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Where Not To Die

March 18, 2014

Filed under: Estate Planning,Estate Taxes,Taxes — Neel Shah @ 3:41 pm

Although the federal estate tax exemption has been raised to a generous $5.3 million, what about the states?

The truth is that, despite the large federal exemption, estate taxes still pose a worry in many states. In fact, 19 states as well as the District of Columbia impose estate taxes. The list includes New Jersey.

New Jersey

New Jersey (Photo credit: tico_manudo)

And every state’s rules are slightly different, making it confusing should one be considering moving for whatever reason, whether it be to save tax money or to be closer to grandchildren.

So some wealthy individuals are now consulting estate planning attorneys to help them with what has become known as “domicile planning,” to help them not escape income taxes but estate taxes, according to an article on Forbes.com.

The federal estate tax exemption of $5.3 million is now permanent, with a 40 percent tax applied to anything over that figure.

States typically have far lower exemptions and impose up to a 16 percent tax on anything over the exempt amount. New Jersey’s exemption, for example, is only $675,000. The tax on anything over that is from 4.2 percent to 16 percent.

But some states are making changes. Illinois reinstated its tax in 2011. Delaware made its “temporary” tax permanent.

That’s why estate planning attorneys are counseling some clients to move to Florida where there is no income tax and no estate tax. To benefit, you have to consider Florida to be your home at the time of your death even if you don’t live there all the time. It is a subjective evaluation.

In the meantime, there are moves afoot in some states to try and repeal the tax. Your estate planning attorney will know the latest changes that are being passed or considered.

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