Will your estate owe taxes after you pass away? It may depend upon where you live, who inherits and if you own property in other locations. Each state sets its own rules regarding estate and inheritance taxes.
Unlike individual state taxes, the federal estate tax is assessed to all citizens. It is currently in a state of uncertainty. Last year, estates worth more than 3.5 million owed taxes. In 2010, the estate tax has been repealed. Next year, the federal limit is expected to be one million. So what does this mean for state estate and inheritance taxes?
State Estate Taxes
Last year eighteen states and the District of Columbia charged an estate tax. This year that number has dropped to fifteen but still includes D.C.. Four states no longer charge the tax and one state instituted an estate tax this year.
Kansas and Oklahoma are two of the states that had an estate tax last year but do not this year. Both states abolished their estate tax in 2010. Last year Kansas estates worth more than one million dollars owed for assets over that limit. In Oklahoma the state tax exemption level was 3 million dollars.
Other states, like Missouri, did not have an estate tax this year or last year. For those in states where no estate tax is assessed, they may have to pay if they own property in another state that does have an estate tax.
Inheritance taxes are different than federal and state estate taxes. These taxes are based upon who inherits. There are seven states that collect an inheritance tax. New Jersey is the only state that collects both inheritance and estate taxes. In each of the seven states where an inheritance tax is owed, the decedent’s spouse is exempt. Each of these seven states decides whether or not decedents and life partners owe inheritance taxes. They also determine if life insurance policies are included in the estate calculation and what rate is owed when applicable. These laws vary in each of the seven states.
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