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State of Residence Is Important in Estate Planning

| May 16, 2017 | Inheritance Tax |

Estate laws vary by state, so your state of residence is crucial, depending on your goals.

If estate planning is important to you and your family, then it makes a big difference where you live when you pass away, according to the Wills, Trusts & Estates Prof Blog in “Why You Should Be Careful Where You Die.”

Only a very small percentage of estates actually end up paying even a single penny in estate taxes.

Nevertheless, the federal estate tax is debated almost every year.

That is the case this year, since many believe the Trump administration and Republicans in Congress will seek to eliminate the tax entirely. If they do, it will not end all estate taxes in the country.

Fourteen states have their own version of the estate tax and they vary both in rates and in how much an estate can be worth before the tax kicks in.

Six states have an inheritance tax, which is similar. However, instead of taxing the estate, inheritance taxes are based on the amount the heirs receive and usually their degree of relationship to the decedent.

The heirs pay the inheritance tax, not the estate.

New Jersey and Maryland have both an estate tax and an inheritance tax.

It is important to understand state estate taxes, so you can ask your estate planning attorney what the rules are in your state and in any state you might consider moving to in your retirement years.

An estate planning attorney can guide you in creating an estate plan that meets your unique circumstances.