Where Not To Die In 2014: The Changing Wealth Tax Landscape

November 1, 2013 – In The News

Charles Bender was featured in the Forbes article “Where Not To Die In 2014: The Changing Wealth Tax Landscape.” While the full text can be found in the November 1, 2013, issue of Forbes, a synopsis is noted below.

Even though the new federal estate tax law is generous, there is still reason to worry about estate taxes. Currently, there are 19 states and the District of Columbia that impose separate state levies. The ever-changing patchwork of state death tax laws has led to a new subspecialty of estate planning – “domicile planning” – not to sidestep income taxes but estate taxes.

“It’s picking a state where you die,” says Bender, who spends a lot of his time getting Pennsylvania and New Jersey clients “down to Florida.” Florida has no income tax and no state death taxes.

In Pennsylvania, it used to be that spouses paid state inheritance tax at a 6% rate; that was cut to 3% in 1994, then to zero in 1995. Still, 4.5% of an estate there going to children, grandchildren, parents or grandparents goes to the state. That rate climbs for all other beneficiaries such as brothers, sisters, nieces or nephews. “It really becomes significant, especially when you consider that there is no exemption, so the first dollar of the estate is subject to tax,” says Bender.

For income tax purposes, most states tax individuals as residents if they have lived in the state for 183 days. For estate taxes, the rule of residence is one of subjective intent – what state did you consider to be your home at the time of your death, according to Bender.

In one case, Bender had a client in a nursing home in Florida who suffered from Alzheimer’s and her children moved her to a nursing home in New Jersey where they lived. Because domicile is based on subjective intent and she didn’t have the mental capacity to decide to change her domicile, her executor was able to claim that she was still a Florida resident when she died several years later.

To read the full article, click here.