State estate taxes? That's another story. Sixteen states and the District of Columbia (NOT VIRGINIA) impose an estate tax, and some kick in for estates valued at $1 million or less. At that level, estate taxes aren't just a problem for people who own private planes and beachfront property.
When it comes to taxation, there tends to be a weird tension in the space between state-level taxes and federal-level taxes. Not surprisingly, this tension also springs up with regards to the death tax. We tend to spend so much time talking about the federal estate tax it seems we may forget about the pesky, often dangerous, state estate tax.
Fact: there are state-level estate taxes in many states. The exemption limits on these state estate taxes are often set at levels low enough to tag even middle class families. Consequently, it can be a big mistake to ignore these state estate taxes to your peril. So, do you have a false sense of security?
The problem with state estate taxes is that there are, at any given time, 50 moving pieces. Fortunately, Kiplinger sheds important light on the subject of state death taxes in a recent article titled “10 States With the Scariest Death Taxes.”
Even if you are living outside of the 20% of estate taxing states, you may own assets that cross into these death tax states. This could be a problem. For that matter, assuming you are still around and kicking, you may retire from your estate tax-free state to a state that has an estate tax.
The original article breaks down estate taxes state by state. However, the scariest state-level death taxes come out of New Jersey, Rhode Island, Minnesota, Oregon, Maryland, New York, Massachusetts, Connecticut, Maine, and Washington.
Do you, your family, or your assets enter into these states? And if so, how do you plan for both the state and the federal estate taxes? More importantly, how do you plan for all 50 state legislatures looking for additional revenue and a highly unpredictable Congress and White House?
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning
Reference: Kiplinger (December 2013) “10 States With the Scariest Death Taxes”