An inheritance tax is a tool that governments sometimes use to tax assets that people get as part of an inheritance. As you can imagine, this tax can have a big impact when leaving a significant estate to your heirs.
You may think that Michigan doesn’t have an inheritance tax. Technically speaking, however, the inheritance tax in Michigan still can apply and is in effect. However, it does not apply to any recent estate. It only counts for people who receive property from someone who passed away prior to or on September 30, 1993.
As you can imagine, this means that the vast majority of estates are not subject to a state inheritance tax. Most estates from 1993 and before have already been settled and the taxes have been taken care of. Only in very rare cases would this tax apply today.
One way this could happen, for instance, is in the case of an “After Discovered Asset.” This usually happens if the estate gets distributed and then closed, but then another asset is discovered later. It was not mentioned in the initial estate, but it still belonged to the person who passed away. It may be possible for this asset to be taxed if the person passed away on or prior to September 30. When this happens, you are required to report it to the state.
It is important to consider taxes and estate planning together, ensuring that your plan does not contain any problematic surprises for your heirs. An experienced Michigan estate planning attorney can provide important guidance.