• What Will State Estate and Inheritance Taxes Look Like in 2011?
  • December 15, 2010 | Author: David K. Ranich
  • Law Firm: Hinshaw & Culbertson LLP - Schererville Office
  • In addition to the federal government, individual states charge death taxes as well. After 2010, the resurrected federal estate tax and any other changes in the federal estate tax may also have significant state estate and/or inheritance tax implications. For example, many states tie their estate taxes to the federal estate tax state death tax credit. Beginning in 2011, barring other changes by Congress, there will be a state death tax credit on the federal estate tax return. In Illinois and Florida, this would mean that those states would impose a state estate tax equal to the state death tax credit allowed on the federal estate tax return. No estate tax exists in either state in 2010. Further, Florida’s estate tax did not apply in years that the state death taxes were allowed as a deduction — rather than as a credit — on the federal estate tax return.

    States with their own inheritance tax regime should not be affected by the changes in the federal estate tax. For example, in Indiana, changes to the federal estate tax are unlikely to change liabilities under the Indiana inheritance tax.

    State death taxes can be considerable enough that taxpayers need to consider them in their estate plans. Accordingly, taxpayers should discuss the applicable state death tax issues with their tax and estate planning professionals.