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Affluent Urged to Focus on State Estate Taxes
Author: Scarinci Hollenbeck, LLC
Date: October 16, 2013
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Many affluent Americans and business owners who may be subject to federal state estate taxes focus a great deal of attention on understanding their obligations under tax law, utilizing gift tax allowances, and establishing wealth management plans that will help lower their liability. However, a recent analysis indicates that too few individuals give the same attention to the estate taxes they may be required to pay by their state.
In a recent Wall Street Journal column, wealth manager Michael Foltz noted that after lawmakers raised the federal estate tax exemption to $5.25 million and announced that the exemption between spouses is portable, most households will not be required to pay federal estate taxes. However, some may fail to prepare themselves adequately for state estate taxes, which vary largely across the U.S. Currently, 21 states and the District of Columbia impose taxes on residents’ estates, and some are significantly higher than others and may carry top rates as high as 16 percent.
For instance, New York carries a $1 million exemption, whereas New Jersey’s exemption is only $675,000. This means that New York resident with a $5.25 million exemption would escape federal taxes, but be required to pay roughly $420,800 in estate taxes to the state, Forbes notes. In addition to estate taxes, six states levy an inheritance tax, the rate of which varies by who is inheriting the assets. For instance, Maryland imposes an estate tax of up to 16 percent above a $1 million exemption, and a 10 percent inheritance tax on every dollar left to a niece, nephew, or friend. However, no inheritance tax is levied against funds left to children, grandchildren, parents, or siblings.
It’s important that individuals understand all of the potential liabilities they may face – both local, state, and federal – when managing their wealth in order to establish a more comprehensive plan.
- Practices: Tax and Trusts & Estates, Sophisticated Estate Planning & Wealth Preservation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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