Some states have harsher estate tax laws.
You probably do not think about death taxes when you decide where to retire.
Maybe you should.
Where you live will impact the inheritance you leave to your loved ones.
According to a recent Fox News article titled “Estate and inheritance tax guide: The best and worst states to die in,” there are currently 18 states with estate or inheritance taxes of their own.
An estate tax is paid by the estate before the heirs inherit.
An inheritance tax is paid by the heir, even if he or she lived in a different state than the decedent.
Are the laws of some states less favorable than others?
Only six states have an inheritance tax.
If you want to avoid this completely, do not reside in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania when you die.
If you are only leaving your assets to your spouse, the inheritance tax usually does not apply.
Some states allow for exemptions for children or siblings.
If you are leaving money to your children and grandchildren, do not move to Nebraska or Pennsylvania.
In Nebraska immediate relatives must pay a 1 percent tax on the amount exceeding $40,000.
Pennsylvania levies a 4.5 percent tax for children or lineal heirs.
If you are not an immediate relative, Nebraska will levy an inheritance tax at 18 percent.
The other states are less dramatic, but still significant at levels between 10 and 16 percent.
This is a lot of money to gamble by remaining in the state after retirement.
If you inherited from someone in one of these states, talk with an experienced estate planning attorney from the state to determine what you will owe and whether any exemptions might apply.
If you live in Maryland, do not plan on dying there.
It imposes both an estate and inheritance tax with the estate tax being 16 percent on estates exceeding 4 million.
Are there states with estate taxes you should avoid if moving in retirement in 2019?
Avoid Connecticut, District of Columbia, Hawaii, Illinois, Main, Massachusetts, Minnesota, Oregon, Rhode Island, Vermont, and Washington.
State laws and exemptions vary and even change through the years.
In the end, there are reasons we live where we live despite the tax climate.
For example, your family, social network, church home, favorite sports teams, hobbies, and other considerations may make "home" the best place to retire independent of death tax considerations.
Be sure to work with an experienced estate planning attorney in your state and review your estate plan regularly to account for any changes going forward.
Reference: Fox News (March 28, 2019) “Estate and inheritance tax guide: The best and worst states to die in”