The current federal estate tax exemption limit is $5.34 million for an individual and $10.68 million for married couples. This means that estate taxes are usually only a concern for very wealthy people in the U.S. However, 16 states have estate taxes that set lower exemption limits than the federal levels. People in these states, most of which are in the north, could be subject to estate taxes even if they are only considered to be middle- or upper-middle class.
The worst situation for estate taxes in the country is in New Jersey, where the exemption limit is $675,000 for an individual. Rhode Island comes in at second. In New York, Governor Cuomo recently took steps towards aligning estate taxes in the Empire State with the limits at the federal level. Many governors are now realizing that this action might need to be taken in order to prevent the affluent residents from relocating to a state that doesn’t have estate taxes.
A spokesperson commenting on the relocation trend states that he has seen many people move out of New York and New Jersey and establish residency in Florida in order to avoid estate taxes. He pointed out that his firm even has a book that provides a guide for moving to Florida. Governors realize that the relocation of affluent people means that their state will miss out on those residents’ property, income and sales taxes, in addition to estate taxes.
Massachusetts has an estate tax exemption limit of $1 million, and the highest rate of estate taxes that residents could be subject to is 16 percent. One advantage that people in Massachusetts have is the fact that residents can make large gifts near the end of their life that will not be subject to estate taxes. Avoiding high taxes while planning an estate in Massachusetts will likely require the help of a tax law professional. Residents of the state who are looking to lower their estate tax amounts might not necessarily have to go as far as changing residency in order solve their problems.
Source: nytimes.com, “Some States Are Moving to Loosen Their Estate Taxes” Paul Sullivan, Jan. 24, 2014
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