2024 Northeast Estate Planning Guide:

State Estate Taxes Remain a Factor

If you’re from the northern part of the country (or have property in those states) you have to consider estate tax. Many of the northern states (18 in all) have their own estate or inheritance tax. An argument can be made for always planning as though your estate may be subject to state estate tax, no matter where you live at the present time. State-level death taxes have been eliminated, raised, then lowered, then raised again. It is best to draft your trusts assuming there could be a tax.

Furthermore, for high net worth estates, federal estate tax drafting should always be employed. Even though the federal tax allows portability of the exemption between spouses, the exemption of the first-spouse-to-die should be sheltered in a bypass trust in order to enjoy growth on that amount through the date of the second-to-die. Federal tax planning will naturally include possible state taxes.

Finally: climate change. Far-fetched? Maybe. Not sure it will drive a lot of tax planning quite yet, but you heard it here first: People may flee overheated southern states for cooler climates, unexpectedly finding themselves in a northern state that has an estate tax. How ironic.

Real-World Case Study

Harry and Flo have lived in Massachusetts all their lives. Now that they have retired they can consider living in various states with either much higher state exemptions from estate tax or no estate tax at all. In the Northeast, NH and NJ have no estate tax, while every other state, except RI has a higher exemption than MA, which is at $2M in 2024.

Real-World Case Study

Jane died in a Mass. assisted living facility after living there only a couple of months. However, she had not severed her ties with NY state, her long-standing state of abode. Although her death certificate was issued in Mass., the estate attorneys got the death certificate re-issued to show her residence as New York. Mass. had a $2M exemption from estate taxes, NY $5M. The estate saved $60,000 in taxes as a result of claiming (correctly) that Jane was a resident of NY, not Mass.

Takeaway: Strategic selection of the state of residence may make a significant difference in estate tax liability.

Checklist for establishing residence in another state:

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