Robert Negele is a 90-year-old retired executive who has lived in Connecticut for almost 40 years. Despite decades of community involvement, including service on corporate and charity boards, he and two of his children who live nearby are seriously considering leaving the state.
“It’s a prime possibility we discuss at Sunday night dinners,” Mr. Negele says.
Nineteen states and the District of Columbia, home to just over one-third of the U.S. population, levy an estate tax on the assets of people who die or an inheritance tax on heirs receiving assets. Jim Haynes
A big factor in their deliberations: Connecticut’s estate and gift taxes, which tax assets above $2 million per individual at rates as high as 12%. Mr. Negele says some snowbirds at his Stamford retirement home have shifted their tax home to Florida, while others he knows have left the state altogether.
Mr. Negele is far from alone, estate planners say. “State death taxes are considerably more important than they used to be, and we spend a lot of time planning for them,” says Beth Kaufman, an estate-tax lawyer at Caplin & Drysdale in Washington, in part because of changes in the federal tax laws.
Nineteen states and the District of Columbia, home to just over one-third of the U.S. population, levy an estate tax on the assets of people who die or an inheritance tax on heirs receiving assets. Maryland and New Jersey have both, although each allows offsets to prevent double taxation.
In January, Congress voted to keep Uncle Sam’s inflation-adjusted estate exemption above $5 million per individual ($10 million per married couple). The change excluded almost all Americans from the federal levy, so state-level taxes loom larger by contrast. (This year, the federal exemption is $5.25 million.)
Many states also have far smaller exemptions than Uncle Sam’s. The threshold is $1 million for estate taxes in Massachusetts, New York, Oregon and Minnesota, and just $675,000 in New Jersey. Pennsylvania’s and Iowa’s inheritance taxes have no exemption in some cases.
However, all states allow surviving spouses to inherit tax-free from their partners, says James Walschlager, an estate-tax specialist at CCH, a unit of Wolters Kluwer.
Only Delaware and Hawaii track the U.S.’s $5 million-plus exemption, according to Mr. Walschlager (see table on page B10).
Rates can be high as well. The top rate often is double digits, with Washington state’s the highest: 20%.
Stay well,
Brian
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