,000. If the heirs had to pay the estate transfer tax, they would be eligible to receive a credit for any necessary federal estate taxes. Similar to the state inheritance tax, estate transfer taxes were abolished in 2004.
Louisiana no longer levies any state-level succession taxes on any estate, no matter how large or small it may be. However, if the decedent owned property in another state that still has an inheritance tax or estate transfer tax, the estate may have to pay taxes on out-of-state assets and holdings.
Federal Estate Taxes
While Louisiana has no estate tax, the federal government may demand payment on particularly large or valuable estates:
- For 2021, the federal estate tax exemption was $11.70 million.
- For 2022, the federal estate tax exemption was $12.06 million.
- For 2023, the federal estate tax exemption is expected to rise to $12.92 million.
The federal estate tax is portable for married couples, meaning that spouses may combine their assets to exempt double the current-year exemption. For example, if both partners pass away in 2022, they can automatically exempt up to $24.12 million in assets.
However, any estate that exceeds these minimum limits must still pay federal estate taxes. For example:
- If the estate’s value exceeds the exemption threshold by $0.00 to $10,000, it will be taxed at 18%.
- If the estate’s value exceeds the exemption threshold by $10,001.00 to $20,000, it will be taxed $1,800 plus 20% of the amount over $10,000.
- If the estate’s value exceeds the exemption threshold by $20,001.00 to $40,000, it will be taxed 22% plus 22% of the amount over $20,000.
- If the estate’s value exceeds the exemption threshold by $40,001.00 to $60,000, it will be taxed $8,000 plus 24% of the amount over $40,000.
The federal estate tax ranges between 18% to 40%, with 40% chargeable on estates valued at $1,000,001 or more over the exemption floor.
Federal Gift Taxes
The federal government’s current gift tax exemption is $15,000 per year for each gift recipient. If you gift more than $15,000 to any individual within a single calendar year, you will have to report the amount to the Internal Revenue Service. The lifetime gift tax exemption in 2022 was $12.06 million.
State Gift Taxes
Louisiana, like most other states, does not impose any gift taxes. However, Bayou State residents may be compelled to pay gift taxes if they receive an inheritance from a decedent who resided in a state with gift taxes.
Generation-Skipping Transfer Tax Exemption
The generation-skipping transfer tax is a tax levied on property passed two or more generations beyond that of the transferring decedent.
However, the generation-skipping transfer tax can be exempted up to $12.06 million. Similar to other exemptions, this amount is also portable for married couples.
Contact a Louisiana Attorney Today
While Louisiana’s tax-friendly laws effectively exempt most Bayou State residents from having to worry about estate-related taxes, high-net-worth families and people who own properties in other states may have long-term tax implications when passing assets and properties to the next generation.
If you need assistance planning your Louisiana succession, please call Scott Vicknair Law, Estate and Probate Division at 504-264-1057 to get started today.