Most of the country’s attention has been on federal estate tax changes made by the American Taxpayer Relief Act of 2012. Little focus centered on state estate taxes. North Carolina is among 21 states where state-level estate or inheritance taxes are imposed on assets passed on to heirs.
State estate and inheritance tax legislation fluctuates. Individuals are not able to predict how their assets will be taxed by the state if their heirs receive their inheritances five years from now or twenty years from now. This makes both long-term estate planning and regular reviews important.
North Carolina’s estate tax exemption is the same as the federal exemption - $5.25 million this year. The maximum tax rated is 16%. If a decedent’s property exceeds this amount, a North Carolina estate tax return must be filed if the decedent was a resident of North Carolina, or was a non-resident who owned real property or personal property with a tax situs in North Carolina. The return and any tax are due within nine months from the date of death.
Since the passing of the American Taxpayer Relief Act, there is more predictability concerning federal estate taxes. The act made the federal estate tax exemption permanent. An individual’s estate is now exempt from federal estate tax up to $5.25M, which will be graduated for inflation in future years. (Amounts in excess of this figure are subject to a 40% tax.)
Many states are eliminating their death taxes. Ohio, Delaware, and –slated for 2016—Tennessee have all approved repeals. North Carolina may soon follow a similar path. Recent political campaigns opened a dialogue about removing the North Carolina estate tax. Once Tennessee’s estate tax expires in 2016
, North Carolina will be the only state in the Southeast to impose a death tax. Eliminating the tax would make North Carolina an attractive place for individuals to relocate or retire to, and for businesses to be headquartered.
If the North Carolina estate tax
is repealed, it will most likely be part of legislation alterations that will affect other taxes. Make sure you routinely consult with a North Carolina estate planning attorney to ensure you are taking advantage of every exemption possible.