Hawaii Changes Its Estate Tax -- Again

Hawaii reinstated its own estate tax in 2010, imposing the tax on estates larger than $3.5 million. Now it has changed the tax again. This time, the state decided to impose its estate tax only on estates that are large enough to be subject to federal estate tax--currently, estates of $5.12 million or more. The bill, signed into law on July 6, 2012, affects deaths as of January 25, 2012.

The federal estate tax exemption, however, is likely to change next year. If Congress does nothing, it will drop all the way to $1 million, making many more estates liable for tax. The Obama administration has proposed a $3.5 million exemption.