Choosing where to retire requires forethought.
Picture yourself in retirement.
What are you doing?
Are you spending time with children and grandchildren?
Are you sitting on a beach?
Consider estate taxes.
Although you cannot run away from estate taxes at the federal level, you can control whether you subject yourself to them at the the state level.
If you owe money to both the state and the federal government, this can take a significant bite out of your estate assets.
There are eighteen states in the U.S. that currently levy their own “state” estate taxes.
These taxes are paid by the estate before assets are transferred to heirs.
Avoid inheritance taxes when choosing where to retire.
Inheritance taxes are paid by the heirs of an estate on the assets they received.
Six states currently have an inheritance tax.
Kansas and Missouri are not on the list of “states to avoid” in retirement due to either form of “death” taxation.
In all of the states with an inheritance tax, the surviving spouse is exempt.
All of these states, except Pennsylvania and Nebraska, also provide exemptions for children and grandchildren.
How much would be owed by your relatives if you retire in one of these states?
In Nebraska, immediate relatives are taxed at 1 percent for an inheritance sum above $40,000.
In Pennsylvania, children and lineal heirs will owe at least 4.5 percent.
For non-family members, Nebraska holds the highest inheritance tax rate at 18 percent.
The other states vary between 10 percent and 16 percent.
If you retire to one of these states and then die, your heirs should contact an estate planning attorney in the state to determine how much they will owe to the state government.
Generally exemptions for spouses and children are generous, but real estate can trigger unexpected taxes.
Work with an experienced estate planning attorney to transfer your assets through the most beneficial means possible.
If you currently reside in a state with death taxes and higher income taxes, then you may want to reevaluate where to retire.
Reference: Tucson.com (March 27, 2020) “Best States to Die In…For Taxes”