Wednesday, August 11, 2010
As previously discussed on this blog, in addition to the federal estate tax, the State of New Jersey imposes its own estate tax on individual estates larger than $675,000. In client meetings, we spend a lot of time discussing and developing solutions that revolve around the New Jersey estate tax. At the end of this discussion, clients usually say something along the lines of “isn’t there an easier way?” My answer is always simple: “yes, you can become a resident of a state without a state estate tax.” Now, for most people, leaving the state is not an option, but to be a resident of a state for estate tax purposes, you only have to reside in that state for 6 months and 1 day. So if you’ve ever considered a beach house in Florida or a ski cabin in Colorado, here’s one more incentive to go for it: you won’t have to pay estate taxes to New Jersey or any other state from the list below. The only caveat here is that you actually have to live in the state in which you are claiming residency for the 6 months and 1 day. The New Jersey Division of Taxation has gone to great lengths to determine whether a taxpayer was a resident of another state at the time of his or her death, including looking into phone records, electricity bills, airplane tickets and other similar records.
States that do not impose an estate tax as of this writing*:
1. Alabama 13. ***Kansas 25. North Dakota
2. Alaska 14. **Kentucky 26. ***Oklahoma
3. Arizona 15. Louisiana 27. **Pennsylvania
4. Arkansas 16. Michigan 28. South Carolina
5. California 17. Mississippi 29. South Dakota
6. Colorado 18. Missouri 30. Texas
7. Florida 19. Montana 31. Utah
8. Georgia 20. **Nebraska 32. Virginia
9. Idaho 21. Nevada 33. West Virginia
10. **Indiana 22. New Hampshire 34. Wisconsin
11. ***Illinois 23. New Mexico 35. Wyoming
12. **Iowa 24. ***North Carolina
* Please be advised that with the future of the federal estate tax uncertain, some states may alter their state estate tax laws once the federal estate tax situation is resolved.
** These states do not collect a state estate tax, but do collect a state "inheritance tax."
*** Estate taxes in these states were repealed on January 1, 2010 due to the repeal of the federal estate tax and are may return once the federal estate tax uncertainty is resolved.