Several economists have predicted that during the next few decades we will witness the largest wealth transfer in history. While much of that transfer is expected to be the result of inheritances received by Baby Boomers from their parents, many Baby Boomers will also pass their wealth to their children during this time. The amount of money and property Baby Boomers are projected to inherit on average is substantial. If you are an heir to this type of estate, the issue of inheritance tax could suddenly become important to you, even if you never considered it before.
Of course, even if your parents or other relatives have the opportunity to leave their property to you when they pass on, there is no guarantee they will. Many senior citizens are drafting estate plans designed to fund their favorite charitable causes or create endowments at universities. The rising cost of health care and longterm care will wipe out many estates, forcing seniors to rely on Medicaid and help from their children. Nevertheless, for many families, the issue of inheritance tax will become an important concern. For those living in states where taxes are high, such as New Jersey, Oregon, Pennsylvania, and Maryland, inheritance taxes threaten to take away even more of what previous generations have worked hard to accumulate.
When making a will or living trust, most people focus on estate taxes. However, if you reside in a state that also levies an inheritance tax, there are estate planning strategies that can ensure more of your assets are passed to your beneficiaries rather than the government. Consult an estate planning attorney or tax advisor about the inheritance tax laws in your state for more information.
For a list of bestselling books on estate, inheritance, and gift taxes, see Estate Tax Books.
States With No Inheritance Tax
The following states in the U.S. do not impose an inheritance tax:
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Kansas
Louisiana
Maine
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nevada
New Hampshire
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Rhode Island
South Carolina
South Dakota
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Note, this article only addresses inheritance taxes. It does not address estate taxes. A state may impose a state estate tax even if it does not impose an inheritance tax.
The above state specific inheritance tax information is current as of October, 2010. Tax laws change frequently. Consult your advisor for the most up to date information.