Governor Mitch Daniels signed legislation to provide relief from Indiana Inheritance Tax. Effective July 1, 2012, Indiana will phase out the inheritance tax over nine years beginning in 2013 by providing an increasing credit against a beneficiary’s inheritance tax liability.

The credit is 10% for transfers made from persons dying in 2013, 20% for transfers made from persons dying in 2014, 30% for transfers made from persons dying in 2015, 40% for transfers made from persons dying in 2016, 50% for transfers made from persons dying in 2017, 60% for transfers made from persons dying in 2018, 70% for transfers made from persons dying in 2019, 80% for transfers made from persons dying in 2020, 90% for transfers made from persons dying in 2021; the inheritance tax does not apply to a property interest transferred after December 31, 2021.

The inheritance tax replacement amounts payable to counties is phased out over 10 years beginning with amounts payable for the state fiscal year beginning July 1, 2012. The bill also increases the inheritance tax exemption amount for Class A transferees from $100,000 to $250,000 with respect to taxable transfers resulting from the deaths of individuals dying after December 31, 2011.

Effective retroactive to January 1, 2012, a spouse, widow or widower of a child of the transferor is reclassified as a Class A transferee instead of a Class B transferee, and a spouse, widow or widower of a stepchild of the transferor is reclassified as a Class A transferee instead of a Class C transferee.