The Wall Street Journal has a very interesting look at estate taxes (or “death tax” if you prefer) across the nation this weekend. With the federal tax almost entirely going away this year, more and more people are turning to tax and estate planners for help with similar taxes levied by the individual states. (To be clear, the federal estate tax hasn’t disappeared entirely, but the minimum threshold has risen to $3.5M for individuals and $7M for married couples.)
There are a 17 states which impose an estate tax, and another eight which have an inheritance tax. (Imposed on the recipient, not on the estate.) You lucky, lucky taxpayers in New Jersey and Maryland get to pay both. But the rules across these various areas are, as the article describes it, a “crazy quilt” of exemption levels and residency requirements. One aspect of it which I had been unaware of was the instance of states laying claim to the “domicile” of the dead person. If you live and spend most of your time in one state but, for instance, have a vacation home in another, the second state can sometimes challenge the estate and try to lay claim to the tax.
There’s a very useful chart and map included which will show you what the current status is in your state, and if you have any reasonable amount of wealth, you may want to take a look at it. And that amount may be less than you think in some cases. Nebraska imposes an 18% tax on all estates valued at more than ten thousand dollars.(That makes you rich?)
If you click a tab at the top of the page, you should also take a look at the lively battle erupting in comments left regarding this article. Several self styled accountants, lawyers and historians provide a variety of interesting angles on estate taxes. Among these you will find this wild-eyed account:
Calling Estate Taxes a “Death Tax” is just a trick to sucker people into thinking that the tax is immoral when in fact, the tax history of estate taxes is rooted in the founding of our country and the tax laws were designed to prevent huge concentrations of wealth that can be perpetually tranfered from generation to generation.
Wow! That certainly would be some eye-opening information and provide a while new view of the redistributionist and quasi-socialist tendencies of the founding fathers, wouldn’t it? Well, it would if it were true, anyway. Of course, the reality is that the first estate tax was enacted in 1797 specifically to pay for the reconstruction and expansion of our navy and was repealed in 1802 after the work was paid for.
(Try for a moment, here in 21st century America, to imagine a Congress that told the public that it needed a new tax to pay for a pressing, specific need and then removed the tax once the need was met. Man, those guys really were revolutionary, weren’t they?) The tax showed up again for eight years during the civil war to pay for all that carnage and then disappeared pretty much entirely until the 20th century.
Anyway, take a look at the whole article and associated discussion. Some useful information there.