Do you trust your wife? It’s not my question, it’s Andy Dufresne’s question. Remember when Andy asked prison guard Captain Hadley that question after overhearing the prison guard complaining about the taxes he would have to pay on an Inheritance?
Andy posed the question because it was the lead-in to his advice on how to structure the receipts of the Inheritance to minimize the taxes that Hadley would have to pay.
Most people, remembering the scene, assume that with an Inheritance comes a big tax bill.
Wrong!!! Well, at least usually. Only six states have an inheritance tax. Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. The rate in those states range from 4% to 18%. FYI: don’t confuse an inheritance tax with an estate tax.
An inheritance taxes paid by each beneficiary out of his or her share. An estate tax, on the other hand, is paid by the Executor off the top before disbursing anyone’s Inheritance. Which jurisdictions have an estate tax? I’m glad you asked! They are Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington State and Washington, D. C. And of course, the federal government.
However, in every case of an estate tax, the total amount that the deceased left behind has to be worth a certain amount before any taxe is due. Anywhere from $1 million to over $10 million.
The moral of the story? Don’t spend that Inheritance until you know how much you’re really getting.
Any other valuable lessons from Shawshank that you’d like to share with us?