Estate planning. It’s the one thing that most of us don’t like thinking about. However, it’s important to make decisions about what will happen to your assets after your death. No matter your age or health condition, having an estate plan will ensure that all of your financial affairs are in order in the event of your death or incapacitation.
What Happens to Your Estate if You Don’t Make a Will?
Every state has its own legal process that determines who inherits a property if no will or estate plan is in place. These laws, known as intestacy laws, will discern who your assets are given to in the event of your death.
While every state has its own laws, most will follow the same pattern: spouse and children are the first to inherit; if there are no children or spouse, parents will inherit; if the parents are deceased, siblings will inherit; if your siblings have passed away, nieces and nephews will inherit.
For some families, the state’s intestacy laws work in their favor. If you’re married, there’s a good chance you would want to leave your estate to your spouse and children. However, even in this scenario, you may still have assets or other items that you would like to leave to other family members.
Plan it Before the IRS Takes It
Even if your state’s intestacy laws work in your favor and within your wishes, there is still estate tax to consider. If your estate is worth over $5 million, your family may be paying a hefty tax bill after your death.
While the federal estate tax only affects a small percentage of Americans, some states have both inheritance and estate tax with much lower thresholds. These states include:
- Massachusetts: Estate tax. Exemption amount: $1 million; 0.8%-16%
- Rhode Island: Estate tax. Exemption amount: $1.5 million; 0.8%-16%
- Connecticut: Estate tax. Exemption amount: $2 million; 7.2%-12%
- New Jersey: Estate and inheritance tax. Exemption amount: $675,000; 0.8%-16% (estate) and 0%-16% (inheritance)
- Delaware: Estate tax. Exemption amount: $5.43 million; 0.8%-16%
- Maryland: Estate and inheritance tax. Exemption amount: $1.5 million; 16% (estate) and 0%-10% (inheritance)
- DC: Estate tax. Exemption amount: $1 million; 0.8%-16%
- Hawaii: Estate tax. Exemption amount: $5.43 million; 0.8%-16%
- Washington: Estate tax. Exemption amount: $2.054 million; 10%-20%
- Oregon: Estate tax. Exemption amount: $1 million; 0.8%-16%
- Nebraska: Inheritance tax: 1%-18%
- Iowa: Inheritance tax: 0%-15%
- Minnesota: Estate tax. Exemption amount: $1.4 million; 9%-16%
- Illinois: Estate tax. Exemption amount: $4 million; 0.8%-16%
- Kentucky: Inheritance tax: 0%-16%
- Tennessee: Estate tax. Exemption amount: $5 million; 5.5%-9.5%
- Pennsylvania: Inheritance tax: 0%-15%
- New York: Estate tax. Exemption amount: $3.125 million; 3.06%-16%
- Maine: Estate tax. Exemption amount: $2 million; 8%-12%
- Vermont: Estate tax. Exemption amount: $2.75 million; 0.8%-16%
As you can see, there are numerous states with estate and inheritance taxes in place. With some states having lower exemption amounts than the federal limit of $5.43 million, the IRS may be taking a large portion of your estate.
Working with an experienced and competent estate lawyer can ensure that your estate is planned in a way that minimizes estate and inheritance taxes. Planning now will help protect your family’s future after your death.
The Micklin Law Group, LLC is a New Jersey law firm focusing exclusively on family law for men and fathers. Attorney Brad Micklin was recently named to The National Advocates list of Top 100 attorneys from each state. To set up a consultation, call 973-562-0100.
