Overview of Vermont Estate Tax Laws

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Understanding How Vermont Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Vermont, then you live in one of a handful of states that still collect a local death tax. The estates of Vermont residents, as well as the estates of nonresidents who own real estate and/or tangible personal property and/or income-producing property located in Vermont, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Vermont estate tax?

If the decedent was a resident of Vermont at the time of death, the estate may be subject to the Vermont estate tax if the federal gross estate exceeds $2,750,000 on the date of death or if the estate is required to file a federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.

For nonresidents of Vermont, an estate may be subject to the Vermont estate tax if it includes Vermont sitused property (real estate, tangible personal property, and/or income-producing property sitused in Vermont) and the federal gross estate exceeds $2,750,000 on the date of death or if the estate is required to file a federal estate tax return.

Note: The Vermont estate tax exemption was increased to $2,750,000 on January 1, 2011. Prior to this date, the exemption was as follows:

2006 - 2010 = $2,000,000
2004 - 2005 = $1,500,000
2002 - 2003 = $1,000,000
2001 - 2002 = $675,000

What Vermont estate tax forms must be filed?

The personal representative or other fiduciary representing an estate that is subject to the Vermont estate tax must complete and file the Vermont Estate Tax Return, Form E-1.

Additional documents that must be filed with the Vermont Department of Taxes when a Vermont Estate Tax Return is required to filed are as follows:

If no federal estate tax is due and no federal estate tax return (IRS Form 706) is required to be filed, nonetheless the estate representative must complete and file a pro forma IRS Form 706, including all exhibits and appraisals, with the Vermont Estate Tax Return.

When federal estate tax is due and all assets are located in Vermont, the first page of IRS Form 706 must be included with the Vermont estate tax return.

When federal estate tax is due and some assets are located outside of Vermont, IRS Form 706 must be attached to the Vermont Estate Tax Return, but excluding exhibits and appraisals.

A duplicate of the Estate Tax Closing Letter issued by the IRS must be filed with the Vermont Department of Taxes.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Vermont death tax may be due on the B Trust after the first spouse's death due to the gap of $2,500,000 between the Vermont exemption of $2,750,000 and the 2013 federal exemption of $5,250,000. While some states allow a married decedent's estate to make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the local estate tax, Vermont law does not specifically allow for this. However, one commentator on Vermont estate taxes has stated that "representatives of the Vermont Department of Taxes have stated informally that Vermont will recognize whole or partial QTIP elections for properly drafted trusts as long as the election is, or would be, binding for both federal and Vermont estate tax purposes." (See Planning for the Vermont Estate Tax for more about this issue.) Thus, married Vermont residents should consult with a Vermont estate planning attorney to determine if they can incorporate ABC Trust planning into their estate plans.

When are the Vermont estate tax return and tax payment due?

The Vermont Estate Tax Return, Form E-1, must be filed, and any estate tax due must be paid, within 9 months of the decedent's date of death. An extension of time to file the Vermont Estate Tax Return does not extend the time to pay, so an estimate of the estate tax to be due must be paid with the extension of time request. Where are the Vermont estate tax return filed and tax payment made?

Mail all required forms and any payment due to:

Vermont Department of Taxes
133 State Street
Montpelier, VT 05633-1401

What is the Vermont estate tax rate and how is the tax calculated?

Computing the Vermont estate tax is a convoluted process. According to Vermont estate planning attorney Richard W. Kozlowski, the Vermont estate tax is based on "a complicated and slightly regressive tax system, with marginal tax brackets that begin at 35% (for the first dollars in excess of $2.75 million) and then decrease to 9.6% for estates in excess of $3.4 million, and then rise again to a max rate of 16% for estates in the $10+ million range." (See ESTATE TAXATION - FEDERAL & VERMONT on Mr. Kozlowski's website for his overview of Vermont estate taxes.)

Page 4 of the current Vermont Estate Tax Return, Form E-1, contains "Computation Schedules" for calculating the Vermont estate tax bill for residents and nonresidents.

Where can I find additional information about Vermont estate taxes?

For more information about Vermont estate taxes, refer to the Vermont Department of Taxation's website: Vermont Estate Tax.

You may also call the Vermont Department of Taxation at (802) 828-6820.

Refer to Vermont estate planning attorney Richard W. Kozlowski's article, ESTATE TAXATION - FEDERAL & VERMONT, for an overview of the Vermont estate tax laws.

Does Vermont collect an inheritance tax?

Does Vermont collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, Vermont does not collect a local inheritance tax.

Overview of Rhode Island Estate Tax Laws

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Understanding How Rhode Island Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

If you live in Rhode Island, then you live in one of the remaining states that collects a state estate tax or a state inheritance tax. The estates of Rhode Island residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Rhode Island, are subject to a state estate tax under the following guidelines.

When is a Rhode Island Estate Tax Return Required to be Filed?

For a Rhode Island resident, a Rhode Island Estate Tax Return, Form 100A, must be filed if the decedent's gross estate plus adjusted taxable gifts exceeds $675,000 in 2009, $850,000 in 2010, $859,350 in 2011, $892,865 in 2012, or $910,725 in 2013.

For a nonresident, the estate must file Form 100A if the estate includes real or tangible personal property located in Rhode Island and the gross estate plus adjusted taxable gifts exceeds $675,000 in 2009, $850,000 in 2010, $859,350 in 2011, $892,865 in 2012 or $910,725 in 2013.

A signed copy of the federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, must accompany Form 100A if the estate is required to file Form 706.

Note: The Rhode Island estate tax exemption increased from $675,000 to $850,000 on January 1, 2010, and has been indexed for inflation beginning in 2011.

When is the Rhode Island Estate Tax Return and Any Payment Required Due?

Form 100A must be filed and any tax due must be paid within nine months of the decedent's death.

An extension of time to file Form 100A may be requested, however, even if an extension is granted it won't delay the time for payment of any tax due.

Where is the Rhode Island Estate Tax Return Filed?

Mail the Rhode Estate Tax Return (Form 100A), a $25.00 filing fee, any payment due, and all other required forms to:

Rhode Island Division of Taxation Estate Tax Section
One Capitol Hill
Providence, RI 02908

Make checks payable to "RI Division of Taxation."

What is the Rhode Island Estate Tax Rate?

The tax rate is a progressive rate that maxes out at 16% for the amount above $10,040,000.

Are Transfers to a Surviving Spouse Taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used traditional AB Trust planning to reduce their federal estate tax bill, a Rhode Island estate tax may be due on the B Trust after the first spouse's death since there is a gap between the Rhode Island estate tax exemption and the federal estate tax exemption (for example, the gap in 2012 is equal to a whopping $4,107,135). A married decedent's estate is, however, authorized to make an election on Form 100A to treat property as marital deduction qualified terminable interest property ("QTIP") for Rhode Island purposes, so married Rhode Island couples can defer payment of both Rhode Island estate taxes and federal estate taxes until after the death of the surviving spouse by using an ABC Trust scheme instead of AB Trust planning.

Do Nontaxable Estates Have to File Any Forms?

For gross estates valued at the exemption amount or less, Form 100, Estate Tax Credit Transmittal, can be filed to obtain discharge of the automatic statutory lien that attaches to all Rhode Island real estate a person owns at death, to obtain a Notice of No Tax Due for probate administration purposes, and to allow the sale of Rhode Island securities, including Rhode Island incorporated stock, Rhode Island state and municipal bonds, and mutual funds organized as business trusts that do business in Rhode Island.

Form 100 should be signed by the executor, administrator, trustee or heir at law of the deceased person. It should be mailed along with a death certificate and $25.00 filing fee to the address listed above for Form 100A.

Note: As mentioned above, the Rhode Island estate tax exemption was increased from $675,000 to $850,000 on January 1, 2010, and was then indexed for inflation beginning in 2011. Does Rhode Island Impose a Lien on the Deceased Person's Property?

Form T-77, Discharge of Lien Form, must be filed along with Form 100A or Form 100 if the decedent had any interest in real estate located in Rhode Island. Form T-77 must be filed in triplicate and the description of the real estate must be stated as the tax assessor's description which can be found on the property tax bill issued by the applicable city or town.

Form T-79, Estate Tax Waiver Form, must be filed along with Form 100A or Form 100 if the decedent had any interest in a security of a Rhode Island incorporated business requiring an estate tax waiver. Form T-79 must be filed in duplicate.

Where Can I Find Additional Information About Rhode Island Estate Taxes?

For more information about Rhode Island estate taxes, refer to the Rhode Island Division of Taxation website.

Overview of Oregon Estate Tax Laws

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Understanding How Oregon Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Oregon, then you live in one of a handful of states that collects a state death tax. The estates of Oregon residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Oregon, are subject to a state death tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Does Oregon collect an estate tax or an inheritance tax?

Prior to 2012, the Oregon death tax was referred to as an "inheritance tax" in the Oregon code, but effective January 1, 2012, the Oregon death tax became known as an "estate tax." This makes sense since Oregon's death tax is collected based on the value of the estate (hence, an "estate tax"), as opposed to being based on who inherits the estate (hence, an "inheritance tax").

In this article, the Oregon death tax collected on or before December 31, 2011 is referred to as an inheritance tax, the Oregon death tax collected on or after January 1, 2012 is referred to as an estate tax, and both taxes are referred to in general as the death tax.

When is an estate subject to the Oregon inheritance tax or estate tax?

For Oregon residents, an estate may be subject to the Oregon inheritance tax or estate tax if the total gross estate exceeds $1,000,000.

For nonresidents of Oregon, an estate may be subject to the Oregon inheritance tax or estate tax if it includes real estate and/or tangible personal property having a situs within the state of Oregon and the gross estate exceeds $1,000,000.

What Oregon inheritance tax or estate tax forms must be filed?

For deaths that occurred on or before December 31, 2011, estates with a gross value that exceeds $1,000,000 must file an Oregon inheritance tax return, Form IT-1, even if no Oregon inheritance tax will be due as a result of applicable deductions and exemptions.

For deaths that occurred on or after January 1, 2012, estates with a gross value that exceeds $1,000,000 must file an Oregon estate tax return, Form OR706, even if no Oregon estate tax will be due as a result of applicable deductions and exemptions.

Are Oregon Registered Domestic Partners treated the same as married couples?

In 2007 the Oregon legislature passed HB 2007. Under the provisions of this law, the instructions for the Form IT-1 were amended to provide that the term “surviving spouse” may be replaced with "surviving Oregon Registered Domestic Partner."

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse or registered domestic partner are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, an Oregon death tax may be due on the B Trust after the first spouse's death due to the gap of $4,120,000 between the Oregon exemption of $1,000,000 and the federal exemption of $5,120,000. Nonetheless, a married decedent's estate can make an election to treat a trust of which the surviving spouse is the sole beneficiary as "special marital property" for purposes of calculating the Oregon death tax. Thus, married Oregon residents can defer payment of both Oregon and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Oregon death tax return and tax payment due?

The Oregon death tax return must be filed and any death tax due must be paid within nine months after the decedent's date of death.

An extension of time to file the Oregon death tax return and pay any tax due will be accepted for Oregon if granted by the Internal Revenue Service. If the estate does not have to file a federal estate tax return, then mark "For Oregon Only" at the top of IRS Form 4768 and federal guidelines will be used to consider the request. If an extension of time to pay is granted, the tax must be secured by collateral acceptable to the Oregon Department of Revenue. In addition, an extension of time to file the return does not extend the time to pay the tax, and interest will accrue during the extension period.

Where is the Oregon death tax return filed?

Mail the Oregon inheritance tax return, Form IT-1, or the Oregon estate tax return, Form OR706, and all other required forms and documentation to:

Oregon Department of Revenue
P.O. Box 14110
Salem, OR 97309-0910

If you are using a private delivery service such as FedEx or UPS, then use the following address:

Oregon Department of Revenue
955 Center Street
NE Salem, OR 97301-2555

What are the Oregon inheritance tax or estate tax rates?

For deaths that occurred on or before December 31, 2011, once the value of the net estate exceeded $1,000,000, the entire value of the estate was taxed. Inheritance tax rates ranged from 0.8% to 16% of the adjusted taxable estate.

For deaths that occurred on or after January 1, 2012, the first $1,000,000 of an estate is exempt from the estate tax calculation. For a table showing the estate tax rates that went into effect on January 1, 2012, refer to Lawmakers Tweak Oregon Estate Tax.

Overview of New York Estate Tax Laws

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Understanding How New York Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in New York, then you live in one of a handful of states that collects a state estate tax. The estates of New York residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in New York, are subject to a state estate tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the New York estate tax?

For New York residents, an estate may be subject to the New York estate tax if the total of the federal gross estate, plus the federal adjusted taxable gifts and specific exemption, exceeds $1,000,000.

For nonresident U.S. citizens, an estate may be subject to the New York estate tax if it includes real estate or tangible personal property having a situs within the state of New York and the gross estate, plus federal adjusted taxable gifts and specific exemption, exceeds $1,000,000.

For nonresident, non-U.S. citizens, an estate may be subject to the New York estate tax if it includes real or tangible personal property having a situs within the state of New York and the estate is required to file a federal estate tax return (Form 706-NA).

What New York estate tax forms must be filed?

Each estate that may be subject to the New York estate tax as described above must file a Form ET-706, New York State Estate Tax Return.

The estate of a nonresident must also file Form ET-141, New York State Estate Tax Domicile Affidavit.

Aside from these New York forms, the starting point for Form ET-706 is the federal estate tax return, IRS Form 706. Thus, a completed IRS Form 706 (or IRS Form 706-NA for a noncitizen, non-U.S. resident) with all schedules and supporting documents must be completed and submitted with New York Form ET-706 even if the estate is not required to file a federal estate return.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a New York estate tax may be due on the B Trust after the first spouse's death due to the gap of $4,250,000 between the New York estate tax exemption of $1,000,000 and the 2013 federal estate tax exemption of $5,250,000. A married decedent's estate is NOT authorized to make an election on Form ET-706 to treat property as marital deduction qualified terminable interest property ("QTIP"). What this means is that married couples cannot defer payment of both New York estate taxes and federal estate taxes until after the death of the surviving spouse using an ABC Trust scheme.

When is the New York estate tax return and any payment required due?

Form ET-706 must be filed and any tax due must be paid within nine months after the decedent’s date of death unless an extension of time to file the return and pay the tax is received.

An extension of time to pay the estate tax for up to four years from the date of death may be granted if it is established that payment of any part of the tax within nine months from the date of death would result in undue hardship to the estate, but annual installments may be required. Extensions of time to file the return, pay the tax, or both, are requested on Form ET-133.

Where is the New York estate tax return filed?

Mail the New York estate tax return, Form 706-ET, and all other required forms to:

NYS Estate Tax Processing Center
P.O. Box 15167
Albany, NY 12212-5167

What is the New York estate tax rate?

The New York estate tax rate is a progressive one that starts at 5.085% and rises to 16% for the amount above $10,040,000.

Where can I find additional information about New York estate taxes?

For more information about New York estate taxes, refer to the New York Department of Taxation and Finance website.

How can I get an estimate of my New York estate tax liability?

To calculate an estimate of your New York estate tax liability, refer to the following calculator offered by the New York law firm of Cohen & Schwartz, LLP: New York Estate Tax Calculator

 

Overview of New Jersey Estate Tax Laws

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Understanding How New Jersey Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

In addition to a state inheritance tax, New Jersey also imposes a separate state estate tax which has been decoupled from the federal estate tax laws. Here is a summary of the current New Jersey estate tax laws.

When is a New Jersey Estate Tax Return Required to be Filed?

A New Jersey estate tax return, Form IT-Estate, must be filed if the decedent's gross estate plus adjusted taxable gifts exceeds $675,000. How is the New Jersey Estate Tax Calculated?

The New Jersey estate tax is either the maximum credit for state inheritance, estate, succession or legacy taxes allowable under the provisions of the Internal Revenue Code in effect on December 31, 2001 (this is called the "Form 706 Method"), or an amount determined pursuant to the Simplified Tax System prescribed by the Director, Division of Taxation (this is called the "Simplified Form Method").

The Form 706 Method must be used if the taxpayer is required to file a federal estate tax return, IRS Form 706.

If the taxpayer isn't required to file IRS Form 706, then, in addition to the Form 706 Method, the Simplified Form Method may be used provided that it produces a tax liability similar to the Form 706 Method.

When is the New Jersey Estate Tax Return and Any Payment Required Due?

Form IT-Estate must be filed and any tax due must be paid within nine months of the decedent's death, or nine months plus 30 days if the Form 706 Method is used.

An extension of time to file Form IT-Estate may be requested, however, even if an extension is granted it won't delay the time for payment of any tax due.

The Form 706 Method requires that Form IT-Estate be prepared and filed along with a 2001 IRS Form 706. This is in addition to IRS Form 706 for the year of the decedent's death if one is required to be filed. Where is the New Jersey Estate Tax Return Filed?

Mail the New Jersey estate tax return, Form IT-Estate, and all other required forms to:

NJ Inheritance Tax and Estate Tax
P.O. Box 249
Trenton, New Jersey 08695-0249

What is the New Jersey Estate Tax Rate?

The tax rate is a progressive rate that maxes out at 16% for the amount above $10,040,000.

Are Transfers to a Surviving Spouse Taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a New Jersey estate tax may be due on the B Trust after the first spouse's death if there is a gap between the New Jersey estate tax exemption and the federal estate tax exemption at the time the federal estate tax comes back into effect. A married decedent's estate is authorized to make an election on Form IT-Estate to treat property as marital deduction qualified terminable interest property ("QTIP") for New Jersey purposes, but married New Jersey couples cannot defer payment of both New Jersey estate taxes and federal estate taxes until after the death of the surviving spouse using an ABC Trust scheme.

Are Transfers to a Surviving Domestic Partner Taxable?

Federal estate tax laws do not have a provision providing a deduction for property passing to a domestic partner. However, if a New Jersey decedent was a partner in a civil union and died on or after February 19, 2007, and was survived by his or her partner, then a marital deduction equal to that permitted to a surviving spouse under the provisions of the Internal Revenue Code in effect on December 31, 2001, is permitted for New Jersey estate tax purposes.

Does New Jersey Impose a Lien on the Deceased Person's Property?

For New Jersey decedents dying after December 31, 2001, the New Jersey estate tax remains a lien on all property of the decedent as of the date of death until paid. No property may be transferred without the written consent of the Director of the Division of Taxation.

Where Can I Find Additional Information About New Jersey Estate Taxes?

For more information about New Jersey estate taxes, refer to New Jersey Inheritance and Estate Tax General Information on the New Jersey Division of Taxation website.

Overview of Minnesota Estate Tax Laws

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Understanding How Minnesota Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Minnesota, then you live in one of a handful of states that still collect a local death tax. The estates of Minnesota residents, as well as the estates of nonresidents who own real estate and/or tangible personal property and/or business interests located in Minnesota, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice. When is an estate subject to the Minnesota estate tax?

If the decedent was a resident of Minnesota at the time of death, the estate may be subject to the Minnesota estate tax if the federal gross estate exceeds $1,000,000 on the date of death or if the estate is required to file a federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.

For nonresidents of Minnesota, an estate may be subject to the Minnesota estate tax if it includes Minnesota sitused property and the federal gross estate exceeds $1,000,000 on the date of death or if the estate is required to file a federal estate tax return. Note that new legislation passed in late May 2013 and expected to be signed into law by Governor Mark Dayton will subject Minnesota property owned by an S corporation, partnership, LLC or a trust of which a nonresident is a shareholder, partner, member or beneficiary to the Minnesota estate tax.

What Minnesota estate tax forms must be filed?

The estate representative of an estate that is subject to the Minnesota estate tax must complete and file the Minnesota Estate Tax Return, Form M706.

Note that as indicated above, a Minnesota Estate Tax Return may be required to be filed even if a federal estate tax return, IRS Form 706, is not required to be filed. Thus, the estate representative must first complete IRS Form 706 for the year of death before completing Form M706.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Minnesota death tax may be due on the B Trust after the first spouse's death due to the gap of $4,250,000 between the Minnesota exemption of $1,000,000 and the 2013 federal exemption of $5,250,000. While some states allow a married decedent's estate to make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the local estate tax, Minnesota law does not allow for this. Thus, married Minnesota residents cannot incorporate ABC Trust planning into their estate plans.

When are the Minnesota estate tax return and tax payment due?

The Minnesota Estate Tax Return, M706, must be filed, and any estate tax due must be paid, within 9 months after the decedent's date of death.

All estates are granted an automatic six-month extension of time to file Form M706. This means that a written request is not required to be submitted to the Minnesota Estate Tax Unit to request an extension to file. But regardless of whether or not IRS Form 706 is required to be filed, each estate has either 15 months from the decedent's date of death in which to file M706, or the maximum amount of time granted by the IRS in which to file IRS Form 706, whichever is longer.

There is no extension of time to pay the Minnesota estate tax allowed. Thus, any tax not paid by the regular due date will be subject to penalties and interest.

Where are the Minnesota estate tax return filed and tax payment made?

You can use one of the mailing labels provided in the instructions for Form M706 to mail your return and all required attachments to the Minnesota Department of Revenue.

If you choose not to use the label, mail your forms to:

Minnesota Estate Tax
Mail Station 1315
St. Paul, MN 55146-1315

Minnesota estate taxes can be paid electronically online or by check.

To pay electronically, login to e-services. Enter the decedent's Social Security number and follow the prompts for individuals to make an estate tax return or an extension payment. You will receive a confirmation number when your transaction is complete.

For payment by check, make the check payable to "Minnesota Revenue" and mail the check with the appropriate payment voucher. For a tax return payment (taxes due with Form M706), complete and attach the voucher Form PV47. For an extension payment, complete and attach voucher Form PV86. Follow the instructions on the voucher.​ How is the Minnesota estate tax calculated?

Minnesota did not adopt the changes in the federal Economic Growth and Tax Relief Reconciliation Act of 2001. Thus, you must read the instructions for Form M706 for details on how to determine the federal gross estate and how to calculate the Minnesota estate tax. In addition, you must use the tax tables found in the Form M706 instructions and not the tables in the IRS Form 706 instructions in order to calculate the Minnesota estate tax due.

Also note that you can use the Minnesota Estate Tax Calculators for the applicable year of death provided on the Department of Revenue's website in order to verify that you have properly calculated the Minnesota estate tax due.

What is the Minnesota estate tax rate?

In general, a Minnesota estate will be subject to a tax of approximately 10%. However, the only way to calculate the exact amount of tax due is to complete the applicable IRS Form 706 and Minnesota Form M706. Where can I find additional information about Minnesota estate taxes?

For more information about Minnesota estate taxes, refer to the Minnesota Department of Revenue's Estate Tax Frequently Asked Questions.

You may also call the Estate Tax Unit at 651-556-3075 between 8:00 a.m.- 4:30 p.m. Monday through Friday, or email the unit by following this link and clicking on "email" on the right hand side of the page: Estate Tax.

Overview of Massachusetts Estate Tax Laws

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Understanding How Massachusetts Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Massachusetts, then you live in one of a handful of states that still collect a state estate tax. The estates of Massachusetts residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Massachusetts, are subject to a state estate tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Massachusetts estate tax?

For Massachusetts residents, an estate may be subject to the Massachusetts estate tax if the value of the gross estate, plus adjusted taxable gifts, exceeds the applicable exclusion amount in the Internal Revenue Code in effect on December 31, 2000. The applicable exclusion amounts for Massachusetts estate tax purposes are $700,000 for 2003, $850,000 for 2004, $950,000 for 2005, and $1,000,000 for 2006 and later years. Thus, in general, under current law an estate may be subject to the Massachusetts estate tax if the value exceeds $1,000,000. For nonresidents of Massachusetts, an estate may be subject to the Massachusetts estate tax if it includes real estate or tangible personal property having a taxable situs within the state of Massachusetts and the value of the gross estate exceeds $1,000,000 under the criteria set forth above.

What Massachusetts estate tax forms must be filed?

The estate representative of an estate that is subject to the Massachusetts estate tax must first complete a federal estate tax return, IRS Form 706, with a revision date of July 1999 and all applicable schedules. Once the federal return is completed, the estate representative can prepare the Massachusetts Estate Tax Return, Form M-706.

In addition to IRS Form 706 with a revision date of July 1999 and a Form M-706, the following documents may be required to be filed:

A Federal Closing Letter submitted to the Massachusetts Department of Revenue within two months of receipt, if the filing of a federal Form 706 is required. This includes both the federal letter of acceptance and line adjustments, if any. Copies of federal changes must be accompanied by an Application for Abatement/Amended Return (Form CA-6), or by an amended Form M-706, as appropriate. No Massachusetts Estate Closing Letter will be issued without a copy of the Federal Closing Letter.

A Certificate Releasing Massachusetts Estate Tax Lien (Form M-792) in triplicate for each parcel of real estate where a release of lien is required. A copy of the deed or certificate of title, and the purchase and sale agreement (or mortgage commitment), if any, should be provided.

A Massachusetts Nonresident Decedent Affidavit (Form M-NRA) for the estates of nonresident decedents.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Massachusetts estate tax may be due on the B Trust as a result of a gap between the Massachusetts exemption and the federal exemption. In 2013, that gap is $4,250,000. Nonetheless, a married decedent's estate can make a Massachusetts-only election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP Trust" for short) for purposes of calculating the Massachusetts estate tax. Thus, since there is a significant gap between the Massachusetts estate tax exemption and the federal exemption and a state-only QTIP election is allowed, married Massachusetts residents can defer payment of both Massachusetts and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Massachusetts estate tax return and tax payment due?

The Massachusetts estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's date of death.

By submitting an "Application for Extension of Time to File Massachusetts Estate Tax Return" (Form M-4768), an extension of time to file Form M-706 may be granted for a reasonable period, provided the application is made on or before the original due date of the return and 100% of the estimated amount of Massachusetts estate tax is paid. Failure to pay at least 80% of the amount of estate tax finally determined to be due on or before the due date will void any extension of time to file, and the return will be subject to the late filing penalty and, possibly, the late payment penalty. Interest will accrue on any unpaid tax from the original due date.

By filing an "Application for Extension of Time to Pay Massachusetts Estate Tax" (Form M-4768A), an extension of time to pay Massachusetts estate taxes may be granted for a reasonable period, but not to exceed six months. However, when an extension of time to pay is granted, interest on any unpaid tax accrues from the original due date. An extension is granted only for reasonable cause. An extension of up to three years from the due date may be granted upon a showing of undue hardship.

Where are the Massachusetts estate tax return filed and tax payment made?

Payment of the Massachusetts estate tax must be made by a check payable to the :Commonwealth of Massachusetts." Enter the decedent’s full name and Social Security number in the memo portion of the check. The executor signing the return is personally liable for payment of any tax shown on the return if it is not otherwise paid.

The return and the tax payment should be sent to the following:

Massachusetts Estate Tax Unit
P.O. Box 7023
Boston, MA 02204

What is the Massachusetts estate tax rate?

Effective for dates of death on or after January 1, 2003, the Massachusetts estate tax for the estates of residents and nonresidents is computed with reference to the allowable federal estate tax credit for state death taxes allowed in the Internal Revenue Code in effect on December 31, 2000.

If an estate consists solely of property subject to Massachusetts estate taxation, it pays to Massachusetts an amount equal to the federal credit for state death taxes computed using the Internal Revenue Code in effect on December 31, 2000.

In the case of a resident of Massachusetts who owned or transferred real estate or tangible personal property located outside of Massachusetts, Massachusetts grants a credit for estate or inheritance taxes properly paid to other states.

In the case of a nonresident of Massachusetts who owned or transferred real estate or tangible personal property located in Massachusetts, the amount of the Massachusetts nonresident estate tax is the proportion of the allowable credit from the federal estate tax return that the gross value of the Massachusetts property bears to the entire federal gross estate wherever situated.

For an explanation and examples on how to calculate the Massachusetts estate tax, refer to following information listed on the Massachusetts Department of Revenue website: A Guide to Estate Taxes (Applicable to dates of death on or after January 1, 2003).

When is a release of Massachusetts estate tax lien required?

For dates of death on or after January 1, 1997, if the amount of the gross estate requires the filing of a Massachusetts estate tax return, a "Certificate Releasing Massachusetts Estate Tax Lien" (Form M-792) is required for real estate that is owned jointly with rights of survivorship or as tenants by the entirety, real estate that is held in a trust and other real estate that is not part of the probate inventory but is includible in the taxable gross estate. Form M-792 may be required for probate real estate where there is a sale pending (or mortgage commitment), and no closing letter has been issued.

For estates of decedents dying on or after January 1, 2003 that are not required to file M-706, an affidavit of the executor, subscribed to under the pains and penalties of perjury, recorded in the applicable Registry of Deeds and accurately stating that the value of the decedent's gross estate does not require a Massachusetts estate tax filing, is required to release the gross estate of the lien. The Massachusetts Department of Revenue does not publish blank affidavits for filing in the Registry of Deeds, although some Registries may publish sample affidavits and provide them to the public.

For the estates of decedents dying on or after January 1, 2003 that equal or exceed the Massachusetts filing requirement for the year of death, the Commissioner of Revenue will release the lien with respect to property if the Commissioner is satisfied that the collection of the tax will not be jeopardized. The Commissioner will release the lien by issuing Form M-792, "Certificate Releasing Massachusetts Estate Tax Lien."

Where can I find additional information about Massachusetts estate taxes?

For more information about Massachusetts estate taxes, refer to the Massachusetts Department of Revenue website: A Guide to Estate Taxes (Applicable to dates of death on or after January 1, 2003).

Overview of Maryland Estate Tax Laws

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Understanding How Maryland Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Maryland, then you live in one of a handful of states that still collect a state estate tax. In addition, Maryland is one of six states that collects a state inheritance tax (New Jersey is the only other state that collects both an estate tax and an inheritance tax.)

The estates of Maryland residents, as well as the estates of nonresidents who own real estate, tangible personal property, and/or one or more business entities located in Maryland, are subject to a state estate tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Maryland estate tax?

For Maryland residents, an estate may be subject to the Maryland estate tax if the federal gross estate, plus adjusted taxable gifts, plus property for which a Maryland qualified terminal interest property (QTIP) election was previously made on a Maryland estate tax return filed for the estate of the decedent's predeceased spouse, equals or exceeds $1,000,000.

For nonresidents of Maryland, an estate may be subject to the Maryland estate tax if it includes real estate or tangible personal property having a taxable situs within the state of Maryland and the value of the federal gross estate equals or exceeds $1,000,000 under the criteria set forth above.

What Maryland estate tax forms must be filed?

The estate representative of an estate that is subject to the Maryland estate tax must first complete a federal estate tax return, IRS Form 706, for the year of the decedent's death, even if the estate is not required to file a federal estate tax return. Once the federal return is completed, the estate representative can prepare the Maryland Estate Tax Return, Form MET-1.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Maryland estate tax may be due on the B Trust as a result of a gap between the Maryland exemption and the federal exemption. In 2013, that gap is $4,250,000. Nonetheless, a married decedent's estate can make a Maryland-only election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP Trust" for short) for purposes of calculating the Maryland estate tax. Thus, since there is a gap between the Maryland estate tax exemption and the federal exemption and a state-only QTIP election is allowed, married Maryland residents can defer payment of both Maryland and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Maryland estate tax return and tax payment due?

The Maryland estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's date of death.

An automatic six-month extension of time to file the Maryland estate tax return and related forms may be requested on Form MET-1E (or up to one year if the person required to file the return is located outside of the U.S.); however, this will not extend the time to pay the tax, and interest will accrue during the extension period. In addition, a penalty of up to 10% will be assessed if the estate tax bill is not paid by the estate tax return due date.

Where are the Maryland estate tax return filed and tax payment made?

For Maryland residents, the Maryland Estate Tax Return, Form MET-1, should be filed with the Register of Wills of the county where the decedent's probate estate is being administered or, if no probate estate is required, then in the county where the decedent resided at the time of death.

For nonresidents, file the Maryland Estate Tax Return, Form MET-1, with the Register of Wills of the county where the nonresident owned real estate or tangible personal property.

For links to all 24 Maryland Register of Wills websites, refer to the Office of the Register of Wills website.

Mail the estate tax payment directly to the Comptroller of Maryland on or before the due date of the Maryland estate tax return at the following address:

Comptroller of Maryland Estate Tax Section
P.O. Box 828
Annapolis, MD 21404-0828

What is the Maryland estate tax rate?

According to the Maryland Comptroller's website, there is no Maryland estate tax rate table. Instead, the Maryland estate tax tax is calculated using the maximum allowable credit for state death taxes under §2011 of the Internal Revenue Code, as computed for Maryland purposes, less any Maryland inheritance tax paid to the Register of Wills. For decedents dying after December 31, 2005, the tax cannot exceed 16% of the amount by which the decedent’s taxable estate exceeds $1,000,000. If the Maryland inheritance tax is equal to or exceeds the federal credit for state death taxes, no Maryland estate tax is due.

For an explanation and tips on how to calculate the Maryland estate tax, refer to following information listed on the Comptroller of Maryland's website: Maryland Estate Tax Calculation Method.

Where can I find additional information about Maryland estate taxes?

For more information about Maryland estate taxes, refer to the Comptroller of Maryland's website: Maryland Estate and Inheritance Tax.

Call the Maryland Comptroller's Office with your Maryland estate tax questions at 410-260-7850 from Central Maryland or 1-800 MD TAXES from elsewhere, Monday - Friday, 8:00 a.m. - 5:00 p.m. EDT.

You can also e-mail your Maryland estate tax questions as well as fiduciary tax questions to taxhelp@comp.state.md.us. How have the Maryland estate tax laws changed over the past few years?

On May 22, 2012, Maryland Governor Martin O'Malley signed the "Family Farm Preservation Act" into law. This legislation, which was passed by unanimous votes in both the House and Senate, reduces the Maryland estate tax rate assessed against Maryland farms valued over $5 million from 16% down to 5% when the property passes to someone who agrees to continue to use it for agricultural purposes. If the property is then taken out of agricultural use within 10 years of the owner's death, the estate tax will be recaptured. The law went into effect on July 1, 2012 and applies to deaths occurring after December 31, 2011.

 

Overview of Illinois Estate Tax Laws

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Understanding How Illinois Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Illinois, then you live in one of a handful of states that still collect a state death tax. The estates of Illinois residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Illinois, are subject to a state death tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

How have the Illinois estate tax rules changed in the past few years?

The Illinois estate tax rules have changed significantly in the past few years. In 2009, the Illinois estate tax exemption was $2,000,000. In 2010, the Illinois estate tax was repealed due to changes in the federal estate tax laws. In 2011, the Illinois legislature acted quickly to reinstate the state estate tax with a $2,000,000 exemption. Then, in December 2011, the Illinois legislature acted to raise the estate tax exemption to $3,500,000 for 2012 and $4,000,000 for 2013. The information presented below applies to deaths that occur in 2012 only.

When is an estate subject to the Illinois estate tax?

For Illinois residents, a 2012 estate may be subject to the Illinois estate tax if the total gross estate exceeds $3,500,000.

For nonresidents of Illinois, a 2012 estate may be subject to the Illinois estate tax if it includes real estate and/or tangible personal property having a situs within the state of Illinois and the gross estate exceeds $3,500,000. What Illinois estate tax forms must be filed?

The estate representative of a 2012 estate that is subject to the Illinois estate tax must file an Illinois Estate & Generation-Skipping Transfer Tax Return, Form 700, as well as a federal estate tax return, IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return (or any other form containing the same information), even if the estate is not required to file IRS Form 706. IRS Form 706 must include all schedules, appraisals, wills, trusts, attachments, etc., as the federal Form 706 would have for a 2011 decedent with a tentative taxable estate plus adjusted taxable gifts over $2,000,000. The Illinois estate tax will then be determined using the inter-related calculation for 2012 decedents as discussed below.

Note that when the 2012 tentative taxable estate plus adjusted taxable gifts exceeds $5,120,000, Illinois Form 700 is to be prepared in the same manner for 2012 as for 2011, and must therefore include a copy of IRS Form 706 with all attachments.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, an Illinois death tax may be due on the B Trust after the first spouse's death due to the gap of $1,620,000 between the Illinois exemption of $3,500,000 and the federal exemption of $5,120,000. Nonetheless, a married decedent's estate can make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the Illinois estate tax. Thus, married Illinois residents can defer payment of both Illinois and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Illinois estate tax return and tax payment due?

The Illinois estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's date of death.

An extension of time to file the Illinois estate tax return and related forms and pay any tax due may be requested; however, this will not extend the time to pay the tax, and interest will accrue during the extension period.

Where are the Illinois estate tax return filed and tax payment made?

For Cook, DuPage, Lake and McHenry Counties, file the original of the return with:

Office of the Attorney General Revenue Litigation Bureau
100 West Randolph Street
13th Floor
Chicago, Illinois 60601

For all other counties, file the original of the return with:

Office of the Attorney General Revenue Litigation Bureau
500 South Second Street
Springfield, Illinois 62706

Effective July 1, 2012, an additional copy of the return, without attachments, must also be filed with the State Treasurer as indicated below.

Effective July 1, 2012, all estate tax payments should be directed to one of the State Treasurer’s offices, which is encouraging people to mail the applicable returns, attachments, and payments to the Springfield office; however, taxes may be paid in person at either office indicated below:

By mail or in person:

Illinois State Treasurer Estate Tax Division
400 W. Monroe, Suite 401
Springfield, IL 62704

In person: Illinois State Treasurer
100 West Randolph Street
Suite 15-600
Chicago, IL 60601

How is the Illinois estate tax calculated?

The Illinois estate tax is determined using the inter-related calculation. For both resident and non-resident decedents, the tax base will be calculated assuming all assets are located within Illinois. (Line 6, Schedule A or B, Form 700). The percentage of Illinois assets to total assets is then computed with the percentage applied to the tax base for apportionment purposes to determine the amount of Illinois estate tax due.

For deaths that occurred on or after January 1, 2012, use the following calculator provided by the Illinois Attorney General's office to calculate the tax due: 2012 Decedent Estate Tax Calculator. Where can I find additional information about Illinois estate taxes?

For more information about Illinois estate taxes, including information for the estates of decedents who died in 2011 and prior years, refer to the Illinois Attorney General's Estate Tax webpage. For more information about estate tax payments, refer to the Illinois Treasurer's Inheritance Tax and Estate Tax webpage.

Overview of Hawaii Estate Tax Laws

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Understanding How Hawaii Estate Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Hawaii, then you live in one of a handful of states that still collect a local death tax. The estates of Hawaii residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Hawaii, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes.  For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Hawaii estate tax?

In 2013, an estate of a resident of Hawaii, or a nonresident of Hawaii but U.S. resident or citizen, is taxable in Hawaii and a Hawaii Estate Tax Return, Form M-6, is required to be filed if the taxable estate (determined using IRS Form 706, Part 2, line 3a) is $5,250,000 or greater. Nonetheless, if the decedent is survived by a spouse and the spouse is allowed to claim an election for transfer, or "portability," of the deceased spouse’s unused estate tax exclusion amount, then a Hawaii Estate Tax Return must be filed to make the election. See more on portability below.

The estate of a nonresident of the U.S., not a U.S. citizen, is taxable and a Hawaii Estate Tax Return is required to be filed if the taxable estate (determined using IRS Form 706-NA, Part II, line 1) is $60,000 or greater.

What Hawaii estate tax forms must be filed?

The personal representative or other fiduciary representing an estate that is subject to the Hawaii estate tax must complete and file the Hawaii Estate Tax Return, Form E-1.

Additional documents that must be filed with the Hawaii Department of Taxation when a Hawaii Estate Tax Return is required to filed are as follows: ◾IRS Form 706 (for the year of death) completed through Part 2, line 12, or IRS Form 706-NA completed through Part II, line 8 ◾All federal schedules with federal Forms 712, as required ◾Death certificate ◾Will ◾Trusts ◾Power of appointment documents ◾A copy of another state’s estate tax return or foreign estate tax return, if the estate is subject to other estate taxes ◾Any valuations or appraisals

Note that for estates that are not required to file a Hawaii Estate Tax Return, the personal representative or person(s) in possession, control, or custody of the decedent's property must file a Request for Release, Form M-6A, with the Department of Taxation if the agent wishes to obtain a release which indicates that the personal representative or person(s) in possession, control, or custody is/are free from taxes under chapter 236E, Hawaii Revised Statutes (HRS).

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, since the Hawaii estate tax exemption equals the federal estate tax exemption, a Hawaii death tax will not be due on the B Trust after the first spouse's death since there will not be a gap between the Hawaii exemption and the federal exemption.

Are transfers to a civil union partner taxable?

On January 1, 2012, civil unions became recognized in Hawaii. Civil unions entered into in a jurisdiction other than Hawaii are also recognized, provided that the relationship meets Hawaii’s eligibility requirements, has been entered into in accordance with the laws of the other jurisdiction, and can be documented. Hawaii law provides the Internal Revenue Code (IRC) sections and provisions referred to in Hawaii’s estate and generation-skipping transfer tax Laws that apply to a husband and wife, spouses, or person in a legal marital relationship will apply to partners in a civil union with the same force and effect as if they were “husband and wife”, “spouses”, or other terms that describe persons in a legal marital relationship.” Accordingly, references to “married”, “unmarried”, and “spouse” also means “in a civil union”, “not in a civil union”, and “civil union partner”, respectively.

Is portability of the Hawaii estate tax exception allowed between spouses?

Yes, but portability of Hawaii's estate tax exemption applies only to decedents who die after January 25, 2012 and who were U.S. residents or U.S. citizens and validly married on the date of death (including Hawaii civil unions or the equivalent) and to nonresidents of U.S., not U.S. citizens, where allowed by any applicable treaty obligation of the United States.

What is the Hawaii estate tax rate?

The Hawaii estate tax rate is a progressive one that starts out at 5% and tops out at 16%.

When are the Hawaii estate tax return and tax payment due?

The Hawaii Estate Tax Return, Form M-6, must be filed, and any estate tax due must be paid, within 9 months of the decedent's date of death. An extension of time to file the Hawaii Estate Tax Return does not extend the time to pay any tax due.

An extension to file the Hawaii Estate Tax Return, Form M-6, is based on the federal extension to file the federal estate tax return. Hawaii does not have a separate extension form, but an automatic six-month extension to file Form M-6 will be granted if: 1.A copy of the IRS approved extension to file the federal estate tax return, IRS Form 4768, is attached to Form M-6; and 2.Form M-6 is filed by the due date specified by the IRS for filing the federal estate tax return.

Where are the Hawaii estate tax return filed and tax payment made?

Mail all required forms and any payment due to:

Hawaii Department of Taxation
P.O. Box 259
Honolulu, Hawaii 96809-0259

Where can I find additional information about Hawaii estate taxes?

For more information about Hawaii estate taxes, refer to the Department of Taxation's website: Hawaii Department of Taxation.

You may call customer service at 808-587-4242 or toll free at 1-800-222-3229; Telephone for the Hearing Impaired at 808-587-1418 or toll free at 1-800-887-8974; or send a fax to 808-587-1488.

You may also email the department at Taxpayer.Services@hawaii.gov

Correspondence may be mailed to:

Taxpayer Services Branch
P.O. Box 259
Honolulu, HI 96809-0259

Does Hawaii collect an inheritance tax?

Does Hawaii collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, Hawaii no longer collects a state inheritance tax because it was replaced with a state estate tax under "The Estate and Transfer Tax Reform Act of 1983."

Overview of District of Columbia Estate Tax Laws

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Understanding How DC Estate Taxes Affect an Estate

By Julie Garber, About.com Guide If you live in the District of Columbia, then you live in one of a handful of jurisdictions that still collect a local death tax. The estates of DC residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in DC, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the DC estate tax?

For DC residents, an estate may be subject to the DC estate tax if the total gross estate exceeds $1,000,000.

For nonresidents of DC, an estate may be subject to the DC estate tax if it includes real estate and/or tangible personal property having a situs within the District of Columbia and the gross estate exceeds $1,000,000. Ads

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If the estate is not passing to a surviving spouse or being donated to charity and the estate is subject to the DC estate tax, then the estate representative must file a DC Estate Tax Return called Form D-76.

If the estate is passing to a surviving spouse or being donated to charity and the estate is subject to the DC estate tax, then the estate representative must file a DC Estate Tax Return called Form D-76EZ.

The following documents should be attached to DC Form D-76 or DC Form D-76EZ, if applicable:

A copy of Form FR-77 (Extension of Time to File DC Estate Tax Return)     A copy of the Letters of Administration     A copy of the Power of Attorney     A copy of the decedent's Last Will and Testament     A complete copy of IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, including all attachments, if the estate is required to file IRS Form 706; OR, a current copy of pages 1-3 of IRS Form 706, if the estate is not required to IRS Form 706     A copy of all certified appraisals of the decedent's property and a copy of the Death Certificate.

Note that as indicated above, a DC Estate Tax Return may be required to be filed even if a federal estate tax return, IRS Form 706, is not required to be filed. In addition, even if the estate will not be required to file IRS Form 706, if a DC Estate Tax Return is required to be filed, then pages 1 - 3 of IRS Form 706 need to be prepared and filed with the DC Estate Tax Return.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a DC death tax may be due on the B Trust after the first spouse's death due to the gap of $4,250,000 between the DC exemption of $1,000,000 and the federal exemption of $5,250,000. While some states allow a married decedent's estate to make an election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP" for short) for purposes of calculating the local estate tax, DC law does not specifically allow for this, although some practitioners have been able to do this. Thus, married DC residents should consult with a DC estate planning attorney to determine if they should incorporate ABC Trust planning into their estate plan.

When are the DC estate tax return and tax payment due?

The DC estate tax return must be filed, and any estate tax due must be paid, within 10 months after the decedent's date of death.

A six-month extension of time to file the DC estate tax return and related forms and pay any tax due may be requested; however, this will not extend the time to pay the tax, and interest will accrue during the extension period. Interest is charged at the rate of 10% per year, compounded daily and without regard to any extension.

All extension requests must be requested using DC Form FR-77; IRS Form 4768 will not be accepted. Where are the DC estate tax return filed and tax payment made?

Mail returns and payments to:

Office of Tax and Revenue Audit Division Estate Tax Unit
P.O. Box 556
Washington, DC, 20044-0556

Checks should be made payable to the "DC Treasurer."

How is the DC estate tax calculated?

The DC estate tax rate is a progressive tax that maxes out at 16% for estates valued at $10,040,000 or more. Use the Estate Tax Computation Worksheet to calculate the tax due.

Where can I find additional information about DC estate taxes?

For more information about DC estate taxes, refer to the DC Office of Tax and Revenue's Estate, Fiduciary, and Inheritance Taxes Frequently Asked Questions.

Does DC collect an inheritance tax?

Does the District of Columbia currently collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, the District of Columbia inheritance tax was repealed effective for deaths occurring on or after April 1, 1987.

State Estate Tax and Exemption Chart 2009-2013

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NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Currently only a handful of states and the District of Columbia collect a state estate tax. Below is a chart that lists which states collected state estate taxes from 2009 through 2013, along with each state's respective state estate tax exemption. Summary of Changes to State Estate Tax Laws

Here is a summary of the changes that took effect with regard to state estate tax laws between 2009 and 2013:

Delaware enacted a state estate tax that was only supposed to be effective for deaths occurring between July 1, 2009 and July 1, 2013. Nonetheless, in the spring of 2013 the Delaware legislature acted to eliminate the sunset of the tax.

Two states saw their estate tax exemption increase on January 1, 2010: Rhode Island's exemption increased to $850,000 and Connecticut's exemption increased to $3,500,000; however, see more on these two states below.

Two states saw their state estate tax disappear on January 1, 2010, due to state legislative action: Kansas and Oklahoma.

On June 27, 2011, S.L. 2011-330 was signed into law by North Carolina Governor Beverly Perdue. This law clarifies that the North Carolina estate tax does not apply to the estates of decedents who died in 2010 but will apply to the estates of decedents dying on or after January 1, 2011 with a $5,000,000 exemption, which is indexed for inflation in 2012 and future years.

Illinois saw its estate tax disappear on January 1, 2010 due to repeal of the federal estate tax, and despite the retroactive reinstatement of the federal estate tax, Illinois' tax did not come back automatically like in North Carolina. Nonetheless, the Illinois legislature acted quickly at the beginning of 2011 to reinstate the Illinois estate tax for the 2011 tax year with a $2,000,000 exemption. However, in December 2011 the Illinois legislature acted to increase the exemption to $3,500,000 in 2012 and $4,000,000 in 2013.

*Hawaii brought back its state estate tax effective May 1, 2010. Note that although the Hawaii estate tax exemption appears to be set at $3,500,000 for deaths occurring before January 26, 2012, in calculating the tax due the tax really does not kick in until the estate exceeds $3,600,000. In May 2012, Hawaii tweaked its estate tax laws to provide that the Hawaii estate tax exemption will be tied to the federal estate tax exemption for decedents dying after January 25, 2012.

The Rhode Island estate tax exemption will be adjusted for deaths occurring on or after January 1, 2011 based on the percentage increase in the Consumer Price Index rounded to the nearest $5.00.

Vermont's estate tax exemption was increased to $2,750,000 effective January 1, 2011.

On May 4, 2011, the Connecticut estate tax exemption was retroactively decreased from $3,500,000 back down to $2,000,000 for deaths occurring on or after January 1, 2011.

On June 30, 2011, Ohio Governor John Kasich signed the 2012 - 2013 budget into law, which eliminates the Ohio estate tax effective for deaths occurring on or after January 1, 2013.

On January 1, 2012, the name of Oregon's death tax changed from an "inheritance tax" to an "estate tax." In addition, while the Oregon estate tax exemption (formerly inheritance tax exemption) remains at $1,000,000 for 2012 and future years, the tax will only apply to the value of an estate in excess of $1,000,000 (under prior law once an estate exceeded $1,000,000 the tax applied to the entire estate). The estate tax rates have also been changed for 2012 and future years such that the majority of estates valued between $1,000,000 and $2,000,000 will pay slightly less in taxes and estates valued over $2,000,000 will pay slightly more in taxes. Note that on November 6, 2012, Oregon Ballot Measure 84, which would have repealed Oregon's estate tax by 2016, was defeated, so it does not appear that Oregon's estate tax will be repealed any time soon.

Effective January 1, 2013, Maine's estate tax exemption increased to $2,000,000 and the estate tax rate has been lowered.

In May 2012 Tennessee repealed its state gift tax retroactively to January 1, 2012. In addition, the Tennessee estate tax (referred to as an inheritance tax in the Tennessee statutes) will be phased out by 2016.

In June 2013, Washington tweaked its state estate tax laws in several ways that will affect the estates of decedents who die on or after January 1, 2014. First, the $2,000,000 exemption will be indexed for inflation on an annual basis. Second, the estate tax rates for the top four brackets will increase by one percentage point. Finally, certain family-owned businesses will receive an estate tax exemption of up to $2,500,000.

In an unusual move, Minnesota enacted a state gift tax that went into effect on July 1, 2013. Aside from this, Minnesota tweaked its estate tax laws as they are applied to nonresidents who own real estate in Minnesota. The new legislation includes Minnesota property held in a pass-through entity such as an S corporation, a partnership (including a multi-member LLC taxed as a partnership), a single-member LLC or similar entity, or a trust in a nonresident's estate.

In July 2013, North Carolina's estate tax was repealed retroactively to January 1, 2013.

State Estate Tax Rates

For information about current state estate tax rates, refer to the 2013 State Death Tax Exemption and Top Tax Rate Chart. State Inheritance Taxes

For information about state inheritance taxes, which are not the same as state estate taxes, refer to the State Inheritance Tax Chart.

State Estate Tax and Exemption Chart

State 2009 Exemption 2010 Exemption 2011 Exemption 2012 Exemption 2013 Exemption
Connecticut $2,000,000 $3,500,000 $2,000,000 $2,000,000 $2,000,000
Delaware $3,500,000 effective 07/01/2009 $3,500,000 $5,000,000 $5,120,000 $5,250,000
District of Columbia $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
*Hawaii No state estate tax $3,600,000 effective 05/01/2010 $3,600,000 $3,600,000 or $5,120,000 $5,250,000
Illinois $2,000,000 No state estate tax $2,000,000 $3,500,000 $4,000,000
Kansas $1,000,000 No state estate tax No state estate tax No state estate tax No state estate tax
Maine $1,000,000 $1,000,000 $1,000,000 $1,000,000 $2,000,000
Maryland $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Massachusetts $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Minnesota $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
New Jersey $675,000 $675,000 $675,000 $675,000 $675,000
New York $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
North Carolina $3,500,000 No state estate tax $5,000,000 $5,120,000 No state estate tax
Ohio $338,333 $338,333 $338,333 $338,333 No state estate tax
Oklahoma $3,000,000 No state estate tax No state estate tax No state estate tax No state estate tax
Oregon $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Rhode Island $675,000 $850,000 $859,350 $892,865 $910,725
Tennessee $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,250,000
Vermont $2,000,000 $2,000,000 $2,750,000 $2,750,000 $2,750,000
Washington $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000

 

Connecticut Estate Tax Laws

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Connecticut, Land of Both Estate and Gift Taxes

NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Connecticut residents, as well as nonresidents who own real estate and/or tangible personal property located in Connecticut, are subject to gift taxes and state estate taxes under the following guidelines.

What is the Connecticut taxable estate?

The Connecticut taxable estate is the sum of (1) the total value of the decedent’s federal gross estate less allowable deductions other than the deduction for state death taxes; and (2) the aggregate amount of Connecticut taxable gifts made by the decedent during his or her lifetime for all calendar years beginning on or after January 1, 2005.

When is an estate subject to the Connecticut estate tax?

If the Connecticut taxable estate as determined above exceeds $2,000,000, then Connecticut estate tax is due and payable on the value of the taxable estate, including the first $2,000,000. Note: For deaths occurring on or after January 1, 2010 and on or before December 31, 2010, the state estate tax exemption was increased from $2,000,000 to $3,500,000.

What Connecticut estate tax forms must be filed?

All estates subject to the Connecticut estate tax must file Form CT-706/709, Connecticut Estate and Gift Tax Return, with the Connecticut Department of Revenue Services, and also file a copy of Form CT-706/709 with the appropriate Connecticut probate court.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce federal estate taxes, Connecticut estate tax may be due on the B Trust after the first spouse's death. A married decedent's estate is authorized to make an election on Form CT-706/709 to treat property as marital deduction qualified terminable interest property ("QTIP") only for purposes of calculating the Connecticut estate tax (this is called a "state QTIP election"). What this means is that if the estate is passing to a surviving spouse through an ABC Trust scheme, then the payment of both Connecticut and federal estate taxes can be deferred until after the death of the surviving spouse.

Do Connecticut nontaxable estates have to file any tax forms?

If the sum of the Connecticut taxable estate is $2,000,000 or less for deaths occurring before January 1, 2010 or after January 1, 2011, or $3,500,000 for deaths occurring between January 1, 2010 and December 31, 2010, then no Connecticut estate and gift tax return will be due. However, all Connecticut estates must file Form CT-706 NT, Connecticut Estate Tax Return (For Nontaxable Estates), with the appropriate Connecticut district probate court. Do not file Form CT-706 NT with the Department of Revenue Services. Form CT-706 NT must be filed with the appropriate Connecticut district probate court.

When is the Connecticut estate tax return and any payment required due?

For deaths occurring before July 1, 2009, Form CT-706/709 for the Connecticut estate tax is due within nine months after the date of the decedent's death unless an extension of time to file is requested.

For deaths occurring on or after July 1, 2009, Form CT-706/709 for the Connecticut estate tax is due within six months after the date of the decedent's death unless an extension of time to file is requested.

Use Form CT-706/709 EXT, Application for Estate and Gift Tax Return Filing Extension and for Estate Tax Payment Extension, to apply for an extension of time to file.

Payment of the Connecticut estate tax is due at the same time as Form CT-706/709 unless an extension of time to pay has been granted.

Where is the Connecticut estate tax return filed?

Mail the Connecticut estate tax return, Form CT-706/709, and all other required forms to:

Department of Revenue Services
P.O. Box 2978
Hartford, CT 06104-2978

Do not mail your Connecticut nontaxable estate return, Form CT-706 NT, to the Department of Revenue Services. Instead, this form gets filed with the appropriate Connecticut district probate court. What is the Connecticut estate tax rate?

The Connecticut estate tax rate is a progressive one that starts with 5.085% of the first $100,000 over the $2,000,000 threshold and rises to 16% for the amount above $10,100,000.

Where can I get more information about Connecticut estate taxes?

For more information on Connecticut estate taxes, refer to Connecticut Estate Tax Resources From the Department of Revenue Website.

What about other states that collect estate taxes or inheritance taxes?

For information about other states that collect estate taxes, refer to the State Estate Tax and Exemption Chart.

For information about state inheritance taxes, which are different from state estate taxes, refer to the State Inheritance Tax Chart.

About.com

Estate Tax Tables 1997-2013

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Historical Federal Estate Tax Exemptions and Rates: 1916 - 1997

Year

Estate   Tax Exemption

Top   Estate Tax Rate

1916

$50,000

10%

1917   - 1923

$50,000

25%

1924   - 1925

$50,000

40%

1926   - 1931

$100,000

20%

1932   - 1933

$50,000

45%

1934

$50,000

60%

1935   - 1940

$40,000

70%

1941

$40,000

77%

1942   - 1976

$60,000

77%

1977

$120,000

70%

1978

$134,000

70%

1979

$147,000

70%

1980

$161,000

70%

1981

$175,000

70%

1982

$225,000

65%

1983

$275,000

60%

1984

$325,000

55%

1985

$400,000

55%

1986

$500,000

55%

1987   - 1997

$600,000

55%

 


Historical and Future Federal Estate Tax Exemptions and Rates: 1997-2013

Year

Estate   Tax Exemption

Top   Estate Tax Rate

1997

$600,000

55%

1998

$625,000

55%

1999

$650,000

55%

2000

$675,000

55%

2001

$675,000

55%

2002

$1,000,000

50%

2003

$1,000,000

49%

2004

$1,500,000

48%

2005

$1,500,000

47%

2006

$2,000,000

46%

2007

$2,000,000

45%

2008

$2,000,000

45%

2009

$3,500,000

45%

*2010

$5,000,000   or $0

35%   or 0%

2011

$5,000,000

35%

**2012

$5,120,000

35%

**2013

$5,250,000

40%


State Estate Tax and Exemption Chart

State

2009   Exemption

2010   Exemption

2011   Exemption

2012   Exemption

2013   Exemption

Connecticut

$2,000,000

$3,500,000

$2,000,000

$2,000,000

$2,000,000

Delaware

$3,500,000   effective 07/01/2009

$3,500,000

$5,000,000

$5,120,000

$5,250,000

District   of Columbia

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

*Hawaii

No   state estate tax

$3,600,000   effective 05/01/2010

$3,600,000

$3,600,000   or $5,120,000

$5,250,000

Illinois

$2,000,000

No   state estate tax

$2,000,000

$3,500,000

$4,000,000

Kansas

$1,000,000

No   state estate tax

No   state estate tax

No   state estate tax

No   state estate tax

Maine

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$2,000,000

Maryland

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

Massachusetts

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

Minnesota

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

New   Jersey

$675,000

$675,000

$675,000

$675,000

$675,000

New York

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

North   Carolina

$3,500,000

No   state estate tax

$5,000,000

$5,120,000

No   state estate tax

Ohio

$338,333

$338,333

$338,333

$338,333

No   state estate tax

Oklahoma

$3,000,000

No   state estate tax

No   state estate tax

No   state estate tax

No   state estate tax

Oregon

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

Rhode   Island

$675,000

$850,000

$859,350

$892,865

$910,725

Tennessee

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,250,000

Vermont

$2,000,000

$2,000,000

$2,750,000

$2,750,000

$2,750,000

Washington

$2,000,000

$2,000,000

$2,000,000

$2,000,000

$2,000,000

Inheritance Tax Chart

State

Are   Spouses Exempt?

Are   Descendants Exempt?

Are   Domestic Partners Exempt?

*Is   Life Insurance Included?

Tax   Rate

Tax   Form

Due   Date

**Indiana

Yes

No

No

No

1%   to 20%

Form
IH-6

9   months after death

Iowa

Yes

Yes

No

No

5%   to 15%

Form
IA 706

Last   day of ninth month after death

Kentucky

Yes

Yes

No

No

4%   to 16%

Form   92A200, 92A202, or 92A205

18   months after death

Maryland

Yes

Yes

Certain   transfers

No

10%

Varies

Varies

Nebraska

Yes

No

No

No

1%   to 18%

Form   500

12   months after death

New   Jersey

Yes

Yes

Yes

No

11%   to 16%

Form
IT-R or IT-NR

8   months after death

Pennsylvania

Yes

No

No

No

4.5%   to 15%

Form
REV-1500 or
REV-1737A

9   months after death

**Indiana's inheritance tax has been repealed effective January 1, 2013. Thus, the information in the chart above refers to deaths that occurred in 2012 and prior years.

Top 5 Estate Planning Mistakes

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I recently read a report that suggested that only about 20 percent of the population has a formal estate plan. After reviewing the points below, please take a minute to consider whether it's time for you to create or update your estate plan.

Here are five estate planning mistakes that people make that can be avoided.

1. Dying without a will or trust - If you die without a will or trust, the state in which you reside and the IRS will simply make one for you.  Of course, they have no interest in avoiding or reducing estate taxes, minimizing estate administration costs or protecting your family and legacy. The distribution of your assets will just be turned over to the Probate Court. The probate process is needlessly time consuming, frustrating and expensive. It is also open to the public, meaning creditors, predators or anyone else will have complete access to all information about your estate. For the vast majority of people, the benefits far outweigh any initial costs.

2. Having an "I love you" will – An”I love you” will is one in which all the decedent's assets have been left to the spouse. On paper, it might seem to be a caring, thoughtful gesture, but the reality is quite different, because such a will simply passes the complex issues and problems associated with transferring and protecting wealth onto the spouse or other loved ones.  It creates more problems than it solves, particularly for future generations.

3. Giving property outright to your children - Here is another solution that might sound good at first, but ignores several important realities. For instance, what if the child in question is too immature to handle the responsibility of a large sum of money on his or her own? What if the child suffers a severe financial setback that puts the inheritance at risk to creditors?  What if the child marries a fortune-hunter, is addicted to drugs or alcohol, gets divorced or remarried? You may need to protect your children and heirs from their own poor decisions.  These assets are also gifted assets which carry potentially large IRS penalties if not handled properly.

4. Owning property jointly - There are two types of joint ownership, Joint Tenancy with Right of Survivorship (JTWROS) and Tenants in Common (TIC).  Problems with JTWROS include postponement of probate only until last tenancy, the loss of the double step-up in tax basis creating more to pay in capital gains taxes, and outright distribution.  With TIC, you also lose the double step-up in tax basis where it's available, and your property is subject to the estate plan of each tenant as well as probate for each tenant.

5. Not having a trust - A trust is the single most effective estate planning tool available. There are many different types of trusts.  Among the better known and more commonly used are revocable trusts, irrevocable trusts and testamentary trusts. A Trust protects your privacy, and will help you leave what you want, to whom you want, in the way you want at the lowest possible cost overall.  The additional advantage is that you avoid Probate altogether, which means that the settlement of the living trust will be done swiftly, without court or attorney's involvement, in contrast to having only an "I love you" Will.

Mechelle McNair Asks Probate Court for Over $3.7 Million to Pay Estate Tax Bills

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On March 30 Jonula "Mechelle" McNair, the widow of murdered NFL quarterback Steve McNair, asked a Tennessee probate court to allow the dispursement of over $3.7 million from her husband's estate to pay nearly $2.9 million in estate taxes owed to the IRS and over $860,000 in estate taxes owed to the state of Tennessee.

The motion filed with the probate court stated that the tax payments were due on or before April 5. In fact, both federal and Tennessee estate taxes are due nine months after the date of death, but since McNair died on July 4 and April 4 fell on a Sunday, the estate had an extra day to pay. Strangely enough the motion that sought release of the funds was filed on March 30 and the judge signed the order granting the motion on the same day, leaving not a minute to spare.

The motion does state that both the federal and Tennessee estate tax returns will need to be amended once Mechelle McNair's share of the estate is finally determined. But since the estate clearly has the cash necessary to pay the estimated tax bills, Mechelle McNair apparently decided to pay the bills on time in order to avoid interest that would begin to accrue on any unpaid portion due and owing after April 5.

The really sad thing in all of this is the fact that 100% of both federal and Tennessee estate taxes could have been avoided if Steve McNair had simply taken the time to do proper estate planning. This would have meant over $3.7 million in the pockets of his heirs instead of in the pockets of the IRS and the Tennessee Department of Revenue.

 

Planning Matters: Even estates of rich and famous crash and burn

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If you are like most people, you have done no estate planning. If that is the case, you are in good (bad) company.

You would think lawyers -- trained legal professionals -- would have completed their own estate plan. Alas, lawyers are no different than anybody else and often fail to plan. One of the most famous and respected lawyers of all time, Abraham Lincoln, died without a will. I also have known a number of attorneys who died without even having the simplest of wills.

More often problems arise when lawyers, who are not estate planning specialists, attempt to do their own estate plans. These lawyers often believe they are qualified to prepare estate plans for themselves and their clients. I regularly review wills and trusts, powers of attorney and other estate planning documents that are drafted by lawyers who are not estate planning specialists.

These plans usually have unintended results.

There are health care powers of attorney that do not to have living will provisions, mental health care powers, Health Insurance Portability and Accountability Act access and releases or signed patient advocate acceptances.

It is not uncommon for trusts to have faulty tax provisions. I have seen wills, which are death instruments; contain health care powers, which can only be used during a lifetime.

I often see financial powers of attorney that do not allow for the gifting of assets to the family instead of spending it all down on nursing home care. Unfortunately, many times I only see the estate planning documents after the maker's incapacity or death when there is little that can be done to remedy the situation.

What do Pablo Picasso, Howard Hughes and Sonny Bono all have in common? None of them had a will.

Often the rich and famous do no planning or poor planning. However, with estates whose amounts end in lots of zeros, the unintended consequences have much more of a financial impact.

The rich and famous make the same mistakes as everybody else, only worse. The failure to plan or failure to plan properly has resulted in many their estates to be eaten up administration expenses, taxes and litigation costs.

One of the more well-known estates that had unintended results is the estate of Elvis Presley, the King of Rock 'n' Roll. Considering his stature in the entertainment world, Elvis left a relatively modest $10.2 million estate.

However, the settlement costs of his estate totaled nearly $7.4 million leaving only about $2.8 million to his heirs. About 73% of his estate was eaten up by the settlement costs.

The super-rich also are not immune from doing poor planning. Conrad Hilton of the Hilton Hotel chain left an estate of nearly $200 million. More than half of that was consumed in settlement costs.

Author and filmmaker Michael Crichton, best known as the author of "Jurassic Park" and creator of the TV series "ER," died unexpectedly when his wife was pregnant. He had not provided for his unborn child in his estate plan. This resulted in substantial legal fees for his widow in her quest to obtain a share of his estate for their child.

Andy Warhol on the other hand, did proper estate planning. This resulted in only a fraction of his estate being eaten up in settlement costs. Although his estate settlement costs were nearly as much as Elvis' at a reported $6.9 million, because his estate was nearly $300 million, only 2.3% of his estate was consumed by the settlement costs.

Because it looks like many celebrities' estate settlement costs have left their legacy as "not so rich and famous," don't take your cue from them.

Do proper planning with a legal specialist in estate planning. You wouldn't go to an oncologist to treat your diabetes any more than you should have a divorce or criminal lawyer prepare your estate plan.

The estate planning professional who prepares your estate plan should have a working knowledge of not only estate planning, but also federal and state tax laws and elder law. Without a working knowledge of all three of these areas, your estate plan could be missing some critical elements. So go forth and do proper estate planning today.

Matthew M. Wallace

Overview of Tennessee Inheritance Tax Laws for 2013

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Understanding How Tennessee Inheritance Taxes Affect an Estate
By Julie Garber, About.com Guide

If you live in Tennessee, then you live in one of a handful of states that collects a state death tax. The estates of Tennessee residents who die in 2013, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Tennessee, are subject to a state death tax under the following guidelines.

NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

Estate Tax vs. Inheritance Tax

While the Tennessee death tax is referred to as an "inheritance tax" in the Tennessee legislative code, it is really an estate tax since it is collected based on the value of the overall estate located in Tennessee (hence, a true "estate tax"); it is not a tax that is collected based on who actually inherits the estate located in Tennessee (a true "inheritance tax").

Interestingly enough, the Tennessee legislative code also provides for an "estate tax," which is actually a type of "pick up tax" that was tied to the amount of federal estate tax that was collected from the estates of decedents who died before 2005.

Since the Tennessee legislative code refers to both an inheritance tax and an estate tax, this article refers to the death tax that is currently collected under Tennessee law as an "inheritance tax," even though the tax is assessed against the assets located in Tennessee and not against the individual beneficiaries who inherit the estate.

When is an estate subject to the Tennessee inheritance tax in 2013?

For Tennessee residents, an estate may be subject to the Tennessee inheritance tax if the total gross estate exceeds $1,250,000.

For nonresidents of Tennessee, an estate may be subject to the Tennessee inheritance tax if it includes real estate and/or tangible personal property having a situs within the state of Tennessee and the gross estate exceeds $1,250,000.

Note: In May 2012, legislation was enacted which will phase out the Tennessee inheritance tax by 2016. See more on this below in the section titled "What is the future of the Tennessee inheritance tax?"

What Tennessee inheritance tax forms must be filed?

All estates with a gross value that exceeds $1,250,000 must file a Tennessee inheritance tax return, Form INH-301, even if no Tennessee inheritance tax will be due as a result of applicable deductions and exemptions.

Are transfers to a surviving spouse taxable?

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Tennessee inheritance tax may be due on the B Trust after the first spouse's death if there is a gap between the Tennessee inheritance tax exemption and the federal estate tax exemption. Nonetheless, a married decedent's estate can make an election on Form INH-301 to treat property as marital deduction qualified terminable interest property ("QTIP") for purposes of calculating the Tennessee inheritance tax. Thus, married Tennessee residents can defer payment of both Tennessee and federal death taxes until after the death of the surviving spouse using ABC Trust planning.

When are the Tennessee inheritance tax return and tax payment due?

Form INH-301 must be filed and any inheritance tax due must be paid within nine months after the decedent's date of death unless an extension of time to file the return and pay the tax is granted. An extension of time to file Form INH-301 may be requested for up to one year by filing Form INH-304, Application for Extension of Time to File Inheritance Tax Return. Nonetheless, even if an extension is granted, it will not delay the time for payment of any inheritance tax that may be due.

Where is the Tennessee inheritance tax return filed?

Mail the Tennessee inheritance tax return, Form INH-301, and all other required forms to:

Tennessee Department of Revenue
Andrew Jackson State Office Building 500
Deaderick Street
Nashville, Tennessee 37242-0600

What are the Tennessee inheritance tax rates?

Anything over the $1,250,000 Tennessee inheritance exemption for 2013 is taxed at the following rates:

Where can I find additional information about Tennessee inheritance taxes?

For more information about Tennessee inheritance taxes and estate taxes, refer to the Tennessee Department of Revenue's Inheritance Tax webpage, Guide to Tennessee Inheritance and Estate Taxes, and Inheritance Tax Guide.

For assistance with Form INH-301 and Tennessee inheritance tax questions, call the Tennessee Department of Revenue toll free (in state only) at 800-342-1003 or 615-253-0600.

For information about the rules that apply to the estates of decedents who died in 2012 and prior years, refer to Overview of Tennessee Inheritance Tax Laws for 2012 and Prior Years.

Why Does Probate Take So Long? (In California)

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In California probate proceedings are governed by the Probate Code which sets forth certain time limits. Once a petition for probate is filed, you will receive a date for the first hearing in which an administrator or executor is appointed. The hearing is often 2-3 months after the petition has been filed. Once the representative has been appointed, notice has to be given to creditors of the decedent. Creditors have four months after publication of the notice of probate or 60 days after receiving actual notice, whichever is later to file a claim. Then the process begins of collecting and valuing the decedent’s entire asset, paying the debts, taxes, possibly liquidating some assets, and finally distributed the assets to the heirs or beneficiaries.

The normal time for probate in San Diego County is between 9 months and 18 months. There are a number of factors that may make the probate process take longer. Some of these are:

1. Many beneficiaries 2. Beneficiaries that cannot be found 3. A will contest brought to dispute the validity of the will. If a contest is filed, it will have to be decided before the estate can be distributed. Sometimes this can take years if there are depositions that have to be taken and either mediation or a trial. 4. Disagreements among the beneficiaries such as who should be the administrator, whether the accounting is accurate, whether there are beneficiaries that should be disqualified, or having to set up a guardianship of the estate for minors. Each time a petition or motion is brought in the probate matter to resolve a disagreement; it lengthens the time for closing the estate. 5. A taxable estate. If the estate has to pay federal estate tax, this can delay closing the estate. This is not a problem for decedents who passed away in 2010, however in 2011, if the Legislature does not act, the federal estate tax threshold will revert to $1 million making many more estates subject to estate taxes. 6. A complicated estate with unusual assets. Typical estates consist of real property, bank accounts, investment accounts, etc. If one of the assets is a business, however, it can take time to appraise such an asset. The same is true of oil or mineral rights or other unusual assets. If there are many assets, it can also take additional time to appraise all the assets and liquidate them if they need to be.   Roy M. Doppelt

Read This Column Before You Die

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The fear of death follows from the fear of life. A man who lives fully is prepared to die at any time. - Mark Twain

It can be both comforting and horrifying to think that our time on earth is a nano-blink of an eye, a sliver of time that passes slowly when tax forms are being prepared and quickly when the sun is shining.

Death is something we all try not to think about, yet it is our ultimate goal, the ending of every book, if life were an autobiography. We mostly shrug it off because, after all, we can’t avoid it.

But we can make the most of the inevitable. How? By planning ahead, not only for the sake of our families, but for ourselves. We’ve written before about the importance of making financial goals, but life goals are also essential. And, as with financial goals, you can’t meet them if you don’t have them.

The ultimate plan

Whether you’re getting on in age, have a terminal illness or are young and healthy, no one knows what will happen tomorrow, so prepare today. But what should your ultimate plan entail?

Make a "bucket list." The co-author of the book, "100 Things to Do Before You Die," died in an accident when he was 47. According to his writing partner, he had completed about half of his "to do" list when he died. Because he had a list and was determined to achieve his goals, he did many things he never would have done otherwise.

However, his co-author also noted that he traveled alone, so he could move through his list quicker. Sadly, the author missed an important point - it really isn’t about the list. Your list should be a guide to living life to the fullest. If you’re going through a list just to cross something off, why bother?

Whether you’re planning to go skydiving and want to visit the seven wonders of the world, like Jack Nicholson and Morgan Freeman did in "The Bucket List," or you have more modest goals, like learning a foreign language or cooking a gourmet meal, keep in mind that it’s important to savor the moment - and shouldn’t you be savoring the moment with a loved one or friend?

When you make out your bucket list, be certain that everything on it is something you can accomplish. Although you never know until you try, dating Angelina Jolie or winning an Olympic gold medal are about as realistic for most of us as winning the lottery. While it is important to believe in yourself, you need to know your limitations.

It’s also important to give your list some thought. Many of us don’t really know what we want. Sitting and planning out your life - and beyond - is not something you should do one day during your lunch break. Take your time and really think about what you want to do. Then develop a plan for achieving everything on your list.

Update your financial goals. Ideally, you could plan for retirement first and then plan for the next phase when you’re retired. But, since no one knows when the next phase will begin, you need to plan for it now.

What do you want to happen after you’re gone? Is there a charity you would like to help? Do you want to fund your grandchildren’s college education? Think beyond your retirement and write out your goals.

Plan your estate

Estate planning is not just for the very wealthy. It’s true that current law allows an exemption of assets worth up to $5 million from federal estate taxes, but in Massachusetts any estate with a value greater than $1 million is subject to estate taxes.

If you reside in Massachusetts and your estate exceeds $1 million in value, including the value of your home, your investment portfolio, your life insurance benefits and other assets, it will be subject to state taxation at a rate of up to 16 percent.

However, because Massachusetts has no gift tax, gifts can be made during your lifetime to reduce your taxable estate. It’s been said that death and taxes are the only certainties, but with careful planning, sometimes one of the two can be avoided.

Of course, there’s more to estate planning that reducing taxes. It’s also important to have a will, which determines how your property will be divided after your death. Without this essential legal document, your property may not be divided according to your intentions. Most likely, it will also become tied up in Probate Court and it may take years before your survivors have access to your assets.

Make certain you seek the assistance of an attorney with experience making out wills. Having a will that is not legally valid can be worse than having no will at all because it may be disputed. Also, be certain to update your will periodically.

Keep in mind that retirement accounts and life insurance policies are not covered by your will, as you designate beneficiaries when you sign a contract for these assets. Make certain that you have designated individuals you truly want to be your beneficiaries and you have not unintentionally excluded anyone, such as a child born after you initially designated your beneficiaries. Plan your legacy assets. Most people consider their financial assets in planning their estate. You also have accumulated many other assets during your lifetime. Some of the best assets are the memories of special events or family gatherings. Many of these are recorded photographically and able to be passed on to heirs.

However, the asset value of the wisdom garnered, the valuable experiences received, the life lessons learned, the appreciation of others that have helped you along the way are all assets available for sharing.

Similar to a will that administers your financial assets, you can prepare a separate letter, memoranda or formal ethical will to pass on to your family and others.

Get organized

Your death will likely be difficult on your family. You can ease the burden by planning your funeral and letting your wishes be known. Do you have a cemetery plot? Have you picked out a casket? Is there a charity to which you would like contributions sent?

If you take care of every detail, your children and your spouse won’t have to. Clean out your attic and your closet and get rid of unwanted items. Give away anything you won’t use. Go through your photos and organize them. Determine if you need to change their medium to an electronic format.

People often tell me that they do not want to be a burden to their children. It can be painful for your family to have to deal with these issues; dealing with them yourself will make it easier on them.

Also, be certain to choose an executor for your will. Talk to your executor and make certain that he or she has a true understanding of your wishes and will carry them out to the last detail. Many times writing a letter of instruction to your executor or trustee is helpful for those matters not easily handled by the formal document.

You may not care what happens after you die, but keep in mind that your decisions today will have an eternal impact and could affect how you are remembered.

Seek balance

Death and taxes may be inevitable, but the more time you spend preparing for either, the better the outcome is likely to be. If you were to die tomorrow, that would be tragic. The tragedy would be compounded, though, if your family had to deal with matters without knowing your wishes. Regardless, in the process of planning for the future, don’t forget to live for today. Carrying out your bucket list is more important - and more fun - than preparing it.

Ask yourself what you are doing today that you would change. Is your career fulfilling? Do you have a secret ambition, like writing a book or taking a special trip? Act on your passions and interests today, before it is too late. Plan for the future, but enjoy life today. Carpe diem!

Darrell J. Canby

Document Solutions

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Comprehensive Estate Planning Documents - Revocable Living Trusts - Will Package - Ancillary Documents

What Gives Our Documents the Leading Edge?

Detailed and comprehensive, these documents have been developed through nearly 30 years of hands-on improvement by hundreds of attorneys throughout the US resulting in thousands of satisfied clients. They are drafted to ensure accuracy with current state and federal laws, and are updated as changes occur.

The Revocable Living Trust contains over 222 carefully worded provisions so that the trust can accommodate a client’s changing circumstances and to cover additional contingent situations without needing to be legally modified.  The trust is also universal; that is applicable in all 50 states, for a client may eventually own property in or even move to another state.

I Would Like an Advisor to Contact Me to Discuss My Estate Planning Needs

Here is a list of what our package includes:

  • 1 set of Ancillary Documents per person (DPOA for assets, DPOA for healthcare or Advanced Directive, Living Will, Nomination of Conservator, Appointment of Guardian, and Anatomical Gift)
  • Abstract of Trust
  • Trust Certification
  • Pour-Over Will
  • Assignment of Furnishings and Personal Effects
  • 1 three-ring professional quality binder with tabs and inserts
  • 1 set of quality documents with Plain English summaries
  • Funding Manual

We offer a wide variety of estate planning solutions and documents customized at your direction.

Nationally Transportable Living Trusts

Single A Trust
Married A Trust
Married/Unmarried AB Trust
Married ABC Trust
A Q-TIP Trust (for married person)
Partner AA Trust
Partner AB Secure Trust (for Domestic Partners)
Complete Amendment
Partial Amendment

Vital Ancillary Documents

There are a number of other legal documents that are not legally required parts of the Living Trust but which should be included in or with the Trust to provide for future contingencies. Our ancillary documents offer you additional control over your person or assets. These documents are so vital; they are included, at no additional charge as part of your comprehensive document package.

Pour-Over Will
Living Will
Durable Power Of Attorney For Health Care
Durable Power Of Attorney For Assets
Nomination Of Conservator/Guardian
Appointment Of Guardian
Anatomical Gift

Advanced Planning Vehicles

Because many individuals have needs that go beyond basic estate planning, we offer numerous Advanced Estate Planning Solutions that can be incorporated into your overall estate plan. These documents should be considered as a supplement to your Living Trust to shelter your hard-earned estate from unnecessary estate taxes.

■Asset Management Trust (Spendthrift Trust)
■Beneficiary Trust (Dynasty)
■Buy/Sell Agreement
■Catastrophic Illness Trust (Medicaid Planning Trust)
■Charitable Remainder Trust
■Family Catastrophic Illness Trust
■Gift Trust
■Insurance Preservation Trust- Spousal Support (ILIT)
■Insurance Preservation Trust (ILIT)
■IRA/Qualified Plan Trust
■Land Trust
■Special Needs

“A POORLY WRITTEN TRUST IS WORSE THAN NO TRUST AT ALL.” Henry Abts, III

A poorly drawn trust can become a restrictive nightmare for the surviving spouse or successor trustee and beneficiaries. As long as the clients are living, it does not matter what a Living Trust says, because it can always be revoked. However, upon the death of the client, these poorly written Trusts are going to end up in probate court, with petitions being presented to revise or clarify the Trust wording. (Even though the main advantage of a Living Trust is to avoid probate, a Trust falls under the legal jurisdiction of the probate code; any need for clarification of a Trust therefore must be handled in the probate courts.)

One size does not fit all – no two people or families are alike! Your family’s needs, dynamics, personalities, and values are unique. If you use a form kit, you are asking for problems. Even LegalZoom.com reveals that 80% of people who fill in blank forms to create legal documents do so incorrectly. Plus, if your Will or Living Trust is not executed properly, it becomes invalid. If you overlook the opportunity to write specific instructions about how you want to provide for your spouse and children, your family will receive whatever the “cookie cutter” document provides, and you may not know of other options. The only estate plan you rely on is the one that is custom prepared by a qualified estate planning professional attorney.

A well-written comprehensive trust document comes about only through extensive experience. The Estate Planning Source’s trust documents are the result of more than 28 years of working together with legal counsel to cover every imaginable contingency.

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After The Fiscal Cliff

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Fiscal CliffWhat has Changed in the Estate and Gift Tax Laws? By Geri McHam

Congress passed the American Taxpayer Relief Act of 2012’’ (“ATRA”) that made the federal estate tax exemption permanent on January 1, 2013.  In a last minute move before we went over the “fiscal cliff”, in an 11th hour tax law passed by the Senate on New Year’s Eve, and by the House of Representatives one day later, mostly what Congress did was to make permanent the system that has been in effect for the past two years.  I am just thankful that we now have permanence that has been missing for the last 12 years.

What’s most important to us as planners is how the “fiscal cliff” deal changes will affect our clients’ existing estate plans and whether any changes are necessary.

Most estate planning documents deal with non-tax issues, including the very valuable benefit of structuring assets to avoid the probate process at death and to provide creditor protection for beneficiaries.  The Power of Attorney, Conservator, and healthcare documents are all extremely important and necessary.  These documents are critical to avoid unnecessary court oversight and expense, delay, and intrusion.

What are the provisions of the ATRA that will affect my estate planning practice or clients?

Top gift, estate and GST tax rates are set at 40%. ATRA 2012 establishes the top gift, estate, and GST tax rates at 40% for gifts made and decedents dying in 2013 and thereafter. This top rate is higher than the 2012 rate of 35%, but lower than the 55% rate that would have come into effect on January 1 in the absence of legislation. This top rate will apply to transfers exceeding the exemption amounts.

Exemption amount:  Permanently set at $5,000,000 per client, indexed for an inflation adjustment beginning 2012 ($5.12 million in 2012).   The estate tax exclusion amount for deaths in 2013 will be $5.25 million.

Gift Tax Rate:  The estate and gift taxes will remain unified, so the $5 million exemption also applies for gift tax purposes, and will follow the estate tax rate.  The rate was permanently set to 40% of the amount over the exemption.  In addition, the annual gift exclusion amount was raised to $14,000 per person this year.

Generation Skipping Tax Rate:  The generation skipping tax exemption follows the estate tax rate.  The rate was permanently set to 40% of the amount over the exemption.

Portability made permanent:  Further, the deal continues the estate tax portability provisions that allow a surviving spouse to take advantage of his or her deceased spouse’s unused exemption amount. This provision allows a surviving spouse to avoid complicated estate planning by recognizing that gifts between spouses are typically tax free and allowing the exemption to be portable between both spouses.  In order to utilize this, a 706 tax return MUST be filed within 9 months, so in my opinion, portability is less than optimal in many cases.

Use of the A/B/Bypass Trust:  Some of the discussion since passing this legislation has focused on the use of A/B trust structure, and whether planning is better without the credit shelter trust.  I still am in favor of estate planning with an A/B/C trust, especially to preserve a decedent’s share in case of a remarriage of the survivor spouse, and also to allow the flexibility of state estate tax planning.  As long as the trust is flexible enough to allow the options of funding the various sub-trusts to the survivor spouse, which ours does, you still have the benefit of planning that gives the most flexibility to the survivor.  We will review the provisions in our trust as a precaution

Upside to IRA Planning in ATRA

Hidden in the law — along with the typical year-end riders attached to a last minute piece of legislation, including tax breaks for NASCAR and the alternative fuel industry — were a couple of tangible impacts to the retirement world, though one may offer just short-term benefits. First, it looks as though folks hoping to roll over their regular 401(k)s to Roth 401(k)s may get an opportunity for a long-term tax break — lord knows you’re going to need one, as your taxes really are going to go up.  A new provision in the package will allow 401(k), 403(b) and 457(b) participants to make the leap to a Roth 401(k) without waiting for the traditional qualifying events (retirement, reaching age 59 1/2 or changing jobs).  Why? Because doing so immediately sends that tax deferral — which you’ll have to pay up front — to Washington, rather than waiting until your far-off retirement day, and Washington wants your taxes. It’s a huge opportunity for regular folks to make that Roth conversion – provided they have the financial wherewithal to pay those taxes much sooner than later.

Potential future legislation. It is important to note that there may be a push for additional revenue-raising legislation as political debates continue. The current administration has expressed its desire to limit the advantages of GRATs, grantor trusts, GST-exempt dynasty trusts, and transfers in family entities that qualify for valuation discounts. Clients who might consider employing those techniques may wish to do so sooner rather than later.