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Julie Garber

Estate Taxes by State - Understanding Tennessee Estate/Inheritance Taxes, Part 2

By May 27, 2009

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Beginning in 2002 the Tennessee estate tax exemption was decoupled from the federal estate tax exemption. What this means for Tennessee residents and nonresidents who own real estate and tangible perosnal property located in Tennessee is the following:

  • A Tennessee "inheritance tax" return, Form INH-301, must be filed if the decedent's gross estate is valued at $1,000,000 or greater and the decedent was a resident of Tennessee or a nonresident who owned real or tangible perrsonal property located in Tennessee.
  • Form INH-301 must be filed even if no Tennessee estate tax will be due as a result of applicable deductions and exemptions.
  • Form INH-301 must be filed and any tax due must be paid to the Department of Revenue within nine months of the decedent's date of death.
  • An extension of time to file Form INH-301 may be requested for up to one year, however, even if an extension is granted it won't delay the time for payment of any tax due.
  • A married decedent's estate is authorized to make an election on Form INH-301 to treat property as marital deduction qualified terminable interest property ("QTIP") only for purposes of calculating the Tennessee estate tax (this is called a "state QTIP election"). What this means is that if the estate is passing to a surviving spouse through an ABC Trust scheme, then the payment of both Tennessee and federal estate taxes can be deferred until after the death of the surviving spouse.
  • Anything over the $1,000,000 exemption is taxed at the following rates:

    • First $40,000, 5.5%
    • Next $40,000 - $240,000, 6.5%
    • Next $240,000 - $440,000, 7.5%
    • $440,000 and over, 9.5%

This information is courtesy of the Tennessee Department of Revenue.

The bottom line - if you're a Tennessee resident and your estate is passing to someone other than your spouse and the value is $1,000,000 or more, or if you're a nonresident who owns real estate and/or tangible personal property located in Tennessee and your estate is valued at $1,000,000 or more, then your estate may owe a Tennessee estate tax. Up next, Vermont estate taxes.

UPDATE: Tennessee has repealed its gift tax retroactively to January 1, 2012. In addition, the state "inheritance" tax is being phased out by 2016: June 25, 2012 - Tennessee Repeals Gift Tax and Phases Out Inheritance Tax.

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