Now let's assume that a widowed Florida resident dies in 2008 with a $3 million taxable estate consisting of a $2 million Boston condominium and a $1 million Florida property. The decedent does not own the Boston condominium outright; instead, she owns it as the sole member of a limited liability company, which is used for holding the title because it is a rental property. The Massachusetts estate tax applicable to nonresidents applies to Massachusetts real estate; it does not apply to intangible personal property, such as a membership interest in an LLC. There is no state death tax liability.
Conclusion
Advisors cannot assume just because a client does not have a federal taxable estate that state death taxes are not relevant, especially as those states feel the pinch from the post-EGTRRA drop in revenue. A careful analysis is necessary to determine the proper plan to minimize, defer or pay state death taxes. Such analysis should also consider both the applicable estate taxes of the client's domicile and the estate taxes of all states in which the client may own property.
Richard
P. Breed, III is a shareholder and co-founder of Tarlow, Breed, Hart
& Rodgers P.C. of Boston, which was established in 1991. He
concentrates his practice in the field of estate and business planning
and advises owners and their families on the complexities of estate
planning and administration, taxation and corporate law. He can be
reached at [email protected].
Jennifer
A. Civitella has been an associate with Tarlow, Breed, Hart &
Rodgers P.C. since 2006. She concentrates on estate planning, tax
planning and estate administration. She can be reached at [email protected].