An Overview Of State Death Taxes
For those financial professionals working with estate taxes it can be helpful to obtain an estate planning certificate
. Attending an estate planning school can be a great step towards becoming an effective estate planning specialist. This brief article offers an overview of recent updates to estate and death taxes across the country, which is an important topic for all financial professionals. Dealing with estate taxes is often a long and complicated process, and adequate preparation and education can help make a financial advisor better prepared to provide services for those needing help with estate taxes. Finding a good program to learn about various financial topics (like estate taxes) can be difficult, but well worth the effort when these topics arise in daily business.
For 2009, individuals avoided estate taxes if their taxable estate was valued at $3,500,000 or less. At this level, it is estimated just 5,500 estates a year were subject to federal estate taxation. At the previous $2,000,000 limit, 17,500 estates annually were subject to the tax (source: Urban-Brookings Tax Policy Center). The figures for state estate and inheritance taxes vary widely.
Keeping track of constantly changing state death taxes can be difficult. Delaware added an estate tax in 2009, while Kansas and Illinoiswere expected to eliminate such a tax in 2009. Eight states have inheritance taxes that are levied on heirs, not estates. In many states, rates are tied to how closely the heir is related to the now deceased donor. For example, Pennsylvania taxes children and grandchildren at an almost-flat rate of 4.5% while more distant relatives pay up to 15%.
Taxpayers who live in states without estate taxes, such as California and Florida, may face estate taxation if they own property in a state that has an estate or inheritance tax. Such possible taxation is based on domicile, a much broader definition than residency. It is possible for someone to have multiple domiciles since domicile may be determined by where the person votes, has a church or club membership, registers a car or owns a burial plot. For example, when Campbell Soup magnate John Dorrance died in1930, both New Jersey and Pennsylvania each collected about $15 million in death taxes.
Advisors may wish to consider a bypass trust for married couples living in a state that imposes any kind of death tax that has an exemption lower than the federal level. With a bypass trust, when the first spouse dies, assets go into a trust the surviving spouse can draw. When the second spouse dies, any remaining assets in the bypass trust pass tax-free to heirs, thereby preserving the value of both individual exemptions.
From this summary its clear there are many rules and regulations to abide by when it comes to being an effective estate planning specialist. Estate planning school can lead to an estate planning certificate, which can instill confidence in your clients. Keeping up to date with current legislation is very important for financial advisors and this kind of certification will help keep advisors informed of what they need to know regarding estate and death taxes.
by: Cory Bowman
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