Sometimes I ponder where the best place is to retire. Have you ever thought about that? Have you ever considered relocating to another state when you retire?
One of the things you may want to consider is what the impact will be on your estate tax and inheritance tax in both your current and potential new home in making your decision.
Did you know that there are nineteen states, plus the District of Columbia, that impose either an estate tax, an inheritance tax or both?
Maryland and New Jersey have both an inheritance tax and an estate tax, so they may not be the best states for you to die in with regard to having your heirs pay estate tax and inheritance tax.
So, in case you are currently living in or considering moving to these states, to help you evaluate, I thought you might like to see what the states are that have these estate taxes.
For estate tax purposes, here are the states, your latest exemption amounts, and the maximum estate tax rate:
STATE 2015 EXEMPTION AMOUNT TOP RATE
Connecticut $2 million 12%
Delaware $5.43 million 16%
District of Columbia $1 million 16%
Hawaii $5.43 million 15.7%
Illinois $4 million 16%
Maine $2 million 12%
Maryland $1.5 million 16%
Massachusetts $1 million 16%
Minnesota $1.4 million 16%
New Jersey $675,000 16%
New York $2.062 million/$3.125 million* 16%
Oregon $1 million 16%
Rhode Island $1.5 million 16%
Tennessee $5 million 9.5%
Vermont $2.75 million 16%
Washington $2.012 million** 20%
* $2.062 million before April 1, 2015. $3.125 million on or after
April 1, 2015.
** Plus an inflation adjustment to be determined.
Suppose, instead, you are worried about your heirs having to pay tax on the money they inherit from you.
The following states charge an inheritance tax as follows on the amount of assets you inherit from:
STATE 2015 EXEMPTION AMOUNT TOP RATE
Iowa None 15%
Kentucky $500 16%
Maryland None 10%
Nebraska $10,000 18%
New Jersey None 16%
Pennsylvania None 15%
Remember that for inheritance taxes there are often exceptions for your close relatives and in certain other cases. And, for example, Maryland and New Jersey provide offsets when your estate generates both estate and inheritance taxes are due.
Also, remember that these statistics are for 2015 and are subject to change in future years from current and pending state legislation in various locations. Each state and jurisdiction has its own set of rules for applying these amounts, so you need to consult and obtain further information if you are considering your situation for a particular state or set of states. So, this information can only serve as a general guideline.
And if your state was not on either list, in 2015 as of this point in time, congratulations! You are not currently subject to state estate tax and your heirs are not subject to inheritance tax. But this, too, can change at any time, so keep current on any updates that occur.
So, if you live in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, Virginia, West Virginia, Wisconsin, or Wyoming, you only need to worry about the federal estate taxes.
Evaluating the estate and/or inheritance aspects of a particular estate can be quite complex. If you wish to look more closely at your personal situation, or if you have any questions, please do not hesitate to call and set up an appointment.