Tax-Friendly and Not-Tax-Friendly States for Retirees

Kiplinger recently released its 2015 survey about states and their relative tax-friendliness to retirees.

Of course, one quickly focuses on the absence or presence of a state income tax. That is definitely a factor in determining the tax burden of living in a particular state. However, there are other important tax considerations for retirees, including (at least) income taxes on retirement distributions, income taxes on social security, sales taxes, property taxes, and estate and inheritance taxes.

When all these factors are weighed, Kiplinger nominates as the ten “most tax-friendly” states the following (moving from east to west): Delaware, Florida, Georgia, Mississippi, Louisiana, South Dakota, Wyoming, Arizona, Nevada, and Alaska. Kiplinger’s ten “least tax-friendly” states include (from west to east): California, Oregon, Montana, Nebraska, Minnesota, New York, New Jersey, Vermont, Connecticut, and Rhode Island.

Two places on my list of potential retirement homes do alright. Texas is “tax-friendly.” Michigan is “mixed.” Should I now add tax-friendly South Dakota? Nah.


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Happy NEPAW!

Several years ago – before the estate tax exemption was raised to $5,120,000 for 2012 and increasing each year thereafter (so far) ($5,430,000 per individual in 2015), Congress designated the third week in October as National Estate Planning Awareness Week. That equates to October 19th through October 25th in 2015.

AccountingToday reports that only approximately 3,700 estates, or 0.12 percent of the total, are expected to owe federal estate tax in 2015. Thus, there’s no need for most of us to worry about estate planning. Right? Au contraire, my friend. Approaching the topic broadly, as one should, one finds that there are a number of estate planning subjects that should be addressed by most people.

As pointed out by The Transylvania Times (no, I am not making that up for Halloween season), estate planning should address an individual’s financial and nonfinancial goals and develop strategies that will maintain financial security throughout his/her lifetime and ensure the intended transfer of property and assets at death.

I list below just a few estate planning suggestions. There are many more; these are just some basics almost anyone should consider.

  • Be sure that you have a current will.
  • Take advantage of the unlimited marital deduction.
  • Take advantage of the portable estate tax exemption for married couples.
  • Review and update, if necessary, your beneficiary designations for your retirement plans, your IRAs and your life insurance policies.
  • Prepare a living will or advanced directive and designate health care proxies (or execute a durable power of attorney for healthcare).
  • If you are industrious, consider establishing a revocable living trust; you can lower the cost of probating your estate.
  • If your estate could exceed the exemption ($5,430,000 for individuals and, with some planning, $10,860,000 for married couples), consider the use of more sophisticated planning strategies such as irrevocable life insurance trusts, gifting strategies, marital trusts, bypass trusts, and family limited partnerships, just to name a few of the tools in the boxes of high-priced estate planning attorneys.

Do it now! Don’t wait until NEPAW 2016.


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