- North Carolina does impose an estate tax. However, this tax follows from the federal estate tax structure. This means you pay inheritance tax only when you would otherwise be subject to an estate tax under the federal estate tax rules. You must have at least $5 million in assets to be subject to North Carolina's estate tax.
- The deductions allowed under the federal tax system allow you to lower the value of your estate, and thus your North Carolina liability, even if you have a value of more than $5 million. Only the amount in excess of $5 million is subject to the tax.
- You might end up with an estate value of more than $5 million during your working years even if your estate otherwise would not be worth this much. For example, you might have term life insurance policies that equal or exceed $5 million during your lifetime. This money might be necessary to pay your debts and provide a sustainable income for your spouse, or perhaps even a college education for your children. If you die during this time, however, your estate valuation might subject your heirs to estate tax.
- If you have an estate valued at more than $5 million, there are a few ways to reduce the value of the estate. First, you might consider transferring all life insurance policies to a life insurance trust. This removes the policies from the estate, thus lowing its value. Dying with any unpaid debts allows your heirs to deduct the debt from the total value of your remaining assets. While the debt will be paid out of the proceeds of the estate, this might end up being less than the tax you would otherwise pay.
previous post