The state level estate tax is not a problem for most states in the union. Nevertheless, it is a problem worth understanding. This is certainly true if your retirement plans might involve one of those states where the estate tax still has teeth.

As noted in the editorial, 18 states (made 19 by the District of Columbia) exact some form of estate tax, sometimes in conjunction with their own form on inheritance and/or gift tax. Each jurisdiction does so to various degrees. Most of the taxing states apply their estate tax as under the former federal estate tax.

Given that the federal tax has been tamed as of late, the state estate taxes pose a potential trap for unwitting estate planners.

Granted, you may still “vote with your feet” when it comes to state laws. Accordingly, if you are looking to cut your overall estate taxation, then evaluate the laws of your state of residency and those of any potential states to which you may relocate in the future.

When state “shopping” for tax avoidance, remember the three rules every realtor knows: location, location, location.

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.
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