Do I Have to Pay Taxes on an Inheritance in Utah?

Jan 23, 2022 | Estate Planning, Real Estate, Tax, Trusts, Wills and Probate

When a loved one passes away and leaves you with some inheritance, you’ll likely have questions — “What is the process for getting my inheritance?” “Can my inheritance be contested by someone else?” And perhaps most pressing — “Will I have to pay inheritance tax?”

At ProvenLaw, we know that sorting through the many issues related to inheritance, estate planning, and probate can be tricky. That’s why we strive to explain these matters in a simple way to our clients. Utah’s state laws have unique aspects to them that are important to understand to ensure you receive your inheritance with little trouble. 

Below you’ll find our outline of estate tax and inheritance tax considerations in Utah and how they may relate to you. We’ve also highlighted other concerns with inherited assets that you may encounter. Read on to prepare yourself for any work that may be involved with receiving your inheritance.

Inheritance Tax In Utah

An asset passed on to you following someone’s death is considered a form of inheritance. While people may traditionally think of inheritance as money, it can apply to anything that has measurable monetary value. Big-ticket items like houses and cars qualify, as do seemingly low-value items like dishes and furniture. 

Inheritance taxes are paid at the beneficiary level after any estate taxes have been paid after settling estate taxes. Most states don’t levy an inheritance tax, including Utah. However, a beneficiary who lives in another state may have to pay inheritance tax if the beneficiary’s state of residence charges an inheritance tax, even though the estate is administered in Utah.

While a few states require beneficiaries to pay taxes based on the value of their inheritance, Utah does not. There’s no need to file a notice or acknowledgment that you aren’t paying an inheritance tax, either. There may be other types of taxes, but you won’t have to pay for your inheritance. 

House in St George Utah

Estate Tax in Utah

People sometimes mistake inheritance tax with estate tax because both occur after someone passes away. However, the two are very different — an estate tax is levied against the estate before distributing an inheritance. Because the tax is against the remaining estate first, it doesn’t directly impact inheritance taxes. 

Utah does not impose an estate tax itself. However, the federal government does, so the matter must be settled quickly. Estate taxes are due nine months following someone’s death. 

The named executor will determine how to pay estate taxes. If the deceased didn’t name an executor in a will, a judge could appoint someone, or a beneficiary could lobby to become the executor. Regardless, estate taxes have incredibly high thresholds that the total value must pass before any part of the estate can be taxed. Combined with the numerous exemptions and deductions that exist, estate taxes have become less common. 

You should note that not all assets are subject to estate taxes. Some jointly owned assets could be subject to tax, but only the portion owned by the deceased. In addition, there is an unlimited marital deduction that allows for transfer of assets between married individuals without an estate tax consequence on the death of the first spouse.

Other Inheritance Responsibilities

If you’re a beneficiary in a legally recognized will, you will receive your inheritance. However, any outstanding debts left unpaid by the deceased can complicate matters and jeopardize your inheritance. Ideally, the deceased would have worked with an asset protection attorney or an estate planning lawyer to resolve these issues. If they didn’t, however, the responsibility could fall on you and the other beneficiaries. 

Creditors can claim certain parts of an estate to recover their losses. For example, in the case of an unpaid mortgage, they may be able to claim the estate’s home regardless of how their will is designated. Outstanding lines of credit could result in the loss of cash in checking or savings accounts or the liquidation of retirement or investing accounts. Creditors receive priority to do this as part of the probate process.

In Utah, an executor has the responsibility to ensure these debts get paid. Otherwise, creditors can claim assets. The executor must make every reasonable effort to contact the creditors and work out a payment agreement on any remaining debts. Utah law requires executors to contact known creditors directly and publish notices in a newspaper for three weeks to notify unknown creditors if they choose. 

State law gives creditors who receive direct notice sixty days and unknown creditors ninety days to make their claims to assets. If no notice is given then a creditor’s claims are not cut off until a year from the deceased person’s death. Once that period has passed, any action they take is invalid and can be challenged (and subsequently stopped) in court. 

Proven Law Can Help You Settle The Estate

If you are worried about managing your estate after you pass, or if you’re a beneficiary sorting through the complex probate process, don’t be discouraged. Instead, reach out to us at ProvenLaw to get an expert probate attorney on your side. The information addressed in this article is a generalization of complex laws and should not be relied upon without the advice of a competent lawyer analyzing a specific set of facts.

There are multiple legal aspects to wills and trusts. Whether you need an estate attorney to establish your will, a mediation attorney to oversee disputes between beneficiaries, a tax lawyer to help with estate fees, or want to set up an asset protection trust with the expertise of a trust attorney, we’re here for you. 

To learn more about our firm and how we can help you, contact us to set up an appointment today.

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