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Encyclopedia > Gift tax

Inheritance tax, also known in some countries outside the United States as a death duty and referred to as an estate tax within the U.S, is a form of tax levied upon the bequest that a person may make in their will to a living person or organisation. If a bequest is made to a charitable organisation, most countries do not apply the tax. The tax is also imposed on other transfers of property made as an incident of the death of the owner, such as a transfer of property from an intestate estate, or the payment of certain life insurance benefits. This article is in need of attention. ... A tax is an involuntary fee paid by individuals or businesses to a state, or to functional equivalents of a state, including tribes, secessionist movements or revolutionary movements. ... In the law, a will or testament is a documentary instrument by which a person regulates the rights of others over his property or family after his death. ... Intestacy refers to the body of common law that determines who is entitled to the property of a dead person in the absence of a last will and testament or other binding declaration. ... Life insurance policies, including pensions and life annuity policies, provide payments depending on the life or the death of a particular person or persons. ...

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Australia

Death duty existed in Australia until 1981. In 1978 the then premier of the state of Queensland, Sir Joh Bjelke-Petersen abolished inheritance tax in his state. Quotes made by Sir Joh at the time seem to indicate that this was partly intended to encourage business people and others from the more populous southern states to move to Queensland. 1981 is a common year starting on Thursday. ... 1978 was a common year starting on Sunday (the link is to a full 1978 calendar). ... A premier is an executive official of government. ... Motto: Audax at Fidelis (Bold but Faithful) Nickname: Sunshine State/Smart State Other Australian states and territories Capital Brisbane Government Governor Premier Const. ... Sir is an honorary title. ... Sir Joh Bjelke-Petersen Sir Johannes Bjelke-Petersen (13 January 1911 - 23 April 2005) was an Australian politician who was Premier of the state of Queensland from 1968 to 1987, the states longest serving Premier. ...


The then Prime Minister, Malcolm Fraser endorsed this action (some feel as a method of boosting flagging electoral support) and abolished Federal inheritance tax in 1978 as well. By 1981 inheritance tax had been abolished in all Australian states and territories. The current (25th) Prime Minister of Australia, John Howard (sitting, fifth from left), with his Cabinet, 1999 The office of Prime Minister is in practice the most powerful political office in the Commonwealth of Australia. ... Rt Hon Malcolm Fraser John Malcolm Fraser (born May 21, 1930), Australian politician and 22nd Prime Minister of Australia, came to power in the controversial circumstances of the dismissal of the Whitlam government. ...


Australia continues to have no inheritance tax.


Canada

Canada has not had an inheritance tax since it was repealed by Brian Mulroney's government in the 1980s. It's treated as a sale. The Right Honourable Martin Brian Mulroney, PC, CC (born March 20, 1939), was the eighteenth Prime Minister of Canada from September 17, 1984, to June 25, 1993. ... Events and trends The 1980s marked an abrupt shift towards more conservative lifestyles after the momentous cultural revolutions which took place in the 1960s and 1970s and the definition of the AIDS virus in 1981. ...


Hong Kong

Hong Kong has an inheritance tax, but there is opinion to abolish it.


Sweden

Sweden abolished the inheritence tax together with gift taxes in 2005. 2005 is a common year starting on Saturday of the Gregorian calendar. ...


United Kingdom

In the United Kingdom, Death Duty was first introduced as a tax on estates in England and Wales over a certain value from 1796, then called legacy, succession and estate duties. The value changed over time and the scope of estate duty was extended. By 1857 estates worth over £20 were taxable but duty was rarely collected on estates valued under £1500. Royal motto: Dieu et mon droit (French: God and my right) Englands location within the UK Official language English de facto Capital London de facto Largest city London Area  - Total Ranked 1st UK 130,395 km² Population  - Total (2001)  - Density Ranked 1st UK 49,138,831 377/km² Religion... National motto: Cymru am byth (Welsh: Wales for ever) Waless location within the UK Official languages English and Welsh Capital Cardiff Largest city Cardiff First Minister Rhodri Morgan Area  - Total Ranked 3rd UK 20,779 km² Population  - Total (2001)  - Density Ranked 3rd UK 2,903,085 140/km² NUTS... 1857 was a common year starting on Thursday (see link for calendar). ...


Estate duty was replaced in 1975 by Capital Transfer Tax, which was replaced by Inheritance Tax (IHT) in 1986. Inheritance Tax is a significant revenue generator for the UK government, around £2.4bn in 2001. The current rate is 40% on the value of all the estate over £263,000. However, as the estate of a deceased person includes all of their worldly belongings, such as houses and the like, many people can fall foul of this tax. On death there is a minimum of 12 months of probate, during which solicitors assess the value of the estate and consider challenges. If there is insufficient cash to pay the tax and the solicitors' bill, then assets must be sold. 1975 was a common year starting on Wednesday (the link is to a full 1975 calendar). ... 1986 is a common year starting on Wednesday of the Gregorian calendar. ... 2001 is a common year starting on Monday of the Gregorian calendar. ...


In order to avoid the tax, many people with large estates will practice some or all of the following avoidance measures:

  • The giving of money in a trust (property) fund before death.
  • The giving of money before death (subject to a maximum before tax applies of some £5000 a year)
  • Transferring assets to a spouse

Generally, gifts made seven years before death are exempt from inheritance tax In common law legal systems, a trust is a relationship in which a person or entity (the trustee) has legal control over certain property (the trust property or trust corpus), but is bound by fiduciary duty to exercise that legal control for the benefit of someone else (the beneficiary), according...


United States

The federal government imposes an estate tax, which is calculated as a percentage of the net value of the gross estate after certain credits and deductions. Any tax due is paid by the executor or other person responsible for administering the estate, who is also responsible for filing a return with the Internal Revenue Service. The return must contain detailed information as to the valuations of the estate assets and the exemptions claimed, to ensure that the correct amount of tax is paid. For 2005, the credits and deductions mean that an estate with a value less than $1,500,000 would not pay an estate tax and most likely would not have to file an estate tax return. The U.S. Constitution, adopted in 1789 by a constitutional convention, sets down the basic framework of American government in its seven articles. ... An executor is a person named by a maker of a will to carry out the directions of the will. ... The Internal Revenue Service (IRS) is the United States government agency that collects taxes and enforces the tax laws. ... The United States dollar is the official currency of the United States. ...


Life insurance benefits generally form part of the gross estate for tax purposes, if the benefits are payable to the estate, or if the decedent was the owner of the life insurance policy or had any "incidents of ownership" over the life insurance policy. Similarly, bank accounts or other financial instruments which are "payable on death" or "transfer on death" are usually included in the taxable estate, even though such assets are not subject to the probate process. Probate is the legal process of settling a dead persons estate: specifically, distributing his property. ...


The US also imposes a gift tax, assessed in a manner similar to the estate tax. Its purpose is to prevent a person from easily avoiding paying estate tax by giving away all of their assets during their lifetime. However, an exemption is available for transfers of up to $11,000 per person per year. A single donor can make gifts up to this amount to as many people as they wish each year, so if they have enough people they wish to give assets to and/or enough time, they may be able to reduce their estate enough to avoid estate tax.


Furthermore, transfers (whether by bequest, gift, or inheritance) in excess of $1 million may be subject to a generation-skipping transfer tax if certain other criteria are met.


Many of its opponents refer to the estate tax as the "death tax" and have called for its abolition. Since 2002, the top rate has dropped from 50% by 1 per cent. per year; it is scheduled to drop to 45% in 2009, thence to 0% in 2010, but as of 2005, if no further changes in the law are enacted, the tax will be reimposed at a top rate of 50% in 2011. It is, however, expected that Congress will enact legislation to change this in the intervening period. Death tax is a political slogan used mainly by conservatives in the United States to refer to the estate tax. ... 2005 is a common year starting on Saturday of the Gregorian calendar. ...


External links

  • Inheritance Tax World (http://inheritance-tax.openchallenge.org) UK perspective

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