Changes in State Death Tax Exemptions From 2019 to 2020

March 16, 2020

As in past years, there have been numerous changes in the exemptions allowed from the separate estate taxes that 12 states and District of Columbia apply in addition to the federal estate tax. An additional five states have separate inheritance taxes. The McGuireWoods state death tax chart shows the death taxes applicable in the different states.

Legislative Increases. Connecticut, Minnesota and Vermont saw increases in their state exemptions pursuant to legislation. Connecticut increased its state death tax exemption from $3.6 million in 2019 to $5.1 million in 2020; Minnesota increased its exemption from $2.7 million in 2019 to $3 million in 2020; and Vermont increased its exemption from $2.75 million to $4.25 million in 2020.

Indexing Exemptions for Inflation. One development to which estate planning professionals need to pay attention is the increases in the exemptions as a result of inflation adjustments provided in some, but not all, of the states with separate state estate taxes. This has been an area of increasing complexity. The federal estate death exemption was increased to $10 million, adjusted for inflation in 2018 as part of the 2017 Tax Act. The 2020 federal exemption is $11.58 million. No state with a state death tax has yet increased its separate state death tax exemption to match the federal exemption, although Connecticut is scheduled to increase its exemption to match the federal one starting in 2023.

The District of Columbia, Maine, New York and Rhode Island adjusted their state death tax exemption for inflation in 2020. In addition, Hawaii, although it appears that its exemption is supposed to be adjusted for inflation, has failed to do so in 2019 and 2020.

Also, the state of Washington did not adjust its exemption for inflation in 2019 or 2020. In 2018, the Washington State Department of Revenue sent a notice stating that, pursuant to Revised Code of Washington § 83.100, the department must adjust the Washington applicable estate tax exclusion map annually using the Seattle-Tacoma-Bremerton Metropolitan Area October Consumer Price Index (Seattle CPI). As of Jan. 1, 2018, the U.S. Bureau of Labor and Statistics no longer calculates Seattle CPI. Instead, the Bureau of Labor and Statistics is calculating CPI for the Seattle-Tacoma-Bellevue core base statistical area. As a result of these changes, the term “Consumer Price Index,” as defined in the statute, did not match the current CPI measure calculated by the U.S. Bureau of Labor Statistics. As a result, there has been no increase in the exemption in Washington state in 2019 and 2020.

All of these different changes in recent years mean that only two states have the same exemption from state death tax. These are Massachusetts and Oregon, which each have the lowest state death tax exemption of any of the states, at $1 million.

The changes in the exemptions for those states with a state estate tax and the District of Columbia from 2019 to 2020 are summarized in the chart below.

Changes in Exemptions in State Death Taxes From 2019 to 2020

State 

2019 State Death Tax Exemption

2020 State Death Tax Exemption

Connecticut

$3,600,000

$5,100,000

District of Columbia

$5,681,760

$5,762,400

Hawaii

$5,490,000

$5,490,000

Illinois

$4,000,000

$4,000,000

Maine

$5,700,000

$5,800,000

Maryland

$5,000,000

$5,000,000

Massachusetts

$1,000,000

$1,000,000

Minnesota

$2,700,000

$3,000,000

New York

$5,740,000

$5,850,000

Oregon

$1,000,000

$1,000,000

Rhode Island

$1,561,719

$1,579,922

Vermont

$2,750,000

$4,250,000

Washington

$2,193,000

$2,193,000

 

Planners must be especially careful in planning for clients who reside in a state with a state estate tax or the District of Columbia or who have property located in state with a state estate tax and subject to that state’s estate tax. The different exemptions can make this planning quite complicated.

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