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Where not to die in 2012

Changes in estate and inheritance taxes at the state level will make it better -- or worse -- for families in the year ahead.

By MSN Money Partner Dec 27, 2011 5:49PM

Updated Jan. 23, 2012, 5:05 p.m. ET

 

This post comes from Ashlea Ebeling at partner siteForbes.com.

 

Forbes.comAs of Jan. 1, the federal estate tax exemption was indexed for the first time, so that for 2012, up to $5.12 million of an estate will be exempt from the current 35% federal estate tax. That's up from $5 million in 2011, meaning an individual could have left $120,000 more tax-free if he'd died on Jan. 1, 2012, instead of on Dec. 31, 2011.

 

Meanwhile, separate state levies are still a big concern for families. And there are changes for 2012 on the state levies on dying -- for better and for worse.

 

Washington, D.C., and 22 states impose estate and/or inheritance taxes. States with estate taxes typically exempt $1 million or less per estate from their tax and impose a top rate of 16%. Six states levy only an inheritance tax, with the rate depending on the relationship of the heir to the deceased and the taxes kicking in, in some cases, on the first dollar of bequest.

 

Two states, Maryland and New Jersey, impose both. Maryland, for example, imposes an estate tax of up to 16% above a $1 million exemption and a 10% inheritance tax on every dollar left to a niece, nephew, friend or partner, but no inheritance tax on money left to children, grandchildren, parents or siblings. (Any estate tax owed is reduced by the inheritance tax paid.) As in the federal system, bequests to a spouse are tax-free. (Post continues below.)

Some state changes are simply to keep up with inflation. North Carolina's exemption ticked up to $5.12 million for 2012 in keeping with the federal exemption, and Rhode Island's exemption went from $859,350 in 2011 to $892,865 in 2012. But other states are making major changes to the amounts they exempt from tax. In Illinois, which brought back its estate tax in 2011 with a $2 million exemption, the exemption went up to $3.5 million as of Jan. 1, and then will rise to $4 million as of Jan. 1, 2013.

 

Other changes made in 2011 -- both greedy and generous -- will just carry on, unless of course the state pols decide to fiddle again. Connecticut lowered the amount it exempts from its tax from $3.5 million to $2 million per estate, retroactive to Jan. 1, 2011. Vermont, which had a $2 million exemption in 2010, set its exemption at $2.75 million for 2011 and beyond. Oregon made a technical taxpayer-friendly tweak: Its tax applies to the amount of the estate over $1 million now instead of applying to the full amount of the estate.

 

Some changes will be prospective. Republican Gov. John Kasich signed a law in 2011 to abolish Ohio's estate tax effective Jan. 1, 2013 (it kicked in at $338,333 through year-end 2012). That will make New Jersey the state with the lowest state estate tax exemption of $675,000. Maine revamped its tax. Its estate tax exemption will rise from $1 million per person to $2 million on Jan. 1, 2013, with lower graduated rates starting at 8% and going up to 12% on amounts of more than $8 million.

 

According to the American Family Business Institute, which advocates against estate taxes at the federal and state levels, efforts are under way in Indiana, Nebraska, Oregon and Tennessee to repeal the state levies. In Pennsylvania, the House of Representatives recently passed a carve-out to exempt farmers from the state's inheritance tax.

 

But don't rule out more changes to grab estate tax revenue during the 2012 state legislative sessions. "Most of the states are still in pretty poor shape, and if the economy doesn't improve, you might see more action by state legislatures seeking other sources of revenue," says James Walschlager, an analyst with tax publisher CCH.

 

Click here for an interactive map showing state estate and inheritance taxes for 2012. Hover over each state to see the dollar amount exempt from taxes and the top rates for 2012.

 

More on Forbes.com and MSN Money:

VIDEO ON MSN MONEY

141Comments
Dec 27, 2011 7:14PM
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What did these states or the Feds for that matter, do to earn this money? Nothing. This money was already taxed at both levels, it should be passed along to heirs with no levy.
Dec 28, 2011 2:02PM
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What amazes me is that people here (and in the halls of government) think they are entitled to a PENNY of my savings/assets when I die, AFTER I paid every cent of income tax and capital gains tax.  My child is entitled to it because I EARNED I - I didn't waste it all living large; I saved and scrimped and invested long term to accumulate it.  The only reason why the government gets away with this tax is because I'm no longer around to defend myself, and my heirs can easily be classified as "greedy and did nothing to deserve it" - they don't have to, I did it FOR THEM.  Get your greedy fingers off it.  It's a tragedy that heirs end up having to sell or close their families small business just to come up with the cash to pay to inherit it - still haven't figured out how that helped ANYONE.  The jealousy and envy never ceases.  The Constitution only guarantees your right to the PURSUIT of happiness, so get out and pursue it for yourself and stop thinking you are entitled to other people's stuff!
Jan 26, 2012 10:48AM
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Since the government seems to enjoy pissing our tax money away in every way they can think of, to include but not limited to:

 

Benefits of any kind to illegal immigrants (the aid the illegal Mexicans in southern california alone get is insane)

Sending OUR money to other countries in the form of "aid"

Using our military as the world's police force

And politicians making all sorts of deals simply so THEY can get re-elected and keep THEIR easy jobs..

 

I say screw the government.  I made the money and I am keeping it!  I will spend it my way!

 

If I ever win the lottery, I will give CASH to select friends and family members, and no one knows anything on where the money came from or if it even existed.

 

When the government gets more money, they spend more money.  And if they don't get it, they go into debt for trillions.  Obama has blown through 5 trillion in 3 years, that has got to be the all time record.  I'm not paying for it!  Any more than I absolutely have to, anyhow.

 

Joe American

Jan 26, 2012 1:26PM
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The Government needs to keep their noise out of Indviduals Inheritances. The person saving the money/real estate or what ever has paid the taxes on these things when they acquired them. The state and the fed's alike have no business in having their hands in the pot stealing the money a family member has decided to pass on to their decendants. It is immoral!!!.
Dec 27, 2011 9:02PM
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The rise and Fall of the Roman Empire is coming soon to this country

 

Jan 26, 2012 1:22PM
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Taxes were paid on this money when it was made. Then they Gov wants to tax it again at death. Thank the good lord we inherited my father in laws' estate in 2009 while the estate tax was 0. All the envy grabbers want someone else's money taxed at death. Get over it, get a job, spend less than you make AND stay out of other peoples money. 
Jan 26, 2012 8:20AM
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After thirty years as a small business owner, I quit. I quit supporting a government that has done nothing to help me. After paying payroll taxes, and supporting my employees through SEP retirements and Health Insurance payments. I quit. I now fly low below the radar supporting me and my family. What I have accumulated has come from sacrifice and hard work. Not driving new cars and flaunting my wealth. It is mine to give to my children and the government does not deserve a dime more from me, in fact they owe me. I want my retirement money that I contributed for the the last forty years, but they have spent it all. Face it we have been sold out by our government. Our children face "work camps" for the rest of their lives, unless we leave them a better life. And, I will be damned if I am going to give it to the government.
Jan 26, 2012 9:00AM
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After serving my country for 22 years in uniform, and now serving as a military civilian engineer..  the wealth i accumulated will not be staying in the country I chose to serve and defend since age 17 when I went through a federal military academy. I have make great sacrifice.. albeit while making a nice living along the way, and put myself in harms way many many times in my life and service to my country. But I have completely lost faith in it. I will finish out my career and then retire to costa rica where the tax laws are much less ridiculous than they are in this country.  I am disgusted and dismayed with the tax structure in the USA nowadays. I started working when I was 9 yrs old delivering papers... my family didn't have much at all and in fact didn't know from one week to the next if we'd even have out moedest house or be homeless...  I vowed i'd NEVER live like that again and I don't.. but I will be DAMNED if I will pay into a welfare state that simply gives money to so many fat lazy worthless sob's that do nothing... and I care NOTHING for or about.. I am APATHETIC to those I do not know..  noone ever helped me...  and I will NEVER EVER EVER help anyone I don't know..  FK this country and its crap tax laws.. Im taking my money and leaving forever when my time to stop working arrives.
Jan 26, 2012 10:34AM
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I say screw the government where you can when it comes to side income. Some may call it stealing from the government, so what. They steal from you every payday when they take some 30+ percent of your paycheck. Also taxing someone's estate is the governments final "**** you we got your money bitch". Everything in that estate has already been taxed so it should go to the remaining family so they can take care of final expenses and so on.
Jan 26, 2012 9:29AM
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Given we had a 12 YEAR warning that this day was coming, I took care of my daughters inheritence TEN years ago.  Our family farm is well worth more today than it ever has been and she has owned it for a decade now.  I will be penniless when I croak and the government can kiss our asses.

 

Funny how no one felt sorry for us the decades before that we sometimes lost our entire crop and were land rich and money poor.

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I seriosuly do not get you Liberals. Tax tax tax... you all must be some poor SOBs because all you do is want soemone elses money. There should be NO inheritance tax. That moeny has laready been taxed heavily and honestly the government already gets way more than they should. We need to cut government down significantly. If you people want a socialist nation move to one. This country WILL NOT turn into one without a fight.
Jan 26, 2012 10:47AM
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If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

 

Yep, that's our Government. If they didn't waste half of every dollar they get they wouldn't need to find new ways to tax us. The government is supposed to exist to help the people. Not the other way around. The average person is in worse shape than the government. But they keep trying to squeeze more out of us.

Jan 26, 2012 4:44AM
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There should be no inheritance or estate tax whatsoever.  The money being passed on has already been taxed, either as income, capital gains, interest, etc.  Claiming that it is income to the beneficiaries is simply a government scam to tax the already taxed money again.

Jan 26, 2012 7:44AM
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I think its a crude and bullish  way for any state to raise money. I don't care how much an estate is worth. Its just wrong.
Dec 28, 2011 7:07PM
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The Estate Tax should be ZERO.  There is a reason why confiscating inherited wealth is one of the main planks of the Communist Party...
Dec 28, 2011 2:21PM
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People should be able to give their money to whoever they want, without some third party taking a huge chunk of it.  That is why this tax is bogus. 

However its always good to read that a tax has been abolished or an exemption raised.
Jan 26, 2012 7:13AM
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Obama, in his speech, Angrymentioned the rich not paying their fair share.  He used examples of people who are really rich -- millionaires and billionares.  Then he went on to mention "those making more than $250,000 a year."  This is deceptive manipulative talk (propaganda).  Why?  If they only taxed millionaires and billionaires, they would not get the tax revenue they want.  The bar was lowered down to common folk making $250,000.  In other words, the bulk of the one percenters are NOT millionaires or billionaires.  The extra tax burden will NOT HURT Bill Gates or Soros or the HOLLYWOOD STARS (at least not the ones who managed their money wisely).  It will be the top of the working class (e.g., small business owners and company managers who work 60 - 80 hrs a week) who have taken the risks, bust their ****, use their brains, etc.  All it takes is two people in a marriage, each making $125,000 a year to end up in Obama's bucket of WEALTHY INDIVIDUALS.  I don't consider anyone making $125,000 a year, nor $250,000 a year, wealthy.  These so called rich people don't have the tax loop holes or offshore businesses, etc, to pay less than 30% tax.  Rather, they will end up paying close to 50% (fed, state, local) of their money to government.  The net result is not the same as the real rich (millionaires and billionaires).  To this end, don't villanize and abuse those who are mildly successful and are already paying their FAIR SHARE. 

Jan 26, 2012 8:25AM
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Whatever happened to not being taxed twice ?  Eliminate all inheiritence taxes and make income taxes more equitable.  Having to pay taxes because someone died is just wrong.  Also, passing on a small family business is just about impossible if the surviving family members have to sell it in order to pay inheiritence taxes. 
Jan 26, 2012 6:59AM
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This money has already been taxed, Enough is Enough
Dec 31, 2011 4:35PM
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People who pay no income tax should not even be allowed to vote. These are the same losers that yell the loudest that those who pay taxes should pay even more. In a democracy, success is rewarded, not failure. With communism and socialism, the doctor is paid the same as the dumb lazy dishwasher. The only problem is that you will have trouble finding a doctor when you need one. People need to stop counting other peoples money and worry about making their own. Welfare needs to end, as when you feed the poor and ignorant, all you get are more poor and ignorant, The jealous posts from the have-nots only go to prove this point. And I agree, EVERYONE should pay their fair share of taxes, and that includes the bottom 47% of Americans who currently pay nothing. Replacing the current tax code with a consumption tax collected at point of sale would solve problems in a hurry... besides forcing the bottom 47% to pay taxes, it would also collect tax from those that report no income and work for cash under the table. Now that is fair taxation!
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