Sponsored - The following content is created on behalf of Tom Riley Law Firm and does not reflect the opinions of Gray Media or its editorial staff. To learn more about Tom Riley Law Firm, visit https://trlf.com.
In today’s episode of Legal Live, Peter Riley of the Tom Riley Law Firm answers a question about inheritance tax concerns.
A viewer asked, “What are tax implications of probate law?”
“There’s a lot of tax issues,” says Peter. “First of all, federal estate tax only applies if you’ve got a net taxable estate of about $14 million, so very few people are touched by that. Iowa imposes an inheritance tax. When I started practicing law in the early ‘80s, when a spouse passed away and the surviving spouse went to the bank to open their safety deposit box, they couldn’t do it unless the banker was there to fill out an inventory and mail it to the Iowa Department of Revenue.”
He says this started changing in the early 1990s.
“They abolished inheritance tax for spouses in Iowa,” says Peter. “A few years later, they abolished it for ancestors, descendants and step-children. And then two years ago, they started a phase-out, so when you have a more distant relative or a non-relative, the inheritance tax rates go up to about 15% and they’re now under a phase-out.”
This phase-out plan was adopted in 2021 to lower these inheritance tax rates.
“In 2025, Iowa will no longer have an inheritance tax,” says Peter. “But then you talk about the income tax issues. An inheritance is not taxable, except it can be, if the asset is a taxable asset like an IRA...but most assets are not taxable.”
Peter says there is one big issue heirs should pay attention to.
“You need to be aware of the tax break that helps middle America. It’s called a stepped-up basis,” says Peter. “...If your parents sold their house before they died, they would have a gain or loss, based on what they paid for the house...However, the stepped-up basis gives the person who inherits the interest date of death fair market value as their new basis for gain or loss.”
Peter also shares other insight in to tax law histories and guidelines, and recommends speaking to a lawyer if you have specific estate law questions. Watch the video above to hear all the questions and answers to your legal questions.
For other legal questions, please reach out to Peter or his partners online. For more information you can visit the Tom Riley Law Firm website.