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.
Updated Jan. 23, 2012, 5:05 p.m. ET
This post comes from Ashlea Ebeling at partner siteForbes.com.
As 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:
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.
The rise and Fall of the Roman Empire is coming soon to this country
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.
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.
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.
However its always good to read that a tax has been abolished or an exemption raised.
Obama, in his speech, mentioned 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.
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