The federal death tax has all but disappeared from the radar screen of most taxpayers. Why? The fiscal cliff-bridging budget set and made “permanent” the estate tax at a generous $5.25 million exemption amount. Unfortunately, there are still some states with their own death taxes. Fortunately for us, California has no state estate taxes. You could be subject to state estate tax though if you have assets in another state.
Consider Connecticut, a state that enjoyed a bumper year for death taxes. As reported by The Hartford Courant in an article titled “Inheritance Windfall: Record-Breaking Year For Estate Taxes Helps Fuel Budget Surplus,” the tiny Nutmeg State raked in an unprecedented $428 million in inheritance taxes.
A good portion of this windfall is due to budget timing and estate planning, since this figure includes any gift taxes collected in 2012. Remember, that was a year of great gifting before the American Taxpayer Relief Act (ATRA), and Connecticut counts all transfer/inheritance taxes as one and the same. Then again, there were some notable deaths in Greenwich, CT, the richest little town in the U.S.
If you do not reside in one of the states with its own death tax, watch out. As state budgets continue to squeeze, death taxes may become more appealing to your state legislators.
Reference: The Hartford Courant (May 11, 2013) “Inheritance Windfall: Record-Breaking Year For Estate Taxes Helps Fuel Budget Surplus”
If you would like more information about estate planning, please visit www.mrjcestateplanning.com or contact us for a free consultation.