Your Neighborhood Estate Tax
At press time, Congress was considering a repeal of the federal estate tax. Even if it remains, the threshold at which taxpayers begin paying taxes is relatively high at $5.49 million (in 2017). Either way, creating an estate strategy is, for most people, more about where you live than federal tax law.
All Over the Map
Some states tie their estate tax to the federal threshold, a so-called “pick-up tax.” Other states have an estate tax threshold that is separate and often lower than the federal one. Still others don’t have an estate tax, but levy inheritance taxes.
Tough States for Estates
Then there are states that are in a class by themselves. New Jersey used to be the hands-down winner, with both estate and inheritance taxes. The latter will be phased out in 2018, but the state’s $2 million starting point is still among the lower estate tax thresholds. A handful of states have additional thresholds at which you will pay your state, regardless of what you paid in federal estate tax.
Know Your Tax
While you might not want to move just to avoid state estate and inheritance taxes, it is a good idea to create an estate strategy now. Doing so could make life easier for loved ones when your estate is disbursed, and sound strategies can help reduce the effect of estate taxes.
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