Consider the Other Estate Taxes When Deciding Where to Retire
| When people think about relocating to a cheaper place after they retire, they often look to states that don’t have an income tax. But these days, they should also be looking at a state’s estate-tax law before making plans to move. Because of a federal law that has been phasing in over the past few years, the states’ share of federal estate-tax revenue has fallen to zero, from 16% in 2001, says Charles Fox IV in Charlottesville, Va., an estate-tax expert and a partner with the law firm McGuireWoods LLP. Budget-challenged states are feeling the pinch. And a number of states have responded with some form of estate or inheritance levies of their own. |
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Some states, including California, Florida, Michigan, Mississippi, Missouri and Nevada, don’t charge residents an estate tax, so people in those states face only the federal estate tax. But in the states that do have a tax, it’s now surprisingly easy to wind up ensnared. Although the federal law currently exempts the first $2 million of an estate, the threshold in some states is much lower. Add up your home’s value, a retirement account or two and some other dribs and drabs, and your estate may well top your state’s threshold. In New Jersey and Rhode Island, for instance, estates valued at more than $675,000 are potentially subject to some form of state inheritance or estate tax.
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