The Shrinking State Death Taxes

The Wall Street Journal reports that another four states are eliminating or phasing out their estate or inheritance taxes. That leaves only 18 states and the District of Columbia among those who still impose such taxes.

Readers who live in these states need to be wary. You might not have to worry about federal estate taxes any more, but these states taxes kick in at much lower levels than the federal tax in most instances. Your heirs could be forking over a sizable chunk of change to the state. If you live or have property in more than one state, you have to beware of the taxes in each.

The grand prize for self-abuse goes to Minnesota, which this year enacted a new 10% gift tax with a $1 million exemption. A gift tax is a levy on money given away while still alive. This tax is in addition to Minnesota’s 16% estate tax. The new law is all the more punitive because it applies the 16% estate tax (6% on top of the earlier 10% gift tax) to any gift within three years of death.