Nevada: Not One of the Worst Places to Die

In his recent article for the Wall Street Journal’s SmartMoney, Bill Bischoff, the Tax Guy, looks at the worst places to die from an estate tax perspective. Indeed, even with the $5 million federal estate tax exemption for 2011 and 2012 now in place, potentially significant estate tax concerns may remain at the state level. Why so? More than twenty states and the District of Columbia impose estate and/or inheritance taxes with varying exemptions. Therefore, if you reside in one of these locations, your estate could be exposed to state death taxes, despite being exempt at the federal level. Nevada is not included in this list of worst places to die since it does not impose an estate or inheritance tax. Below is a summary of the states that impose estate and/or inheritance taxes as well as the applicable exemptions and top tax rates at the time of this post:

Sixteen States and the District of Columbia Have Estate Taxes:

State 2011 Exemption Top Tax Rate
Ohio $338,333* 7%
New Jersey $675,000 16%
Rhode Island $859,350 16%
District of Columbia $1,000,000 16%
Maine $1,000,000 16%
Maryland $1,000,000 16%
Massachusetts $1,000,000 16%
Minnesota $1,000,000 41%
New York $1,000,000 16%
Oregon $1,000,000 16%
Connecticut $2,000,000 12%
Illinois $2,000,000 16%
Washington $2,000,000 19%
Vermont $2,750,000 16%
Delaware $3,500,000 or $5,000,000** 16%
Hawaii $3,500,000*** 16%
North Carolina $5,000,000 16%

* The new Ohio budget, which was signed into law by Governor Kasich on June 30, 2011, repeals the Ohio estate tax effective January 1, 2013.

** To be determined.

*** While Hawaii appears to have a $3,500,000 estate tax exemption, the tax apparently does not kick in until the estate is at least $3,600,000.

Eight States Have Inheritance Taxes:

The inheritance tax exemptions of these states are zero or negligible other than Tennessee where there is a $1,000,000 exemption amount.

State Top Tax Rate
Tennessee 9.5%
Maryland 10%
Iowa 15%
Pennsylvania 15%
Kentucky 16%
New Jersey 16%
Nebraska 18%
Indiana 20%

Two States Have Both Estate and Inheritance Taxes:

In the worst case scenario, New Jersey and Maryland impose both an estate tax and inheritance tax. As previously noted, the top inheritance tax rate in New Jersey is 16% (combined with a top estate tax rate of 16%), while the top inheritance tax rate in Maryland is 10% (combined with a top estate tax rate of 16%).

The Remaining States Have No Estate or Inheritance Taxes:

The remaining states not included above (for instance, Nevada) do not have estate or inheritance taxes.