The current number of states with death taxes (independent of the federal death tax) is 19 states. Okay, add D.C. to make it 20 "jurisdictions" at present. However, there are several states making changes for 2015. And, this is good news for citizens of those states.
Here in Kansas and Missouri we do not need to worry about this. Neither state has a death tax. So, consider this a little schadenfreude.
The states that are lessening their death tax liability are doing so by increasing the exemption dollar threshold, figuring in inflation, and eliminating “cliff” provisions that tax the first dollar of an estate.
The federal estate tax exemption is currently $5 million per person. As indexed for inflation, it is $5.34 million for 2014. As noted in a recent Forbes article, titled "Where Not To Die In 2015," the exemption will be $5.43 million next year.
Consequently, up to $5.43 million of an individual’s estate will be exempt from federal estate tax, with a 40% tax rate applied to any dollars beyond that exemption threshold.
Compare this with state estate taxes which are usually exempt to a far lesser extent per estate from tax with a top rate of 16%.
New York’s changes went into effect immediately. This doubled its exemption from $1 million for deaths before April 1, 2014 to $2,062,500 for deaths from April 1, 2014 through April 1, 2015.
Similar to Maryland, New York's exemption will increase through 2019 to meet the federal exemption.
Other states where the exemption amounts are climbing include Tennessee, Minnesota, and Rhode Island, which got rid of its “cliff” so the tax only kicks in on amounts above the $1.5 million exemption amount.
There are citizens in Rhode Island who want to get rid of the death tax altogether. The original article reports that there is precedent for a repeal, as North Carolina and Indiana did so last year, and Kansas, Ohio, and Oklahoma abolished this tax in 2010.
As the saying goes, only two things are for certain: death and taxes. Experts predict that the changes in this area of tax law will continue. To ensure that your estate planning documents are up-to-date and you have the most effective strategies in place in light of the current tax laws, maintain contact with an experienced estate planning attorney.
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.
Reference: Forbes (September 11, 2014) "Where Not To Die In 2015"
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