Surprise! Some States Have an Estate Tax Too

12:39 pm Uncategorized

For most people, their primary worry when making their estate plans is the federal estate tax. But, with the federal exemption for estate taxes now at 3.5 million dollars for individuals and 7 million dollars for couples, the growing concern among estate and tax planning professionals are the States’ estate taxes.

A recent article in the Wall Street Journal explains how more and more individuals, whose estates are worth less than 3.5 million, are being surprised by unforeseen State estate taxes.  Many States have a much lower exemption than the federal government.  As a result, people who believed that their estates would pass tax free are being hit with State estate taxes that they never saw coming.

For example, many States like Massachusetts and Minnesota have a 1 million dollar exemption.  This means that a 2 million dollar estate, which would not be taxed by the Federal Government, is taxed by the State Government.  And to further the problem, Congress is considering doing away with the Federal deduction for the amount paid in state estate taxes. This would mean that if you do owe the Federal Government an estate tax, you would no longer be allowed to deduct the amount you paid in State estate tax.

You may shrug it all off, thinking “yeah, but my State doesn’t have an estate tax.”  Even if the state you live in has no estate tax, you may owe an estate tax in another State in which you own property or a domicile can be established.   Additionally, many States are struggling financially and have either added a death tax or are considering doing so.  The area of State death tax is constantly changing and can be tricky to navigate.

Because the estate taxes vary from state to state, and because the state estate tax laws are always changing, it is important to consult an estate and tax planning professional in order to ensure that your estate passes with as little a tax burden as possible. Please contact us at 888-392-6774 if you have any questions with respect to the foregoing.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

           

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