In 2016, there are still 19 U.S. jurisdictions that collect a death tax at the state level: Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Tennessee (repealed this year), Vermont, and Washington. Even if you don’t live in one of these states, the state estate tax may affect you in the future since many people move from time to time. It may affect your beneficiaries, because they may live or move to one of these states.
The following states will see changes to their state death taxes in 2016:
- Washington began indexing its estate tax exemption for inflation on an annual basis in 2014. The 2015 exemption amount was $2,054,000. The 2016 exemption amount is $2,078,000.
- While Connecticut’s $2,000,000 estate tax exemption will not change in 2016, legislation was enacted in 2015 which caps the estate tax payable by any given estate at $20 million for deaths occurring on or after January 1, 2015.
- Delaware’s estate tax exemption matches the federal estate tax exemption which is indexed for inflation on an annual basis.
- The District of Columbia’s 2015 estate tax exemption is $1,000,000; however, a new D.C. law provides that the exemption will increase to $2,000,000 and eventually match the federal exemption when revenue surplus targets are met.
- Hawaii’s estate tax exemption matches the federal exemption, so Hawaii’s estate tax exemption will also increase from $5,430,000 in 2015 to $5,450,000 in 2016.
- Maine enacted legislation in 2015 which will match its estate tax exemption to the federal exemption beginning in 2016. Thus, the Maine exemption will increase from $2,000,000 in 2015 to $5,450,000 in 2016.
- Maryland’s estate tax exemption will increase from $1,500,000 in 2015 to $2,000,000 in 2016 and will continue to increase annually until it matches the federal exemption in 2019. In addition, in 2019 Maryland will begin recognizing portability of its state estate tax exemption between married couples, including same-sex married couples.
- Minnesota’s estate tax exemption will increase from $1,400,000 in 2015 to $1,600,000 in 2016 and will continue to increase annually until it reaches $2,000,000 in 2018. In addition, married couples can take advantage of ABC Trust planning to defer payment of both Minnesota and federal estate taxes until after the death of the surviving spouse.
- New York’s estate tax exemption will be as follows for 2016: $3,125,000 for deaths between April 1, 2015 and March 31, 2016; and $4,187,500 for deaths between April 1, 2016 and March 31, 2017. The exemption will then continue to increase until it matches the federal exemption in 2019. Aside from this, gifts of New York property made between April 1, 2014 and December 31, 2019 will be subject to a three year look-back period. This means that any gifts made during this time-frame will be brought back into the New York taxable estate if the person making the gift dies within three years of making the gift.
- Rhode Island’s 2015 estate tax exemption was $1,500,000 and is scheduled to be indexed for inflation in 2016 and later years. Nonetheless, in this low inflation environment the Rhode Island Division of Taxation announced on October 22 that the estate tax exemption will remain at $1,500,000 for 2016.
- Tennessee’s inheritance tax will disappear in 2016, bringing the number of U.S. jurisdictions that collect a death tax down to 19.
- The Federal estate tax exemption increased from $5,430,000 in 2015 to $5,450,000 in 2016.
As you can see, the days of easily planning for estate taxes have significantly changed due to portability of the federal estate tax exemption and a myriad of state-level death taxes. If you have any questions about the best way to protect your estate from federal and state death taxes, please contact our office.
Disclaimer Notice: It is my intention that the comments, articles, and other information provided on this website are intended to provide you with general information which may be interesting and of value to you. You should not construe any of this information as legal advice or my opinion as it may relate to your specific circumstances. Please feel free to contact me directly if you would like to discuss your own situation and your estate or business planning needs.