The federal exemption for individuals concerning estate taxation is now $5.34 million and $10.68 million for couples. However, there are still individuals living in certain states where the exemption rate is much lower than it is on the federal level.
A number of these individuals are now trying to set up residencies in Florida as a means of avoiding the estate tax altogether. That there is such a discrepancy between the estate tax in a location like Florida as opposed to many other states is resulting in some of these states reassessing their circumstances.
New Jersey currently has the lowest exemption rate in the country at $675,000 with a top rate of 16 percent. The current exemption in New York is $1 million with a top rate of 16 percent. The governor of that state has proposed raising this exemption by 2019 to $5.25 million. Ohio has put an end to the estate tax. Other states like Indiana have repealed its inheritance tax.
Legislative changes may be coming, but the changes could be slow. However, there still may be a variety of strategies individuals or couples could use to reduce or eliminate the paying of estate taxes.
Credit shelter trusts could be set up to shelter a certain amount from estate taxation. There are also provisions that allow for one’s surviving spouse to shelter some income – even if a trust had not yet been set up. Some may consider purchasing a life insurance policy to cover federal and state estate taxes. And there is always the option of giving money away while a person is still alive.
It’s a good suggestion to run any estate planning concerns by an attorney experienced in helping individuals out in this area. There may be options that these professionals can provide that have not yet been considered.
Source: The New York Times, “Some States Are Moving to Loosen Their Estate Taxes,” Jan. 24, 2014