Best Places to Die

Last week the House of Representatives passed a bill that would make permanent the $3.5 million federal estate tax exclusion ($7 million for married couples.) If Congress doesn't act before year-end the estate tax disappears in 2010 and then pops back into action in 2011 for estates above $1 million, with a maximum tax rate of 55 percent. The current top rate is 45 percent.

No one expects the death tax to disappear for 2010. If the Senate doesn't want to rubber stamp the House's permanent fix (some Senate legislators are pushing for a $5 million federal estate-tax exemption, and reducing the maximum rate to 35 percent) at the very least the Senate will help push through a temporary extension of the $3.5 million exemption for 2010.

State of the Problem For all the attention the federal law is getting, the reality is that it has very little impact on the vast majority of us. According to the Center on Budget and Policy Priorities, fewer than 3 in 1,000 estates in 2009 will be hit with the federal estate tax.

But what gets a lot less attention is the fact that 17 states levy their own estate tax and the exemptions are a whole lot less generous than Uncle Sam's.

According to 2007 state estate and gift tax data compiled by the Tax Foundation (the most recent available) the worst states to die in from the perspective of your heirs:

1. New Jersey. Estates above $675,000 are hit with a tax that tops out at 16 percent. According to the Tax Foundation, New Jersey collected nearly $584 million in estate and gift tax in 2007 and clocked in with the highest per-capita levy among the 50 states: $67.53.
2. Pennsylvania. $736 million in aggregate tax; per capita = $59.25.
3. New York. $1.053 billion in aggregate; per capita = $54.59.

Best Places to Die If you are considering relocating in retirement, your kids might appreciate you taking a look at the following states that collected no state estate or gift tax in 2007 according to the Tax Foundation:

• Arizona

• Arkansas

• Missouri

• New Mexico

• North Dakota

If none of those states do it for you, check out this interactive map of state estate and inheritance tax rates to size up what your heirs may encounter.

Photo courtesy of Flickr user Peter Kaminski , CC 2.0

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