I own cash and real estate worth more than $5 million dollars. My house and many tangible personal belongings are situated on the reservation. I also own real estate off the reservation. Should I be worried about possible federal estate taxes at my death? My wife is dead and I have four children. I am 50 years old and not planning to remarry.
Yours is an interesting question that I have not encountered before.
As soverign nations, indian tribes have treaties with the US Government, and I suspect that while property on a reservation may be exempt from federal estate tax, property not located on the reservation will be subject to federal estate tax and perhaps (likely I think) state estate tax if there is one imposed in your state. However, Indian tribal governments are treated as States for certain purposes under Section 7871(a), such as for purposes of allowing a charitable estate tax dedctuction to be made to a tribe. That complicates the inquiry a little and would require further analysis. Based on the fact that you have significant assets both on and off the reservation, I would advise you to speak with an estate planning lawyer in your state. There are many reasons you might want to do so even if estate taxes are not a concern.
Referrals: You might look for a referral by contacting the National Congress of American Indians. See .http://www.ncai.org/Taxation.31.0.html. They may know of attorneys that specialize in the taxation of American Indians. The same might be said for the Native American Tax Policy Project. See http://www.bloch.umkc.edu/natpp/. Another place to look for qualified referrals is Martindale. See http://www.martindale.com. It is also always worth asking trusted friends, bankers, insurance agents and/or realitors. Whatever path you take, do a little shopping and asking around.
A resource you might consider taking notice of: http://www.irs.gov/govt/tribes/index.html, the IRS's Tax Information center for Indian Tribal Governments.
Finally, I have not reviewed the following document entitled "OVERVIEW OF FEDERAL TAX PROVISIONS RELATING TO NATIVE AMERICAN TRIBES AND THEIR MEMBERS" prepared by the Joint Committee on Taxation but would be williing to assume it would be helpful for you to review portions of it. See http://www.ncai.org/fileadmin/economic_policy/J....
Indeed, you might want to start by reviewing that document. I am sorry by I simply don't have time today to review that document to ascertain if it would be helpful to you but will read it at a later date.
Thanks for raising the issue.
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In 2010 there is no federal estate tax, however under the current law, the tax is scheduled to re-appear for those dying in 2011. Unless the law is changed, those with estates in excess of $1Million will be subject to an estate tax. In general, you are subject to both income and estate tax, although there are some exceptions and limitations. The first link below summarizes the current income tax treatment for Indian tribes and enrolled members of Indian tribes.
IRS Revenue Ruling. 69-164, 1969-1 C.B. 220, concluded that the gross estate of a deceased Native American excludes the value of certain property held under Section 5 of the General Allotment Act of 1887 including trust lands acquired either in the original allotment or by inheritance; original and inherited headrights; mineral headright income derived from royalties held in trust by the U.S. Government; and trust fund cash directly derived from allotted lands. See also, Asenap v. United States, et.al., 283 F. Supp. 566 (W.D. Okla 1968). The second link will bring you to a recent letter ruling on this issue, and the third will bring you to a case regarding the application of this exemption.
There are very important limitations to these exemptions from the federal gross estate, and your state may have a different structure for taxing the estates of resident Native Americans. You should be certain to consult with an attorney in your jurisdiction who is competent in estate planning and who is very familiar with the tax laws regarding Indian nations and their members.
This answer is not intended to provide specific legal advice. No attorney client relationship between you and Shoffner & Associates or any of its attorneys is established, intended ,or implied. This answer should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction regarding your particular situation. Any advice contained in this e-mail is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding Federal tax penalties that may be imposed on the taxpayer.
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