Inheritance Tax

*The following information is provided as a public service and should not take the place of legal consultation.
Excerpts taken from: Indiana Death Taxes and Probate Administration, Inheritance Tax Division (2001 revision.)

The Hamilton County Assessor’s Inheritance Tax Division's main function is to determine the Indiana State Inheritance Tax liability of each heir or beneficiary in a decedent’s estate. The Indiana inheritance tax is not a tax on the property itself, but on the transferee’s (heir’s) right to receive or succeed to property. The tax is imposed at progressive rates with exemptions decreasing and the rates rising the more distant the relationship of the decedent to the recipient of the property. Inheritance taxes are determined by the Probate Court for resident Indiana decedents and by the Indiana Department of Revenue, Inheritance Tax Division, for nonresidents decedents who have assets in Indiana.
The inheritance tax applies to real estate (the physical land and everything permanently attached to it) and tangible property (the combination of Real Property and Personal Property) located within Indiana which belonged to a deceased resident and the decedent’s intangible personal property (incorporeal property, such as money, deposits, credits, shares of stock, bonds, notes, other evidences of indebtedness, and other evidences of property interests) regardless of where it is located. It also applies to property interests of a non-resident decedent, for real and tangible personal property.

What is Probate?
Probate is the court procedure by which a decedent’s property is administered. Whether a person dies with or without a will, any assets in the decedent’s name alone are probate assets and must go through the probate process.
The probate process requires a person to present the decedent’s will to the court. After the court determines that the decedent’s will is valid, the court appoints a named personal representative to administer the assets of the estate. The personal representative is responsible for collecting the decedent’s assets to his/her heirs. If the decedent dies without a will, the court will appoint a personal representative. The decedent’s assets will be distributed first to his/her spouse, children or grandchildren, then the assets will be distributed to his/her parents, brothers, sisters and any nieces and nephews who are children of his/her deceased brothers and sisters.

Must I Go Through the Probate Process?
Indiana law allows an estate with less than $50,000 of assets to bypass the probate process. A person may prepare a Small Estate Affidavit which states the following:
45 days have elapsed since the decedent’s death;
The value of the gross probate estate does not exceed $50,000;
No application or petition for the appointment of a personal representative is pending or has been granted in any jurisdiction; and
The claimant is entitled to payment or delivery of the property.
The claimant may present this notarized affidavit to any institution or person holding property of the decedent, and that institution or person shall deliver the property to the claimant.

Must I Complete a Tax Return?
Indiana law requires each estate to file one Indiana Inheritance Tax Return, Form IH-6, on behalf of all of the beneficiaries, if the exemptions due not exceed the gross estate.
Form IH-6 is due one year from the date of the death of the decedent and filed with the probate court of the county in which the decedent resided. Form IH-6 may be obtained from the county Assessor’s Office in which the decedent resided.

How Much Inheritance Tax Must I Pay?
An inheritance tax is imposed on all probate and non-probate assets owned by the decedent at the time of his/her death with the exception of life insurance proceeds payable to a named beneficiary, out-of-state real estate, and tangible personal property which has an actual situs located outside of the state. The amount due is based on the beneficiary’s relationship to the decedent.

When Must I Pay the Tax?
The inheritance tax is due 18 months from the date of death. If the payment is made within 9 months from the decedent's death, the county treasurer shall grant a 5% discount on the tax due. After 12 months, interest is charged at 10% per annum on any delinquent portion of tax due from the date of death to the date of payment. The court may reduce the rate of interest from 10% to 6% if the estate shows unavoidable delay. The court, however, may not waive the entire interest.

What is Indiana Estate Tax?
The Indiana Estate tax is a tax imposed upon a recipient or nonresident decedent’s estate. The tax is the difference between the Indiana portion of the federal state death tax credit allowed on the Federal Estate Tax return (Form 706), and the amount of inheritance tax actually paid.

What is Fiduciary Income Tax?
Indiana Fiduciary Income Tax is imposed on income earned on trust assets and/or on estate assets after the decedent’s death.

Estate:
Under the Internal Revenue Code, the value of a decedent's gross estate is determined by including the value, at the time of death, of all real and personal property, including tangible and intangible property, wherever situated [26USCS-2031(a)]. It includes the value of all property to the extent of the decedent's interest in it at the time of death. The taxable estate consists of the gross estate minus certain deductions for expenses, debt taxes, losses, charitable gifts, and bequests to the surviving spouse. [26 USCS-2051]

Rates and Exemptions:
Transfers to a spouse are completely exempt from Indiana inheritance tax (I.C.6-4.1-3-7). Each heir or beneficiary of a decedent's estate is divided into three classes; each class is entitled to a specific exemption (I.C.6-4.1-3-91).

Class A: Spouse, Children, Grandchildren, Parents and Step Children (If date of death is after 7/1/2004)
Effective July 1, 1997, the first $100,000.00 of an estate going to an heir in Class A is exempt of inheritance tax. Estates over the first $100,000.00, the tax is as follows:
$25,000 or less 1% of net taxable value
$25,000 to $50,000 2% of net over the first $25,000 plus $250.00
$50,000 to $200,000 3% of net over the first $50,000 plus $750.00
$200,000 to $300,000 4% of net over the first $200,000 plus $5,250.00
$300,000 to $500,000 5% of net over the first $300,000 plus $9,250.00
$500,000 to $700,000 6% of net over the first $500,000 plus $19,250.00
$700,000 to $ 1 million 7% of net over the first $700,000 plus $31,250.00
$1 million to $1.5 million 8% of net over the first $1 million plus $52,250.00
Over $1.5 million 10% of net over the first $1,500,000 plus $92,250.00

Class B: Brother, Sister, Niece, Nephew, Daughters-in-law, Sons-in-law
First $500 is exempt from tax. The estate over the first $500 is taxed at the following rate:
$100,000 or less 7% of net taxable value
$100,000 to $500,000 $7,000 plus 10% of net over the first $100,000
$500,000 to $1 million $47,000 plus 12% of net over the first $500,000
Over $1 million $107,000 plus 15% of net over the first million

Class C: No blood relation, Cousin, Aunt, Uncle, Brothers-in-law, Sisters-in-law.
The first $100 is exempt. Estates over the first $100 are taxed at the following rate:
$100,000 or less 10% of net taxable value
$100,000 or $1 million $10,000 plus 15% of net over the first $100,000
Over $1 million $145,000 plus 20% of net over the first million

Who to contact for more information:
Susan Venable
Inheritance Deputy
susan.venable@hamiltoncounty.in.gov
317-776-9733

Inheritance Tax Forms