Navigating Inheritance Taxes: Key Insights for Marsh & McLennan Employees to Consider

Healthcare Provider Update: Healthcare Provider Information: Marsh & McLennan Marsh & McLennan is a global professional services firm offering a wide range of services primarily through its subsidiaries. They do not provide healthcare in the traditional sense but are known for their consulting services related to risk management, insurance, and employee benefits, including health benefits consulting. They work with various healthcare providers and insurance companies to manage and strategize healthcare costs on behalf of their clients. Potential Healthcare Cost Increases in 2026 As we approach 2026, significant healthcare cost increases loom on the horizon, primarily driven by the expected sharp rise in Affordable Care Act (ACA) premiums. States could see premium hikes ranging from 18% to over 60%, attributable to the potential expiration of enhanced federal subsidies and ongoing medical cost inflation. Without these subsidies, many enrollees might face out-of-pocket premium increases exceeding 75%, exacerbating the financial strain on households. This perfect storm of factors underscores the urgency for individuals and employers to prepare for the rising costs and reassess their healthcare strategy in the impending year. Click here to learn more

Especially for Marsh & McLennan employees residing in one of the six states where an inheritance tax is levied, inheriting can be a substantial financial event. Effective financial planning may need a thorough understanding of the intricacies of this tax, including how it applies and what techniques can be used to lessen its effects.

Knowing About Inheritance Tax

State governments impose inheritance taxes on those who inherit property from a deceased person's estate. Inheritance taxes are paid by the beneficiary as opposed to estate taxes, which are subtracted from the estate prior to distribution. There is no inheritance tax levied by the federal government.

Tracy Craig, chair of the Trusts and Estates Practice Group at the Massachusetts law firm Seder & Chandler, notes that inheritance tax rates can differ greatly and are frequently affected by the beneficiary's relationship to the decedent. Closer relatives usually enjoy lower tax rates. A number of state regulations may exempt some assets from this tax, including life insurance proceeds.

Important Disparities between Estate Tax and Inheritance

State-imposed inheritance taxes are to be paid by the beneficiary. The value of inherited assets determines the tax liability. Estate Tax: A tax levied at the federal and occasionally state levels that is settled out of the estate prior to heir distribution.

Beneficiaries may be allowed to write off the amount paid on their federal tax returns in areas where inheritance tax is payable, which might lower their overall tax burden.

States Having a Death Tax

As of 2023, the following states have inheritance taxes:

1. Iowa: between 2% and 4%

2. Kentucky: from 4% to 16%

3. Maryland: ten percent

4. Nebraska: from 1% to 18%

5. New Jersey: 11–16%

6. Pennsylvania: 4.5% to 15%

In these states, an inheritance tax return must be filed to record the distribution and taxation of the estate's assets. Most states have criteria below which inheritance taxes are not owed, and in some cases, the entire inheritance may be free.

For instance, tax rates in New Jersey vary depending on the beneficiary categorization. Class C beneficiaries, such as siblings and in-laws, receive a $25,000 exemption from inheritance taxes; amounts beyond this are subject to tax rates ranging from 11% to 16%. Class A beneficiaries, who are usually immediate relatives, are not liable to inheritance taxes. Interestingly, Iowa intends to completely eliminate its inheritance tax by January 1, 2025.

Methods for Reducing Inheritance Tax

Featured Video

Articles you may find interesting:

There are a few tactics to think about in order to lessen the effects of inheritance taxes:

1. Lifetime Gifts: You can lower your taxable estate by transferring assets during your lifetime.

2. Trusts: Putting assets in trusts might protect them from inheritance and estate taxes.

3. Relocation: To completely escape these taxes, if at all possible, have heirs live in a state where there is no inheritance tax.

Crucially, most state laws favor immediate family in inheritance scenarios, and assets bequeathed to spouses and direct descendants are generally excluded from inheritance taxes.

In Summary

Inheritance tax is complicated, so navigating it takes careful planning and knowledge of both state and federal tax laws. Marsh & McLennan employees thinking about retirement and estate planning should take into account the potential impact of state-level inheritance taxes on their savings. Knowing the tax ramifications for IRA and 401(k) accounts upon inheritance is very important. Research shows that inherited retirement accounts may be subject to various tax treatment scenarios depending on state legislation and beneficiary designations. The tax effects on retirement assets bequeathed to heirs may be lessened by carefully choosing beneficiaries and considering Roth conversions. This estate planning component is crucial to ensuring retirement funds are effectively transmitted to beneficiaries.

Planning a smart retirement and navigating inheritance tax require strategic estate management to maximize tax benefits, much like a seasoned CEO organizes their exit strategy to maximize rewards and avoid interruptions. Diversifying the kinds of assets and how they are allocated in an estate can lessen the tax consequences for heirs, similar to diversifying a retirement portfolio to withstand market changes. Understanding and exploiting exemptions, such as trusts or smart asset transfers, requires timing and expertise to ensure your legacy is as strong as your career at Marsh & McLennan.

Disclosure: Not tax advice. Discuss your individual situation with a qualified tax professional.