Louisiana Inheritance Tax, Estate Tax, and Gift Tax

An inheritance tax is a tax imposed on someone who inherits money from a deceased person.  Inheritance taxes can apply regardless of whether the deceased person had a Louisiana Last Will and Testament or died intestate.

Like the Federal estate tax laws, Louisiana’s inheritance tax laws have undergone a lot of changes in the past several years.  Two things are clear under the current law:

  • There is no Louisiana inheritance tax for people who die after June 30, 2004.
  • There is no Louisiana inheritance tax for people who died on or before June 30, 2004, and an inheritance tax return was not filed before July 1, 2008.

If the decedent falls within either of these categories, there is no need to think any more about Louisiana inheritance tax. No inheritance tax is owed, and there’s no need to file an Inheritance and Estate Tax Return with the Louisiana Department of Revenue.  (In fact, as discussed below, the Louisiana Department of Revenue has stopped issuing receipts.)

It is unclear whether people who died on or before June 30, 2004, will be subject to inheritance tax if an inheritance tax return was filed before July 1, 2008.  The current law does not address this situation.  Although this makes no sense from a policy perspective (it rewards those who failed to timely file inheritance tax returns and penalizes those who did), the Louisiana Department of Revenue appears to have taken the position that any inheritance taxes owed on filed returns is still due and payable.  Thankfully, this should affect an increasingly small number of estates.

The repeal of the Louisiana inheritance tax has caused several changes to the way that Louisiana successions have traditionally been handled. Under the current law:

  • There is no longer to file an Affidavit of Small Succession (Louisiana Small Estate Affidavit) with the Louisiana Department of Revenue. The Department of Revenue now has nothing to do with Affidavits of Small Successions.
  • The Louisiana Department of Revenue has stopped issuing Inheritance Tax Waiver and Consent to Release Forms and receipts for Affidavits of Small Successions.

Louisiana Estate Tax

Under prior Federal law, each estate was given a credit for death taxes paid to a state.  Like many states, Louisiana’s estate tax was a “sop tax” (also called a “sponge tax”).  Louisiana’s estate tax statute levied an estate tax that was equal to the amount of this Federal credit.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) repealed the Federal credit for taxes paid to a state. Since Louisiana’s estate tax laws were tied to this credit, this had the practical effect of repealing Louisiana’s estate tax.  Because the Louisiana estate tax only applied if a credit was allowed against the Federal estate tax, and since that credit was repealed effective January 1, 2005, there is no Louisiana estate tax for deaths occurring on or after January 1, 2005.

As a technical matter, Louisiana Estate Tax Returns are still required if the decedent’s net estate is worth at least $60,000.00.  But since there is currently no Louisiana estate tax, and since the Louisiana Department of Revenue is no longer staffed to process these returns, they are no longer filed.

Louisiana Gift Taxes

The Louisiana Gift Tax has traditionally applied to any gifts that exceeded the Federal annual exclusion.  That tax was repealed effective July 1, 2008.  There is no longer any Louisiana Gift Tax for transfers occurring on or after July 1, 2008.

If a gift in excess of the Federal annual exclusion was made before July 1, 2008, a Louisiana Gift Tax return should be filed by April 15 of the year following the gift.  A Louisiana gift tax may then be owed, depending on the circumstances. Failure to pay the tax could make the donor, the executor, and/or the donee liable for the tax, upon the value of the gift.

New Orleans Inheritance Tax

New Orleans had a separate inheritance tax that is now defunct.  This tax used to apply to property located in Orleans Parish or owned by an Orleans Parish domiciliary.  The tax applied to decedents who died between July 15, 1985, and December 30, 1989.  If the tax hasn’t been collected by now, it is probably time-barred.