Hike in R.I. estate tax exemption linked to CPI
The Providence Business News, August 17, 2009 by William Hamilton, PBN Staff Writer
John Hodnett sees these types of emotional house sales often:
Family members inherit valuable property from a deceased relative, and they desperately want to keep it in the family. But then the estate taxes kick in and reality hits. They can't afford the tax bill.
Hodnett, a broker with Lila Delman Real Estate, which specializes in waterfront and luxury property, says because of skyrocketing values in the early--to mid--2000s, some are discovering that houses and other assets they are inheriting are valued above the state's current $675,000 exemption threshold for the estate tax, despite the more recent declines in value.
"So many people are getting hit with the tax burden," Hodnett said recently. "they're getting a fabulous asset, and then they have to liquidate so the estate can pay it."
And, even though state lawmakers recently approved increasing the exemption, Hodnett doesn't see the situation changing much anytime soon.
While financial planning experts and accountants applaud Rhode Island's move to lift the exemption to $850,000 as a step in the right direction, they say it's not nearly enough to help most people in the situation Hodnett describes, or to persuade others with sizable assets to stay in Rhode Island instead of leaving the state to avoid paying the tax after they die.
Betsey Purinton, president of the Financial Planning Association of Rhode Island and vice president at the investment advisory firm Strategic Point, said the rate of calls from clients contemplating an out-of-state move--while not exactly flowing in--it hasn't slowed, either, since the General Assembly approved the exemption hike.
"The difference between the two is not that great," Purinton said of the current exemption and the pending one. "But it is nice we did something."
The Rhode Island estate tax--a tax on the right to transfer property when someone dies--has long been a hot topic among financial planners, and others.
At one time, Rhode Island's estate tax was designed to absorb a dollar-for-dollar federal estate tax credit, generating revenue without boosting an estate's tax bill. But in 2001, that credit was phased out and many states eliminated the tax.
Rhode Island, however, decoupled from the federal estate tax laws and set the estate tax threshold at $675,000, one of the lowest exemptions in the country.
The Providence Business News, August 17, 2009
William Hamilton , PBN Staff Writer
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