In 2015, 19 states will have an estate tax. Eight states
including Rhode Island will make changes effective in 2015. The federal estate
tax exemption is $5 million per person, indexed for inflation, and bequests to
spouses are tax free. The estate tax is an important issue for small business
owners whose estates are tied up in illiquid assets, such as buildings and real
estate, which endanger the future of the business that family members and workers
depend on for income.
In Rhode Island, the estate tax exemption will be increased
from $921,655 to $1.5 million and indexed to inflation in 2015. Rhode Island
also eliminated the “cliff” which had subjected estates that exceeded the
exempt amount to tax at dollar one.
But the other seven states have also changed their laws. New
York and Maryland are on a path to increase their estate tax exemptions to $5
million or more. Tennessee will increase their exemption to $5 million on
January 1, 2015, and eliminate the estate tax on January 1, 2016. Only New
Jersey and Massachusetts will have estate tax exemptions lower than Rhode
Island’s $1.5 million exempt amount in 2015. And New Jersey is likely to
respond to New York and take action in 2015 to raise the ‘lowest in the nation’
$675,000 exemption.
Rhode Island made progress in 2014 but the estate tax issue
will have to be revisited if RI’s small companies are going to remain
competitive with those in neighboring states.
