When a loved one passes away in South Carolina, there are a lot of things to do and a lot to be aware of. One of the questions you may have is whether there are going to be probate taxes that apply to the estate. Our estate administration lawyers can provide an overview of what to expect in South Carolina.
Is There a Probate Tax in South Carolina?
South Carolina does not have a probate tax. However, the estate may be subject to federal estate taxes.
What is the federal estate tax exemption for 2022?
As of January 1, 2022, the federal estate tax exclusion amount is $12,060,000. For a married couple, the exemption is $24,120,000.
Probate Taxes in South Carolina at a Glance:
- South Carolina does not have an estate tax or an inheritance tax
- A federal estate tax may apply to large estates over $12.06 million
- Income taxes may apply to the estate during administration and to the beneficiary of an account
- Assets are distributed according to a valid will, trust or intestate succession laws in the state
Are there taxes on income earned by the estate during administration?
Estate administration typically takes some time. During that time, the estate may earn income. Estate income must be reported if it is more than $600 gross.
One exception is if the asset has a designated beneficiary. (Retirement and bank accounts are common examples.) In that case, the income generated transfers to the beneficiary who is then responsible for the taxes.
In addition to estate income taxes, the personal representative must see to it that an income tax return gets filed for the deceased individual for the last partial year of their life. When there is a surviving spouse, it can be a joint return in the same manner as if the decedent were still alive through the end of the year.
With no estate tax in South Carolina, who gets what when a person dies?
Even though there is no estate tax in South Carolina, laws still determine how to dispose of the person’s estate. When there is a valid will, the will determines who receives the probate assets and in what amounts. When there is no will, intestate laws apply. State law determines whether children, spouses, parents or siblings inherit from the estate and in what amounts when there is no valid will or trust.
What state’s laws apply to probate taxes?
Even if you are in South Carolina, the laws of a different state may apply if you are inheriting from someone in another state. Some states apply probate taxes if the deceased owned real estate in the state. Taxes may also apply to the personal property that the deceased has in a given state. Some states vary the tax rate based on the relationship between the deceased and the person inheriting the property.
Does South Carolina have a gift tax?
South Carolina does not have a gift tax. However, a person making a gift in South Carolina may be subject to federal taxes. In 2022, the federal tax gift exemption is $16,000. The exclusion applies per recipient. You can give up to $16,000 to each person without having to file a gift tax return. When due, gift tax rates vary depending on the circumstances.
How does estate tax work for payable on death accounts in South Carolina?
Not all of a deceased person’s accounts necessarily pass through the estate for distribution. It is possible that some financial accounts have a named beneficiary. For example, a bank account or a retirement account may designate who receives the funds when the primary account holder passes away. For these payable-on-death accounts, the beneficiary generally must fill out a claim form and provide a death certificate to assume ownership of the account. As the account earns interest, it becomes taxable income to the recipient.
Taxes in South Carolina Probate
Taxes are an important consideration for both estate planning and probate administration. Knowing how taxes work can help you prepare your estate. They are also important to know if you are part of the administration of an estate or a party receiving an inheritance.
Attention to detail is crucial when it comes to estate planning and administration. Our estate administration lawyers can answer your questions, help you avoid mistakes and delays and customize a plan for your situation. Parker Law, LLC often works in conjunction with your CPA or tax professional to makes sure that your tax needs are addressed. Contact us today for your free case evaluation.