Every New York resident knows that different states have different estate tax laws. In fact, some states offer more favorable incentives than others to retiring seniors. For example, the “Sunshine State” is one state that does not have any estate taxes, and for this reason — and the extra sunshine and beaches — it has become a popular place for seniors to retire.
Next year, a number of states, including New York, will be increasing estate tax exemptions and/or getting rid of estate taxes completely. For example, in April 2015, New York will be increasing its exemption from $2.062 million up to $3.125 million. New York will continue to raise its exemption levels by $1 million per year over the next several years until it reaches the federal estate tax exemption level of approximately $6 million.
Lawmakers in New York and other states with estate taxes are making these changes because they are worried that well-off retirees will move away. By moving to a state with lower estate taxes, their estates will not be hit with exorbitant taxes when they die. In fact, some say that escaping tax burdens is one of the most common reasons why retirees move to new states. However, moving away means that the original state will not only miss out on estate taxes, it will also miss out on income tax that the retiree would have paid.
In addition to estate taxes, seven states actually have what is called an inheritance tax and at least two states have both. Inheritance taxes are paid by heirs when they receive an inheritance, whereas estate taxes are charged to an estate before its assets are distributed to heirs.
Regardless if you live in New York or plan to move to another state for estate tax planning purposes, it is best to plan your estate now rather than later. A qualified estate planning attorney will have a number methods at his or her disposal to help you limit any tax implications associated with your death. Also, if you plan to move, your estate planning professional will be able to help you evaluate what your estate tax situation could be in another state should you ultimately choose to relocate there.
Source: recordonline.com, “Protecting your future: Trend among states to lower estate taxes” Bonnie Kraham, Nov. 19, 2014