State Estate Tax Changes for 2011

Its not just the federal estate tax that has been altered dramatically for 2011 -- several states that collect their own estate taxes have also made big changes. Heres a summary.

Connecticut, in its state budget bill signed into law on May 17, 2011, lowered its state estate tax exemption from $3.5 million to $2 million. The change was made retroactive, effective for deaths as of January 1, 2011. The retroactive application of the law is being challenged in court by the estate of a millionaire developer who died in April 2011.

Delaware currently has an estate tax for estates worth more than $3.5 million (that is, the exemption amount is $3.5 million). Its not clear whether or not the exemption amount increased, with passage of the new federal law, to $5 million for deaths in 2011. If this becomes important to your family, see a Delaware tax and estate planning expert for the latest information.

Illinois lost its estate tax on January 1, 2010 because it was tied to the federal estate tax, which was repealed for 2010. In January 2011, the state legislature brought back the Illinois estate tax, effective January 1, 2011, with a $2 million exemption amount.

North Carolinas estate tax, which is tied to the federal estate tax, expired on January 1, 2010 when the federal estate tax did. And like the federal tax, as of January 1, 2011, the state tax has come back with a $5 million exemption amount for deaths in 2010, 2011, and 2012.

Vermont's estate tax exemption amount increased to $2,750,000 on January 1, 2011.