Which state has the hightest death tax? Thats right, I said Death Tax...

The answer……………

NEW JERSEY…(followed by Maryland)

Yes, the state most famous for it’s shoreline, as well as the characters from two television shows about the shore (see “Jersey Shore” and “Atlantic City”) does not just have the highest tax on real estate. It is also the highest when it comes to death taxes. It is no surprise that New Jersey also has the highest rate of emigration of all fifty states. People are leaving the state so fast that Governor Christi decided to give the wealthiest 2% a tax break in hopes that they would stay. 

But citizens of New Jersey may not be able to just cross the border. The neighboring states of Pennsylvania and Maryland also grab some hefty taxes upon death. Yet, it is not surprising that Florida, which invites the world of retirees to its beaches and sunshine, is not charging a death tax.

The key is to not focus solely on the federal estate tax. Watch out for state death taxes. And if you own property or a business in more than one state, consult with your estate planning adviser to ensure you establish domicile where you want. State tax residency rules are complex and like estate tax rules, they vary from one jurisdiction to another.

Specific Details on Death Taxes

Let’s look at some specifics on death taxes for a few minutes. There are currently three categories of death taxes:

1.     Federal: With the relatively generous $5 million federal estate tax exemption for 2011 and 2012, most people are free of any federal estate tax worries -- until at least 2013. 

2.     State Inheritance Tax: Twenty States have them. If you live in one of these places, your estate can be exempt from the federal estate tax but still be exposed to significant state death taxes. Indiana, Iowa, Kentucky, Maryland, New Jersey, Pennsylvania, and Tennessee all have high inheritance taxes with low exemptions. Indiana is the highest at 20%.

3.     State Estate Tax: Sixteen states and the District of Columbia have their own estate taxes. Like the federal estate tax, these state estate taxes are based on the entire value of your estate in excess of the applicable exemption. Exemptions vary from a low of $338,333 to a high of $5 million. 

a.     Three states have exemptions of less than $1 million. This means they start taxing the estate quickly. (Ohio at $338,333; New Jersey at $675,000; and Rhode Island at $850,000). 

b.    Six states have $1 million exemptions (Maine, Maryland, Massachusetts, Minnesota, New York, and Oregon), and so does DC. 

c.     Three states have $2 million exemptions (Illinois, Vermont, and Washington). 

d.    Two states have $3.5 million exemptions (Connecticut and Delaware). 

e.      $5 million exemptions (Hawaii and North Carolina).

As you can see, Maryland and New Jersey charge both an estate tax and an inheritance tax. In Maryland, the inheritance tax exemption is $150 and the maximum tax rate is 10 percent (in addition to the 16 percent maximum estate tax rate). In New Jersey, the inheritance tax exemption is zero and the maximum tax rate is 16 percent (in addition to the 16 percent maximum estate tax rate).

States without Death Taxes

If you are not in New Jersey, Pennsylvania, Tennessee, Nebraska, Maryland, Kentucky, Iowa, Indiana, Connecticut, Delaware, DC, Hawaii, Illinois, Maine, Mass., Minn., NY, North Carolina, Ohio, or Oregon.

Opinions on workforce in America, and the responsibility of Wall Street

don’t usually get into any political discussions on this blog, but the news this week both on the domestic front and international front really has me concerned. The events of this year will shape the decades to come.

The economic crisis, brought on by the real estate bubble, and Wall Street’s excessive greed in exacerbating the bubble by dealing billions of dollars bad loans,  has left millions of families in crisis. Families are over extended and living in properties that they can’t afford or those properties have been abandoned or foreclosed. On top of that, our unemployment rates are still well above 14 percent when you consider the under employed in that formula. The national crisis led to an election of Republican majorities in many states, and many new Republican and Democratic Governors. I think those Governors are justifiably trying to cut programs and spending. This is a time when they can muster the authority to make great changes and to scale down government. They just need to cut in the right places, and they need to think of the ramifications of what they are doing.

In Wisconsin, the Governor is trying to get rid of the unions collective bargaining rights. It seems that his efforts are political in that he left out the three unions that supported him in his election. How he could ever get away with that, I can’t say. It is a bad political move and weakens his position. I am not a fan of  many modern Unions for all the obvious reasons, but I do think they serve a purpose. They make us less competitive, and they typically are asking for too much these days. And when I say too much, I am thinking of pensions, benefits, etc. Why should government employees get lifetime pensions, and lifetime medical benefits when private employers can’t afford to offer those things anymore? Unions have historically provided legitimate protection to workers against the ills of business. There has to be a balance and right now it seems that the unions are exposed, because people like me think that some of the benefits provided to union member is excessive. I think that there needs to be compromise here. The Governor of Wisconsin cannot expect to just remove 80 years of history in one swoop. And crushing the unions, because we are in an economic crisis seems extreme. Both side need to get reasonable.

Workers in this country and abroad need to be employed and make a fair wage in order to ensure that the economy remains healthy for the rich, middle class, and working class. The events in the Middle East are a result of decades of huge disparity. We are beyond the problems faced in Lybia, Egypt, Tunisia, and much of the Middle East and Africa. The stratification of the haves and have nots are unsustainable in those countries without strict military rule. The revolutions being fought in the Middle East today should take us back to our historical struggles to provide opportunity for many in our country.  I think the key to our crisis and the world crisis is that people need jobs in order to feed their families. We need to cut costs in government and we need to get the unions to understand that they better get reasonable or they will die on the vine, but more importantly, we need the state and federal governments to create jobs. We are fortunate enough to have the infrastructure and resources that Lybia, Egypt, and Tunisia could never dream about.  I don’t see an easy road for any of those economies. What I see for us is the need to  get people back to work. I applaud the Obama administration’s spending on expansion of business in this country. Despite the costs, government loans to business to help them expand is a worthy gamble.

What I would like to know is how the new politicians on the block, including Obama, have not done more to deal with Wall Street issues like executive compensation? How come we hear nothing about the Wall Street traders who bought and sold the bundled mortgages going to prison for fraud? I would feel a lot better if I saw more of those types of activities going on. Once again, Wall Street and the Banks hold all the influence so they go most unscathed. There must be balance.