Is There A Difference Between Inheritance & Estate Tax?It basically boils down to the fact that the individual who receives assets from the deceased person has to pay taxes on that asset. On the other hand the estate has to pay taxes on the total value of the assets held by the estate. The executor of the estate is responsible for paying the taxes and can use funds from the estate to pay the taxes. The Federal Government maintains jurusdiction over estate taxes and the states maintain jurisdiction over the gift taxes.
There are tax exemptions that you can use to offset some of the gift taxes that you have to pay when your love one leaves you their hard earned assets. The relationship of the person receiving the asset determines the tax rate as well as the exemption. The state tax regulations govern the taxes and rates and determines the exemptions that a tax payer can take.
There are things you can do while you are alive to help avoid undue taxes on your love ones. One of the best options is to figure out how to transfer ownership of the property to your heir but maintain control while you are alive. One of the ways to do that is to setup a corporation to hold the assets and issue shares of stock to the heirs while you are alive. It's important that you keep all of the stock that has voting rights and give them none voting stock so you keep control of the company. You would transfer the voting stock in your will so they would then gain control of the assets after your death. The voting stock would be a small proportion of the stock so it won't carry a huge value therefore, there won't be much of an inheritance tax. Learn more about Inheritance Tax Planning from the tax planning lesson. | 
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