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Estate tax rules differ widely by state

While the Federal government is giving beneficiaries a generous estate tax exemption, states like New Jersey are not. In fact, New Jersey imposes an estate tax and an inheritance tax on estates with a value about $675,000. Some attorneys who do estate planning for their clients recommend that they move to a state such as Florida that does not have a death tax.

In recent years, several states have changed their death tax laws. Some states, such as North Carolina and Ohio have repealed their state death taxes. Others, such as Tennessee and Illinois have raised their death tax exemption amounts. Estate tax opponents are pushing for more states to repeal their death taxes, especially in states like Pennsylvania, where there is no exemption.

Anyone who plans to die in Florida to avoid estate taxes should be aware of the rules regarding residency. Like most other states, a person has to live in Florida for at least 183 days to be considered a resident. Subjective intent is used to determine whether estate tax rules for the state apply. If a person dies while they are visiting family in another state or are transferred to a skilled nursing facility by family members, their home state would be used to determine if they owe death taxes.

An attorney who has significant estate planning experience may be able to help a client decide which state they should live in during their final years. As the state tax laws stand, the state where a person dies can have huge financial implications for their heirs. Estate planning can help a client leave more of their assets to loved ones and pay less in death taxes.

Source: Forbes, "Where Not To Die In 2014: The Changing Wealth Tax Landscape", Ashlea Ebeling, November 01, 2013

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