posted on April 25th 2014 in Your Financial Advisor with 0 Comments /

About 15 states and the District of Columbia impose an inheritance or estate tax. The tax rates range from a few percent to 19 percent in Washington State. As the typical state exemption rate is much lower than the current federal exemption (it’s only $1 million in New York and Maryland), the middle class is finding themselves still stuck with a death tax. In addition, the federal rule allowing spouses to “port” their deceased spouse’s exemption is only followed in Hawaii.

fee only advisorsWhat’s worse, as with income taxes, multiple states may lay claim to your estate as being taxable. And, even if you die as a resident of a state that doesn’t have an estate tax, your estate could still be hit with estate tax if you own property or other tangible assets (such as a plane or a boat) in a state that does.

As a general rule, while a person can have many residences, he or she can have only one domicile.
Notwithstanding this rule, there is nothing to prevent two states from each independently determining that a taxpayer is domiciled in the respective state.

fee only advisorsThe factors set forth in last month’s issue of determining domicile and residency for purposes of income taxes apply to the determination of which estates pay the estate/inheritance tax. In a court or administrative cases where the state Department of Revenue/Taxation has made a determination that the person is domiciled in the state, the taxpayer typically bears the burden of proof of establishing that he or she is not domiciled in the state.

The Lesson: You must pay attention and take steps to avoid not just income tax, but estate and/or inheritance taxes as well. Discuss your options with your financial advisor today.

For more information on the type of tax and the available exemptions see: a/stateestatetaxchart.htm.

about the author: Anthony G. Ferreira CFP®

anothony640x640Anthony G. Ferreira CFP® specializes in wealth management for high net worth individuals and families with concentration in estate planning, tax efficient investment strategies, retirement planning, portfolio management, risk management, and benefits planning. Learn more and/or Contact Anthony

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