Can moving help avoid estate taxes?

Residents of other states who want to avoid estate taxes may find that moving to California, which imposes no such tax, upon retirement is a way to preserve their financial legacy for their heirs. While this strategy might not work under certain circumstances, it is an attractive option for those who are facing these types of taxes in their current state of residence. In many cases, moving to another state can help those who want to protect their assets from taxation and preserve their estates for their loved ones.

According to estate planning experts, 15 states still impose some form of estate tax, including Hawaii, Oregon and Washington. Only California, among the Pacific coast states, allows residents to keep their estates intact when they pass them on to their heirs. This means that, in addition to federal estate taxes imposed on any amount over $5.43 million for individuals or $10.86 million for couples, there may be additional state taxes on the overall value of their assets. While far less than 1 percent of all United States residents face federal estate taxes, many more can face state taxation, as state thresholds are usually much lower than the federal guidelines.

Many people from states with high estate taxes are taking advantage of retirement to relocate to states with friendlier tax laws. According to one study, states with high estate tax rates may lose as many as one-third of the potential taxes they could collect from people moving to other locations. Nine out of the ten most popular destination states for retirees have no inheritance taxes.

Dealing with estate taxes and other issues related to retirement may be complicated. An attorney with experience in estate planning matters may be able to help those who want to protect as many of their financial assets as possible.


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