ESTATE AND INHERITANCE TAXES

IN KANSAS AND OKLAHOMA – PART 1

“The idea that the property you leave behind after you die might have to go to the government in taxes is not an idea

that most people like.”

By Larry Parman OKLAHOMA ESTATE PLANNING ATTORNEY

Estate and Inheritance Taxes on Kansas and Oklahoma – Part 1 www.ParmanLaw.com 2

After all, you spent a lifetime earning money and building wealth, and the idea

that the government will simply take it after you're gone can be infuriating.

But fear not. While there are taxes that apply to the property people leave after

they die, the issue is far less significant than many people realize. In fact, most

people who die and leave behind property will not have to pay any taxes on their

estates at all. Further, people who inherit property from others usually do not

have to worry about paying taxes on those inheritances either.

To help clarify this estate and inheritance tax issue, today we start the first of a

two-part series that addresses these concerns. As always, if you have specific

questions about the state or inheritance taxes, or need advice, you need to talk to

us so we can speak to you about your specific circumstances.

Estate and Inheritance Taxes on Kansas and Oklahoma – Part 1 www.ParmanLaw.com 3

STATE, FEDERAL, OR BOTH

One of the first issues you need to understand as we discuss these tax issues is

the idea that taxes can exist at several different levels. Every state can impose its

own kind of tax, as can the federal government. With estate and inheritance

taxes, the specter of taxes at both levels is possible, but is, as we will learn, not

very likely.

Estate and Inheritance Taxes on Kansas and Oklahoma – Part 1 www.ParmanLaw.com 4

THE DEATH TAX

While there are a number

of taxation issues

associated with leaving

behind an estate, perhaps

the most well-known, and

widely misunderstood, is

the so-called "death tax."

More appropriately

known as the estate tax,

this tax applies to the

property people leave

behind after they die. To

understand how this tax works, you have to have a basic understanding of the

process that occurs after someone passes away.

Put simply, once you die and leave behind property, someone will become

responsible for managing the property and distributing it to new owners. That

person, known as a personal representative, executor, or estate administrator,

will have the legal authority to use estate property.

It falls to the administrator to determine if the estate owes any estate taxes, and

to use estate property to pay those taxes before distributing anything to new

owners.

Estate and Inheritance Taxes on Kansas and Oklahoma – Part 1 www.ParmanLaw.com 5

In other words, you will never have to pay the estate tax yourself, nor do your

inheritors have to pay it if they receive an inheritance.

Currently there is a federal estate tax, but it only applies to estates worth in

excess of $5.43 million. Not only that, if you are a married couple, you can

combine the exemption amounts afforded to both spouses, meaning married

couples who leave behind estates worth less than $10.86 million dollars will not

pay a single dime in federal estate taxes.

Even better, neither Kansas nor Oklahoma currently have a state-level estate tax,

though some other states do and can impose taxes if you inherit property in

those states.

Estate and Inheritance Taxes on Kansas and Oklahoma – Part 1 www.ParmanLaw.com 6

INHERITANCE TAXES

An inheritance tax, unlike an estate tax, is a tax levied against the property

people inherit. If, for example, you receive an inheritance from your grandfather,

you might have to pay an inheritance tax on the value of the property received.

As with other taxes, both federal and state inheritance taxes could apply.

Currently, however, there are no federal, Kansas or Oklahoma inheritance taxes.

MULTI-STATE ESTATES AND INHERITANCE

When you're dealing with

estates with property in

multiple states, or inheritors

who live in different states,

the question of inheritance

and estate taxation becomes

more complicated. For

example, if you live in one

state and a relative dies in

another, will you have to pay

inheritance taxes if the state

in which your relative died imposes such a tax? The answer to this question can

be a little complicated, so if you're in this type of situation you should consult an

attorney about your potential tax liability.

Estate and Inheritance Taxes on Kansas and Oklahoma – Part 1 www.ParmanLaw.com 7

TAX STRATEGIES

Regardless of how much you

own or what your inheritance

wishes are, having an

understanding of what tax

issues might apply to you and

your estate plan is essential.

While most people will not

require complex tools to deal

with their tax issues, there are

situations where even simple

actions can greatly reduce, and

potentially eliminate, a future

tax bill.

Talking to us about your estate

plan, your current financial

situation, and what you can do

to protect yourself against state and federal taxes is essential if you want to be

sure you leave behind as large an estate as possible. If you haven't already done

so, schedule an appointment to speak to us at your earliest possible convenience.

Estate and Inheritance Taxes on Kansas and Oklahoma – Part 1 www.ParmanLaw.com 8

About the Author Larry Parman

After helping his own family deal with a lengthy probate and a battle with the IRS following his father’s death in a farm accident, Larry made a decision to help families create effective estate plans designed to reduce taxes, and minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors. Following a dozen years in the investment banking and financial services business, in the mid-1980s Mr. Parman formed a law firm that gives families the peace of mind that comes from having created a premier estate and financial plan. After forming his law firm in 1984, he offered a series of public and private seminars to inform the public about using a Living Trust as the foundation of a

family’s estate plan. Today, Parman&Easterday is one of the leading business and estate planning law firms in the Midwest. The firm’s primary focus is on business and estate planning, elder law, asset protection, and providing effective estate planning solutions for clients. Today, the firm’s premier estate plan design is referred to as a Legacy Wealth Plan. Mr. Parman is a frequent guest on the radio and can be seen on television talk shows explaining the importance of proper estate planning. Prosperity Productions selected Mr. Parman as a featured speaker in a nationally-recognized educational video on Living Trusts. He is the author of numerous published articles on financial and estate planning matters and the co-author of two books, Estate Planning Basics: A Crash Course in Safeguarding Your Legacy and Guiding Those Left Behind in Oklahoma: Settling the Affairs of Your Loved Ones. Mr. Parman is a member and Fellow of the American Academy of Estate Planning Attorneys. He is also a member of the Oklahoma and Missouri Bar Associations, the American Bar Association, and the Oklahoma City Estate Planning Council.

www.ParmanLaw.com

OVERLAND PARK, KS 10740 Nall Avenue, Suite 160 Overland Park, KS 66211 Phone: (913) 385-9400 Fax: (913) 385-9422

OKLAHOMA CITY, OK 13913-B Quail Pointe Drive Oklahoma City, OK 73134 Phone: (405) 843-6100 Fax: (405) 917-7018