While President Donald J. Trump’s proposed tax plan seeks to eliminate the federal estate tax, and with an existing federal estate tax exemption of at least $5.49 million for 2017, the tax may not have too many people concerned.
According to Market Watch, there is still a need to plan for this tax in some states, however.
The site lists 20 states, and the District of Columbia, as jurisdictions which currently impose their own estate or inheritance taxes, or both, for 2017. Although some have exemptions, people who live in them could be exposed to a significant state death tax hit.
According to Market Watch: Given state-level estate taxes, however, you may want to be careful where you die. If you are considering moving to avoid state death taxes, be sure to consider all the potential tax hits in the new state, including those that will pertain while you are still alive. Finally, if you decide to move to a lower-tax state, be sure to do what it takes to establish that you are no longer a legal resident of your old higher-tax state. Otherwise, your old state may claim that you still owe taxes back there.
Market Watch reports that 14 states and D.C. to have their own estate taxes, which are based on the entire value of your estate in excess of any exemptions. Estate taxes are paid by the deceased person’s estate before making distributions to heirs.
The states with the lowest maximum estate tax rate -12% – are:
The state with the highest rate – 20% – is:
The other jurisdictions all charge a 16% maximum rate. They are:
- District of Columbia
- New Jersey
- New York
- Rhode Island
Exemptions for 2017 range from $5.49 million in Delaware, Hawaii, and Maine, to only $1 million in Massachusetts, Oregon and D.C.
Wealthier folks in some states could be exposed to both federal and state estate taxes.
There are six states which will impose inheritance taxes in 2017. Inheritance taxes are assessed on the value of specific inherited assets, and are paid by the person who inherits the money or property. Exemptions for inheritance taxes are typically nonexistent or negligible.
The states with the lowest inheritance tax rate, on $0 exemptions, are:
The state with the highest rate -18% – and the largest exemption ($10,000) is:
The remaining states all charge an inheritance tax of 16%. They are:
- Kentucky (note: $500 exemption)
- Maryland (note: they also charge an estate tax)
- New Jersey (note: they also charge an estate tax)
Property passing to a surviving spouse is exempt from state inheritance taxes, while inheritances passing to children and grandchildren are only taxed in Nebraska and Pennsylvania.
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