Where do you call home and how does it affect your estate tax?
About 15 states and the District of Columbia
impose an inheritance or estate tax. The
tax rates range from a few percent to 19
percent in Washington State. As the typical
state exemption rate is much lower than the
current federal exemption, the middle class is
finding themselves still stuck with a death tax.
In addition, the federal rule allowing spouses
to “port” their deceased spouse’s exemption
is only followed in Hawaii.
What’s worse, as with income taxes, multiple
states may lay claim to your estate as being
taxable. And, even if you die as a resident of
a state that doesn’t have an estate tax, your
estate could still be hit with estate tax if you
own property or other tangible assets (such
as a plane or a boat) in a state that does.
As a general rule, while a person can have
many residences, he or she can have only one
Notwithstanding this rule, there is nothing to
prevent two states from each independently
determining that a taxpayer is domiciled in
the respective state.
The factors set forth in last month’s issue
of determining domicile and residency
for purposes of income taxes apply to the
inheritance tax. In a court or administrative
cases where the state Department of
Revenue/Taxation has made a determination
that the person is domiciled in the state, the
taxpayer typically bears the burden of proof
of establishing that he or she is not domiciled
in the state.
Estate Tax vs. Inheritance Tax
What’s the difference between an inheritance
tax and an estate tax? An inheritance tax is
based on who receives a deceased person’s
property and how the beneficiary is related
to the deceased person, while an estate tax is
based on the value of the deceased person’s
estate and not on who gets what. For more
exemptions see: http://wills.about.com/od/
The Lesson: You must pay attention and take
steps to avoid not just income tax, but estate
and/or inheritance taxes as well. Discuss your
options with your financial advisor today.
WHERE DO YOU CALL HOME AND HOW DOES IT AFFECT
YOUR ESTATE TAX?
8350 N. Central Expressway
Dallas, TX 75206
Dusty Wallace, J.D. , CFP®
LFC Trust Services
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