While there is no inheritance tax or estate tax in Michigan, one’s estate will still be subject to state law on estate administration. While wills, trusts, probate, and intestate succession are all part of estate planning law, taxation on inheritance and related tax issues remain one of the most asked-about topics.

Inheritance taxes and estate taxes in Michigan were put in place in 1899, but inheritance tax laws were repealed in 2019. Meanwhile, while the state’s estate tax law is technically still on the books, there has not been a mechanism for collection since 2005. The estate tax in the state depended on a specific provision of the Internal Revenue Tax Code that allowed state estate tax credits against federal estate taxes. As would be explained by your estate attorney, when such credit was eliminated by Congress in 2005, inheritance and estate tax planning in Michigan was effectively eliminated as well.

However, the case is different if the deceased person passed away on or before Sept. 30, 1993. The surviving heir of such decedent will have to be concerned about inheritance and estate tax planning. An estate planning lawyer can tell you more about this exception.

  • Under estate law, what is the difference between estate and inheritance taxes?

 Inheritance TaxWhile both become relevant when you or a loved one dies as well as require the services of a reliable estate lawyer, they are quite different. Estate taxes are collected from the estate of the deceased person immediately after death. Inheritance taxes, on the other hand, are not imposed right after you pass away. They are collected after the heirs or loved ones of the deceased receive their inheritance.

There is likewise no gift tax in Michigan. Federal gift taxes are only applied when transferring more than $15,000 to a beneficiary within a calendar year. This will likely not be a legal issue as beneficiaries who are given less than that amount are exempt from federal gift tax.

  • What about (federal and state) income tax returns?

State and income tax return must be filed by the estate of a deceased family member one last time. Such is due by the deadline for the succeeding year.

  • What about federal estate taxes?

If your inheritance exceeds $11.58M in 2020, you may have federal estate tax liability for the overage. The due date for such is nine months after death. An estate planning attorney can explain this in more detail.

  • How are these related to the estate planning documents?

Any proceeding related to the above will not be as complicated if a professional from a credible law firm has already discussed with you the estate planning process. A good local attorney offering estate planning services can also help you when you create a will.

One of the basic reasons why you would need a will and testament is to avoid intestacy. When you die without drafting a will (dying intestate), your surviving spouse, children, grandchildren, or whoever you wanted to inherit or designate as heir will have to go through intestacy laws. Setting up a last will and testament will enable a testator (following the legal process) to distribute his or her personal property in accordance with the estate plan he or she specified in the legal document.

The simplest legal advice to avoiding probate and estate dispute is to write a will that will likely not be contested (for undue influence, lack of testamentary capacity, or other reasons). Note that Michigan is adherent to the Uniform Probate Code or the standard probate law. Only an estate lower than $15,000 can go through the simple probate process. Larger estates could stay in the probate court for seven months or even a year. 

For questions on inheritance tax, wills, and trusts, or even guardianship, conservatorship, or power of attorney, get only the legal services of true professionals. Contact a law firm whose specialization is wills and probate. Call us at Entrusted Estate and Asset Protection, PC to consult with an experienced estate planning lawyer.