Changes in State Estate/Inheritance Taxes For 2012

The federal estate tax is indexed for the first time at the start of 2012. Starting January 1, 2012, the amount of an estate exempt from the 35% federal estate tax goes up to $5.2 million from $5 million. Familes are still concerned about state estate tax or inheritance taxes – some are changing for the better while some are changing for the worse in 2012.

Twenty-two states and the District of Columbia have estate tax and/or inheritance tax. Six states only impose an inheritance tax. Maryland and New Jersey levy both taxes.

Some states change their exempted amounts just to keep up with inflation. These states include North Carolina, Rhode Island. Illinois is just raising its exemption from $2 million to $3.5 million.

Other states are continuing changes that they made in 2011. Connecticut lowered its exemption, Vermont is keeping the same rate that it raised the exemption to last year, and Oregon’s tax only applies to the amount of the estate that is over $1 million.

Indiana, Nebraska, Tennessee and Oregon are trying to repeal state estate taxes. Pennsylvania is trying to make an exception for famers to elude the inheritance tax.

Because the economy is still suffering, it is possible that these states may make other unexpected changes if they are looking for other sources of revenue.

See Ashlea Ebeling, Where Not To Die In 2012, Forbes, Dec. 22, 2011.