Every state has a separate policy on tax exemptions for estates and inheritances. In 2012, the disparity between exemptions for each state will increase, resulting in states that may impose more financial burden on a deceased’s loved ones. The federal estate tax exemption has increased $5 million on January 1, 2012. However, state levies are increasing and decreasing on a case-by-case basis, which may leave families feeling better or worse about their current living situations.
22 states (including the District of Columbia) have already imposed estate and/or inheritance taxes on individuals. Maryland and New Jersey impose an estate tax and an inheritance tax. Maryland imposes an estate tax of up to 16% above a $1 million exemption. In addition, any asset left to a niece, nephew, friend or partner has a 10% inheritance tax attached to it. However, this does not apply to immediate family members (children, grandchildren, parents, siblings, spouse). Six states levy at just the inheritance tax, which is based on the extent of relationship between the heir and the deceased and the tax implications of the inheritance.
In 2012, Illinois will raise their estate tax exemption to $3.5 million, which is a $1.5 million increase from 2011. Whereas, Connecticut is doing the exact opposite; the estate tax exemption will be $2 million, which is a $1.5 million decrease from 2011. Ohio will abolish their estate tax on January 1, 2013, which will leave New Jersey with the lowest estate tax exemption of $675,000.
Many states are revamping their revenue sources to accommodate for any changes in the economy. Thus, it is highly advisable to research where you are living and prepare an estate plan to ensure financial stability following death. J.D.Katz, P.C. can assist you in these matters with highly trained professionals and an extensive knowledge of state and federal taxes.