Unlike many states, Kansas does not impose an estate tax when its residents pass away—and it has some of the most generous tax laws regarding inheritance and gifts.
However, federal estate tax laws may still apply to your estate if it is valued over a certain amount. Kansas residents who inherit from individuals who pass away in other states may also be subject to those states’ inheritance taxes.
It is important, therefore, to understand what the local and federal tax laws are and whether there are ways to legally minimize the payment of taxes after someone dies.
This will help prevent any nasty surprises later on and prepare you for some smart decision-making when working with your estate planning lawyer to create a comprehensive estate plan that benefits your loved ones after you pass away.
What is the estate tax?
Estate tax is sometimes called “death tax” because it is levied on the estate of a person who has recently passed away.
Kansas, like 37 other states in the U.S., does not levy such a tax so there is nothing to pay before the estate is legally dispersed to the deceased’s beneficiaries.
However, an estate tax may be levied at the federal level, depending on the estate’s value. For most people reading this, the federal tax won’t apply as it’s only levied on the largest estates (more below).
Inheritance and gift tax in Kansas
Some people confuse the estate tax with the inheritance tax. The inheritance tax applies to money or assets that have already been dispersed to the beneficiaries and it is payable by those beneficiaries rather than the estate.
Kansas does not levy an inheritance tax but beneficiaries who inherit assets from someone who lived in another state may be required to pay that state’s inheritance tax. You’ll need to consult with an attorney who is familiar with that state’s estate tax laws to see if an inheritance tax applies.
No gift tax applies in Kansas, either, though a federal gift tax may apply. Gifts are subject to an exclusion amount under which there is no requirement to report the gift to the IRS. This changes annually and, in 2024, the threshold is $18,000.
Gifts over $18,000 must be filed with the IRS and the amount over the threshold counts against your lifetime federal gift tax exemption.
Federal estate tax
Kansas residents should also be aware of the federal estate tax. This applies to all estates in the U.S. valued above the federal tax exemption amount, which changes each year.
The taxable estate is the total above the federal exemption, for which the federal estate tax rate begins at 18 percent and progresses up to a maximum of 40 percent for amounts over one million dollars. Here’s a full list of the federal estate tax rates:
Federal Estate Tax Rates
| Taxable Estate | Base Taxes Paid | Marginal Rate | Rate Threshold |
|---|---|---|---|
| $1 – $10,000 | $0 | 18% | $1 |
| $10,000 – $20,000 | $1,800 | 20% | $10,000 |
| $20,000 – $40,000 | $3,800 | 22% | $20,000 |
| $40,000 – $60,000 | $8,200 | 24% | $40,000 |
| $60,000 – $80,000 | $13,000 | 26% | $60,000 |
| $80,000 – $100,000 | $18,200 | 28% | $80,000 |
| $100,000 – $150,000 | $23,800 | 30% | $100,000 |
| $150,000 – $250,000 | $38,800 | 32% | $150,000 |
| $250,000 – $500,000 | $70,800 | 34% | $250,000 |
| $500,000 – $750,000 | $155,800 | 37% | $500,000 |
| $750,000 – $1 million | $248,300 | 39% | $750,000 |
| Over $1 million | $345,800 | 40% | $1 Million |
Note that the applicable estate tax must be paid before the estate is distributed to the decedent’s heirs.
Federal estate tax exemption
The federal tax exemption applies to every U.S. citizen. It is a lifetime exemption that covers the value of assets you can give away throughout your life and after your death, without being subject to the federal estate taxes outlined above.
In 2024, the federal tax exemption is set at $13.61 million. So, all estates over that amount and owned by a single person are liable for the above federal estate tax rates.
For married persons in Kansas, the applicable federal estate tax is the tax on combined marital estates worth over $27.22 million (in 2024).
Note that the federal estate tax exemption level is scheduled to reduce significantly to around $7 million (similar to 2017 levels) when the Tax Cuts and Jobs Act sunsets in 2026.
Examples of how federal estate tax works
If you are an unmarried individual of high net worth, for instance, who dies in Kansas in 2024 with an estate worth $14.61 million, the amount of federal estate tax payable would be worked out as follows:
- $30 million minus $13.61 million (exemption) = a taxable estate of $16.39 million.
- For the taxable estate over $1 million, the tax payable is 40 percent (the top tax bracket)
- This means you’ll owe a base tax of $345,800 for the first $1 million and 40 percent on the remaining $15.39 million, which equals $6.156 million.
- The total tax burden is $6,501,800.
If you are a married individual of high net worth, who dies in Kansas in 2024 with an estate worth $16.61 million, the amount of federal estate tax payable would be worked out as follows:
- $16.61 million minus $13.61 million (exemption) = a taxable estate of $3 million.
- For the taxable estate over $1 million, the tax payable is 40 percent (the top tax bracket)
- This means you’ll owe a base tax of $345,800 for the first $1 million and 40 percent on the remaining $2 million, which equals $800,000.
- The total tax burden is $1,145,800.
Estate planning tips to reduce estate taxes in Kansas
High net-worth individuals should work with their estate planning lawyer to devise strategies to legally minimize the payment of taxes on their Kansas estates.
These strategies include:
- Trusts: Many types of trusts can reduce an estate’s taxable value and the taxes due. The most common types of trusts include the following:
- Grantor Retained Annuity Trust: a GRAT allows assets to appreciate tax-free above a set percentage for beneficiaries, without contributing to your lifetime gift exemption.
- Spousal Lifetime Access Trust: a SLAT allows you to access the assets placed within it during your lifetime, with any appreciation passing to your spouse free of estate tax (and children may be named as beneficiaries).
- Dynasty trust: individuals and multiple generations of families can preserve wealth, minimize estate taxes, and ensure that assets are distributed according to their wishes.
- Charitable Lead Annuity Trust: CLAT is an irrevocable trust that reduces a beneficiary’s potential tax liability.
- Gifting: Gifting assets before death can utilize the annual and lifetime gift exemptions to reduce your estate’s taxable value. Future appreciation of investments occurs outside the estate without attracting estate tax.
- Marital deductions: An individual can transfer an unrestricted amount of assets (including jointly owned property, such as a home) to their surviving spouse during life or at death without attracting federal estate and gift taxes.
- Life insurance: An effective way to minimize estate taxes, as it is generally exempt from income tax if placed in an Irrevocable Life Insurance Trust (ILIT) or Private Placement Life Insurance (PPLI) to achieve this.
If you have any questions about estate taxes, speak to an estate planning lawyer at ITR Law in Topeka during a free case evaluation. We can advise you of your legal options.