Will State “Death Taxes” Shrink Your Estate?

The federal estate tax has affected relatively few people in recent years, but many states tax estates at death, and your assets could be affected.  Some states impose inheritance taxes, in which heirs are divided into beneficiary classes.  Those with the closest relationship typically receive larger exemptions and pay tax at lower rates.  Other states impose an estate tax similar to the federal estate tax, but with exemptions much smaller than those provided by the federal system.

At last count, 23 states and the District of Columbia had a death tax, meaning 27 states do not.  But keep in mind that taxes may be imposed on real estate or personal property that you own outside your home state (vacation property, for example).  State “death tax” laws change periodically, and you should consult your advisers for the current tax situation in states where any of your assets are located.  Here are the states with “death taxes” at time of publication: CT, DE, DC, IL, IN, IA, KS, KY, ME, MD, MA, MN, NE, NJ, NY, NC, OH, OK, OR, PA, RI, TN, VA, WA.

In general, state death tax laws allow deductions for property passing to qualified charitable organizations.

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