A recent Wall Street Journal article which goes into the uncertain state of estate taxation among the states highlights that estate planning can often be one of the more challenging aspects of estate planning.
Because tax law at the federal and state level frequently goes through changes and adjustments, estate planning specialists have a constant need to keep up to date. In addition, there is also the need to navigate the interactions between the various tax systems at both the federal and state level and determine one’s long-term goals in the midst of all that.
As the article points out, estate planning is approached differently state by state. Just recently, Ohio decided to repeal its estate tax and in the last few months Connected took the opposite approach of reducing its estate tax exemption.
Currently, about 29 states do not have estate tax. Some states impose inheritance taxes on certain beneficiaries. More estate tax changes will likely be coming at the federal level, since the federal credit against estate tax which was thrown out several years ago will return in 2013 unless Congress decides otherwise.
Clients who have property in multiple states need to consider the way each state will tax their property and that can be a challenge to manage. Such individuals are often advised to hire local attorneys and tax planners to work on those details.
In some cases, changes to tax law give rise to court action, as was the case recently when Connecticut decreased its estate tax exemption in May. That law reportedly was applied retroactively back to January, spurring the family of a rich Connecticut developer who died in April to file a suit to resolve the question of whether more taxes could be taken out of the deceased man’s estate.
Working with experts who are aware of the most recent local tax laws is an essential in setting up a working estate plan.
Source: Wall Street Journal, “State Estate Tax Changes Make Plans Trickier,” Arden Dale, 8 July 2011.