NCPA - National Center for Policy Analysis

A Reason to Relocate

November 5, 2003

Estate planners are wielding a new piece of advice to reduce clients' death taxes: Move to another state.

Federal taxes on estates were eased under the Economic Growth & Tax Relief Reconciliation Act of 2001, but the law also had the effect of reducing tax revenue to states. As a result, many states have been rewriting their own tax codes to make up for the shortfalls.

So far, at least a dozen states have pulled out of the federal system and have adopted their own rules, a process known as decoupling. Others have taken equally drastic steps, like freezing their laws to sometime before EGTRRA was enacted. Now, though, the differences can have a big financial impact:

  • If you live in New York, for example, you could face a combined federal and state estate-tax rate of 60 percent in 2004.
  • But pack up the U-Haul and set up house in Nevada and you'll pay a 48 percent rate.
  • If you live in Illinois with a $25 million estate, your heirs will likely pay $1.73 million more if you die there than if you moved to Florida in 2003; the difference rises to a high of $2.6 million in 2004.

There are other strategies being bandied about to deal with the changing estate-tax landscape. For example, anyone who owns property in a state with a high estate-tax rate may consider converting that property into a limited liability partnership to shield it from that state's death taxes. But nothing works as well as moving, say estate planners.

Source: Kaja Whitehouse, "A Reason to Relocate: Death Taxes: Burden for Heirs Depends On Where You Live or Die As States Rewrite Rules," Wall Street Journal, November 5, 2003.

For text (WSJ subscription required),,SB106798822276609400-search,00.html


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