Military Officer - June 2006 - (Page 38)

financialforum Estate Taxes Tax laws are constantly changing, sometimes without warning. Beware of changes in your state’s estate tax laws that could have a big effect on your wallet. By Phil Dyer, CFP I Save on Estate Planning ■ Looking for an estate- planning attorney? The MOAA Lawyer Listing Service can save you 25 percent on hourly fees. Visit www.moaa.org and click on Lawyer Listing under Services. n recent years, a signiﬁcant number of states have radically changed how they deal with death and inheritance taxes. A 2001 federal tax law signiﬁcantly changed the way state inheritance and death taxes are treated on federal estate tax returns. Because of threats of potential revenue drops, some states decoupled their estate exemption from the federal level — freezing the estate tax exemption at a lower level — to protect and maintain these revenue streams. Many states have even crafted completely separate estate tax systems. Some states impose an inheritance tax (also called a death tax) in addition to or in lieu of estate taxes. Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania all levy inheritance taxes. A dozen jurisdictions have decoupled their estate tax from the federal rules and set a lower exemption amount (see chart below). State Kansas Maine Maryland Massachusetts Minnesota Nebraska New Jersey New York Oregon Rhode Island Washington, D.C. Wisconsin Estate Tax Threshold $1 million $1 million $1 million $1 million $1 million $1 million $675,000 $1 million $1 million $675,000 $1 million $675,000 These states have elaborate estate tax systems that should be reviewed carefully: State Connecticut Ohio Oklahoma Washington Estate Tax Threshold $2 million $338,000 $2 million $1 million Estate plans drafted in the late 1990s through 2001 — which relied on streamlined state and federal estate-tax treatment — may need to be revisited. This especially is true of estates totaling $1 million to $2 million or more, which use credit shelter trust (also called A-B trust or bypass trust) techniques that might be exempt from federal taxes but are subject to a nasty surprise at the state level. Depending on the state, these recent changes could add tens of thousands of dollars or more in state taxes to your estate’s tax burden, making where you die just as important as where you live — especially for large estate holders. If you live in one of the affected states, contact an estate-planning attorney to see if your estate plan needs to be updated. Don’t get ambushed by estate taxes because you weren’t paying attention. MO — Former Army Capt. Phil Dyer, CFP, is deputy director for ﬁnancial education, Beneﬁts Information. For ﬁnancial advice, members can contact Garrett Planning Network at (866) MOAA-GPN (662-2476) or www.moaa.org/ garrett, or visit www.moaa.org/ﬁnancialcenter for other resources. 38 MILITARY OFFICER JUNE 2006 SOURCE: AMERICAN COLLEGE OF ESTATE AND TRUST COUNSEL; PHOTO: GREG SCHALER http://www.moaa.org http://www.moaa.org/garrett http://www.moaa.org/garrett http://www.moaa.org/financialcenter

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Military Officer - June 2006 Contents From the Editor President’s Page Your Views MOAA Directory Rapid Fire Washington Scene Financial Forum Ask the Doctor Chapter Activities MOAA Member Services Living Well 5 Foods for Life The Kindest Cut Winning the Battle Cover Story: Choppers Pages of History Information Exchange Advertising Index MOAA Scholarship Donors Member Books MOAA Calendar Sounding Taps Encore

Military Officer - June 2006

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