Friday, November 13, 2009
No Tax Relief in Death
"With the federal estate tax disappearing for most people, state death taxes have emerged as a new worry. ... At the current level, only 5,500 estates a year are federally taxable. ... The problem is that most states with estate or inheritance taxes haven't raised exemptions to meet federal limits. That means thousands of taxpayers who now escape the federal levy could still get hit with a state death tax. As a result, tax advisers are tweaking bypass trusts that allow married couples to maximize exemptions from state taxes. They are advising taxpayers where to retire in order to pare or eliminate estate taxes. And they are counseling out-of-state taxpayers so that they don't get dinged for property they own in a state with a tough death tax. ... Others warn that even taxpayers who live in states without estate taxes, such as Florida or California, risk unpleasant surprises if they also own property in a state that does have one. ... This means that a taxpayer could live in estate-tax-free Florida, California or Texas and even spend most of his time there. But if he keeps an apartment in New York or a summer home on Cape Cod and has other ties to the area the properties might be assessed at death", Laura Saunders at the WSJ, 31 October 2009, link: http://online.wsj.com/article/SB125694593227919879.html.
If you own any out-of-state property have your estate planner review its potential for taxability or to change your "domicile". If you don't, you might subject your estate to an unpleasant surprise.