The estate planning world has been in a bit of shock for the past few years. While the federal estate tax exemption has climbed to ever more generous levels, many states are creating new or increasing old wealth transfer taxes.
Taxpayers who are in the clear when it comes to federal death taxes may be socked with state death taxes.
Will the states follow suit and drop draconian estate laws?
A recent article in The New York Times, titled “Some States Are Moving to Loosen Their Estate Taxes” suggests there may be hope.
Not all states have their own form of estate or inheritance tax, one separate from the federal tax that hits with a 1-2 punch. In fact, most do not.
Fortunately, both Kansas and Missouri fall into that no state death tax or inheritance tax camp.
Still, more than a dozen states, mostly northern and Pacific ones, do have such a tax. Interestingly, these state estate or inheritance taxes can be troublesome for more than just the residents of the taxing state.
Unfortunately, the spaces between the federal tax and the state-level taxes can be sometimes tricky to navigate. Trickier still can be the space between two states. After all, “living” across state lines is not at all out of the ordinary, but having to think about entirely different tax schemes (sales tax aside) is generally less so. Moreover, as the original article elaborates, the states themselves find themselves at odds and fighting jurisdictional battles.
Note: An important pattern may be developing, as more states loosen the rules and either eliminate the death taxes or make them as forgiving as the federal rate. New York and D.C. have recently begun reassessing their taxes, with many more either open to debate or actually winding them down.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: The New York Times (January 24, 2014) “Some States Are Moving to Loosen Their Estate Taxes”