It is no secret that, in the present economy, states are looking to increase revenue any way they can. A report published earlier this year showed that total state tax revenue decreased by more than $14 billion from 2009 to 2010, a two-percent drop. So, not surprisingly, while fewer members of the wealthier class will owe an estate tax to the federal government, they may find that they owe it to the state.
Though the trend is not widespread, many states are looking to increase their receipt of estate taxes. Connecticut collects on estates of more than $3.5 million but wants to lower the exemption to $2 million; the state’s legislature is currently taking this proposal into consideration. Illinois reinstated its estate tax in 2011 with a $2 million exemption. And in 2010, Hawaii imposed an estate tax on residents and Hawaiian assets of non-resident, non-U.S. citizens.
Estate tax rules vary greatly across the country. A few states assess an inheritance tax and others an estate tax. Inheritance tax, now uncommon, is levied on assets a beneficiary gets; estate tax is collected based on the whole estate. About half of the states have an estate tax, with rates that range from 1% to 16%. It is worthwhile to note that some states are moving to reduce or eliminate the estate tax where estate taxes are not a huge source of revenue. In California, for example, decedents who passed away after January 1, 2005, are not subject to a California estate tax.
If you are interested in learning more about estate planning, contact the San Jose estate planning attorneys at Lonich Patton Erlich Policastri, LLP. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.