Under current law, the federal government will not tax an estate if it’s worth less than $5,430,000 (2015 inflation indexed). However, it’s important to note that many states have an estate tax exemption well below the federal exemption. Currently, 15 states and the District of Columbia have an independent estate tax. You may overlook planning if you will not face federal estate tax exposure, but you should not underestimate the potential estate or inheritance tax exposure in States where you live or own real property.
As fiscally challenged States look for ways to balance budgets, they may move to create, reinstate or increase existing estate and inheritance taxes.
The following are the 2015 estate tax exemptions of the 15 states and the District of Columbia:
Connecticut – $2,000,000
Delaware – $5,430,000
District of Columbia – $1,000,000
Hawaii – $5,430,000
Illinois – $4,000,000
Maine – $2,000,.000
Maryland – $1,500,000
Massachusetts – $1,000,000
Minnesota – $1,200,000
New Jersey – $675,000
New York – $3,125,000 as of 4/01/2015 through 3/31/2016
Oregon – $1,000,000
Rhode Island – $1,500,000
Tennessee – $5,000,000
Vermont – $2,750,000
Washington – $2,012,000
Life Insurance owned outside a taxable estate remains an effective method of providing the funds for estate tax liabilities, without further inflating the value of the taxable estate for either federal or state tax purposes.
Please consult with a qualified tax professional for your estate tax matters.