A Reader Asks #18: Iowa Inheritance Tax Question
This comment was left on The Iowa Inheritance Tax post this summer. Doing the research on it brought some unusual twists and turns so it took more time to answer than I would have expected. Despite the delay, I still think it is interesting enough to address.
Thank you so much on your Iowa inheritance tax info. On the tax schedule it had a different tax for, "Unknown heirs, as distinguished from beneficiaries who are not presently ascertainable, due to contingent events." I recently found out that my mother was left around 100,000 in a will, unfortunately my mother passed away many years ago- so according to the lawyer this amount comes to me. Would I fall into this "unknown heir" category possibly?
The key to Iowa Inheritance Tax is the relationship between the decedent (the person who died) and the beneficiary (the person receiving the inheritance). In your scenario, we don't know the relationship between your mother and the decedent. Only that your mother died before the person who's estate is now being settled, and that as your mothers daughter you are entitled to at least a part of her inheritance. It is likely that your mother was named in the decedent's will as a per stirpes beneficiary, which means that if she had already passed then her lineal descendents are entitled to her inheritance. You are a lineal descendant of your mother. If your mother is a lineal descendant of the individual who died, then you would owe no Iowa Inheritance Tax since lineal ascendants and descendants pay no Iowa Inheritance Tax.
I am just going to guess that if that was in fact the case, you never would have asked the question.
I am not an attorney, but I do have access to some through my support systems. They did some research for me and even called the State of Iowa for clarification. You see, we cannot figure out any scenario where Schedule F would actually apply. Once you know who the beneficiary is the tax would be based on that person's relationship to the decedent and be covered under Schedule B or C, or not taxed as a lineal ascendant / descendant. When they called the State, the contact person there could not provide an example of a Schedule F scenario and told us that she has never seen Schedule F actually invoked.
That got us thinking about why someone would want to invoke Schedule F. That is when we noticed that the tax rate on Schedule F is 5%, while schedules B and C have higher brackets. Are you attempting to reduce the amount of tax due by employing schedule F rates instead of schedule B or C?
Obviously there are facts and details which have been omitted and make all the difference in this scenario. This is not intended as tax or other legal advice. For advice on your specific situation you should contact an attorney who is well versed in the Iowa Inheritance Tax.
By the way, it has brought to my attention that my post on The Iowa Inheritance Tax has a tax rate schedule which is out of date. Here is the most current Iowa Inheritance Tax Rate Schedule.
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