With the federal estate tax exemption set at $5.25 million, many people are resting easy knowing that their estate will likely not be subject to estate taxes. As a recent article points out, however, many individuals are quick to forget that their state may levy estate taxes, as well.
Currently, some type of death tax is imposed in 21 states, as well as the District of Columbia. Most of these taxes are applicable at a much lower rate than that at the federal level. New Jersey, for example, taxes estates that are worth over $675,000. In Rhode Island, estates are taxed when they are worth over $910,725. Finally, New York taxes estates that are worth an excess of $1 million.
When considering whether state estate taxes will apply to your estate, remember to include the value of your home and retirement accounts. Depending on the specifics of your life insurance policy, the proceeds of this policy may be counted as well.
To further complicate matters, eight states – including New Jersey – impose inheritance taxes as well as estate taxes. Often, seniors consider state death taxes when determining which state they would like to retire in. Many senior citizens choose to retire in Florida, Arizona, and Texas, because these three states do not impose estate or inheritance taxes.
