STATE ESTATE TAXES AND INHERITANCE TAXES?
Hello, this is the trusted podcast. I am your host Blake Johnson, and want to welcome you to this show. And today I’m going to talk about estate taxes. I was recently reading an article. Um, not terribly. New news is back in March. Um, uh, representative Scott Wiener in California has proposed that California enact in a state tax. And so just got my, got me thinking about a state taxes from a state level because that’s not typically what’s talked about. You know, most, uh, state planning attorneys are worried about the federal estate tax cause that’s one of the biggest one that’s talked about. But let’s talk about state Trust Attorney Las Vegas today and what that looks like as part of your estate plan. So, in California, what a Senator or representative Wiener, uh, suggested was that, uh, anything that’s below, above five, three point $5 million is going to be taxed at 40% and up, up until the person reaches the federal state tax limit, which is 11.4 million per person.
So that 3.5 million to 11.4 million, essentially what he’s done is made it. So the estate tax exemption on the federal level, it goes down down to 3.5 million. So it takes away a lot, um, of that exemption amount because, um, California in, in the Democrats in general were very upset when president Trump was able to double the exemption to 11.4 million. Trust Attorney Las Vegas And the differences, this is all going to go to the state of California. They’re also, you know, in a budget crisis. So that’s a way they’re looking to make up that money. Um, and when people pass the, the argument as well, um, you know, the, the person’s not gonna miss it. It’s not gonna affect them. It just affects what goes to the family. And that’s all bonus at that point. Um, whether you agree with that statement or not, that that’s the, the logic and the theory behind it.
So, um, that’s would be the, the heftiness estate tax from a state perspective that I’ve heard of. There’s currently 12 States that have a state taxes, uh, 38 do not 12 that do the ones that do have a state estate tax are Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. And then also you can include the district of Columbia Trust Attorney Las Vegas. So that’s, um, that’s where you’re going to see a state tax. If you live in that area, there’s really not any way to avoid it if you live there and when you die. So if you retire, move out to one of those States. If you don’t want to have to pay an estate tax. And, um, you know, those range, typically it’s less than 10% as the estate tax, but it kicks in a lot sooner than the federal exemption, usually around, you know, one to $2 million.
Um, so just be aware of that as part of your estate plan when you’re doing your trust with your estate planning attorney, uh, or your wills or whatever the case may be, is ask them, Hey, do I have an estate tax issue here in this? And, um, you know, if you’re over 11 million, you’re gonna have to worry about the federal estate tax. So that’s something that you want to be aware of as well. So just ask questions. Hey, what can I do now to help reduce that tax liability? What we can do is through certain trusts, we can transfer assets out of your name. You still maintain the control, um, but it’s for the benefit of the kids and, um, we can help reduce that state or state estate tax liability in that situation. And, um, you know, really, uh, one of my favorite quotes, don’t know who said it, that’s author unknown, but, uh, state taxes aren’t really taxes, but there are penalties on those imposed on those who failed to do proper estate planning or fail to hire a competent estate planning attorney.
So that’s your quote of the day. Really liked that one. Really estate taxes can be avoided, uh, or at least reduced significantly if you’re charitable, they can be avoided altogether cause you get a dollar for dollar reduction in your state for everything you leave to a charity. And so that’s why you see Warren buffet and bill Gates, they’ve signed that Trust Attorney Las Vegas. Um, I can’t remember what it’s called, but the document that basically says I’m pledging the majority of my estate to charity. Yes, they wanted to be charitable and um, but it’s also, and it’s a PR move, but the real reason is that way their kids don’t have to pay a state tax and the government government doesn’t get 40% of their total estate value when they pass away. So you know, good for them. It’s still going to charity, but know that there’s, you know, double benefit to doing that.
So that’s what that looks like. Now on top of your estate tax from a state, there are also six States who impose an inheritance tax. And what that means is basically you can get double hit because the estate gets tax before it goes to the heirs. So they usually the kids, then any of the beneficiaries. And then once it goes to the kids, it could also be taxed from an inheritance standpoint. And that’s going to be on according to the kids, um, you know, income tax bracket or it they may have a separate bracket for it. So there’s six States currently that do, uh, in inheritance tax Trust Attorney Las Vegas. They are Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. So just eyeballing it looks like, um, New Jersey, Maryland and I think that’s it are the ones that can double hit you. So pretty interesting that you could have the estate tax at the state level and you’re going to get taxed when you inherit that money.
So it’s going to be double dipped by, by the state at that point. So once again, be aware of it. The only real way to avoid that is either to get the money out of your estate or move, move to a state that doesn’t have that. Like I said, there’s 38 currently that, um, don’t have a state taxes and uh, there are 44 that do not have an inheritance tax. So you have a wide range there. So if you, if you aren’t in a position to move and it makes sense, that can be a great to help reduce your tax liability. So that’s it for estate taxes and from a state level and the inheritance tax, you know, just make sure you contact your attorney, let them know what’s going on and what your concerns are. So make sure you don’t have a problem because there are ways to avoid it and if they don’t know what’s going on, obviously you need to to probably find a different attorney, estate planning attorney who knows what they’re doing and, and is aware of all the different taxes that may your state may be subject to. So thank you for listening today. As always, if you haven’t, if you’re not a subscriber yet, please click subscribe so you get all the latest content from us and you can also go back and check out our older episodes with more information about different topics. And then if you can leave us a review, we’d greatly appreciate it to know what you like, what you don’t like, and what you’d like to hear from us in the future. Thanks for listening. This is Blake Johnson. Trust Attorney Las Vegas We’ll see you next time.