On March 20, 2012, Governor Mitch Daniels signed the bill making long-awaited changes to the Indiana inheritance tax. The new law makes some interim changes to the Indiana inheritance tax and ultimately repeals the tax for the year 2022 and beyond.
The new law raises the exemption for Class A transferees (including children, stepchildren, and grandchildren) from $100,000 to $250,000, and reclassifies a spouse of a child or stepchild as a Class A beneficiary to whom the higher exemption applies. Therefore, the first $250,000 transferred by a decedent to each child, stepchild, grandchild, or spouse of a child or stepchild is free of Indiana inheritance tax. These changes are effective for transfers resulting from the deaths of individuals occurring after December 31, 2011. No changes were made to the exemptions for Class B or Class C beneficiaries, and no changes were made to the inheritance tax rates that apply to transfers in excess of the applicable Class exemptions.
In addition to these changes, the new law phases out the Indiana inheritance tax over a period of nine years beginning in 2013. The phase-out occurs by means of an increasing credit against the inheritance tax until the year 2022 when the inheritance tax is completely phased out. The new law also phases out over ten years beginning July 1, 2012, the inheritance tax replacement amounts payable to counties.
These changes favorably impact Indiana residents. Individuals, small business owners, and family farm owners who have acquired assets during their lives may now pass those assets on to children and others at reduced Indiana inheritance taxes through 2021 and completely free of Indiana inheritance tax in 2022 and beyond.
For more information about estate planning and death taxes, you may contact one of the estate planning attorneys at Bamberger, Foreman, Oswald & Hahn, LLP.
Author: M. Beth Burger (bio)