“Most of the states are still in pretty poor shape, and if the economy doesn’t improve you might see more action by state legislatures seeking other sources of revenue,” says James Walschlager, an analyst with tax publisher CCH, a Wolters Kluwer business.
Not all states are created equal whether that be for business, for beaches, or… for dying. Recently, Forbes released its perennial (and cheery) bit of advice regarding how to avoid state death and inheritance taxes: where not to die in 2012.
As you may well know, the federal government isn’t the only level of government to impose wealth transfer taxes. In fact, 13 states and the District of Columbia impose an estate tax, generally with exemption amounts hovering around $1-2 million (far below the current federal rate of $5 million) and with a taxation rate generally pegged at 16 percent.
Among the several states, Ohio offers the lowest rate at seven percent while Minnesota tops out at 41 percent. Fully six states impose an inheritance tax, one that hits the recipient of the inheritance rather than the estate from which the inheritance came. And two states actually impose both: Maryland and New Jersey.
As we head into 2012, though, it’s worth noting that there has been a lot of movement regarding such state level taxation (with possibly more to come down the road). Some states are keeping their current rates or simply indexing them for inflation, while still others are making large changes.
Connecticut, for one, lowered its exemption amount retroactively to be effective from January 1, 2011, at $2 million instead of the previous $3 million. In addition, there were several taxpayer-friendly changes, such as the raising exemption amount in Maine to $2 million up from $1 million and in Vermont to $2.75 million up from $2 million, with gentler tax rates to boot.
Ohio actually repealed their estate tax, as many of you will have heard, but that isn’t effective until 2013. Until then, Ohio boasts the lowest exemption amount (i.e., at $338,333), with New Jersey set to take up that onerous title come next year (i.e., at $675,000).
What other states are rumbling? Strong movements are underway to end such taxes in states like Indiana, Tennessee, Nebraska, and Oregon, according to the American Family Business Institute. Also, Pennsylvania has just passed a “carve-out” exemption from the state inheritance tax for farmers.
In all, 2012 may bring even more changes and fewer estate dangers. Already it seems to be that much safer to pass along your estate. That said, all of this remains to be seen and tax increases may be lurking as state budgets dwindle and the politics grow more toxic.
As James Walschlager, an analyst with tax publisher CCH, put it: “Most of the states are still in pretty poor shape, and if the economy doesn’t improve you might see more action by state legislatures seeking other sources of revenue.”
There is much to learn about each state and the original article also has a handy interactive map. Here’s to looking forward with optimism… but also with caution.
Reference: Forbes (December 22, 2011) “Where Not To Die in 2012”
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Posted by: Gary | 02/11/2012 at 09:55 PM