Nothing is as certain as death and taxes. If you die in any of 24 states and Washington, D.C. and your estate is big enough your heirs will experience both. That is because these localities all charge state estate taxes on top of the federal estate taxes.
If you are planning on having a certain amount of your assets be available to your family you need to plan for all the estate taxes you may experience. Or, as some people are doing you can move to a state that does not have estate taxes. You may still be subject to federal estate taxes, but you will avoid the state ones.
Generally, if you are subject to state estate taxes, some portion of the taxes you pay would be deductible on your federal taxes. Also, several states that have estate taxes are reconsidering them to avoid the flight of wealthy people from their states.
As always, before doing anything consult a tax professional. They know the details that can keep you out of jail.
AMT Update
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The federal alternative minimum tax (AMT) used to be relatively obscure, a tax very few people knew about or ever had to pay. Well, no more. AMT is hitting the pocketbooks of more individual taxpayers every year.
The AMT computation involves taking a taxpayer's regular taxable income, making a series of mandated adjustments to that income, and then subtracting an AMT exemption amount. If the tax on the new bottom line (figured at the AMT rates of 26% and 28%) is more than the taxpayer's regular tax liability, then both the regular tax AND the excess AMT must be paid.
Tax legislation enacted in May increased the 2006 AMT exemptions to $62,550 for married taxpayers filing jointly and $42,500 for unmarried taxpayers (both amounts subject to phase-out at higher income levels). Absent additional legislation, the exemptions will be MUCH lower in 2007.
Posted by: Bob Hansell | August 24, 2006 4:46 PM | Permalink to Comment