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10 Death Tax Myths

        Money | Taxes

The death tax applies equally in every state

Inheritance and estate taxes are like most other taxes, in that there are both state and federal versions. In much the same way that you must file separate state and federal income taxes every year, you may face similar -- but slightly different -- tax situations when paying federal and state inheritance and estate taxes.

Since each state has the right to set its own taxes, estate and inheritance taxes vary. Some states base their exempted amounts, tax rates, and filing and payment procedures on those of the federal government [source: Oregon Department of Revenue]. Others base parts of their inheritance tax structure on market factors [source: Combs].

If you have a substantial estate and are thinking about moving to another state, it can pay to investigate various states' tax structures. Some, due to the vagaries of state legislation, may offer you a better financial scenario than others. A tax advisor familiar with estate planning issues in the state of your choosing can help you understand the nuances of the state tax code. While this isn't likely to be the deciding factor in where you choose to move or retire, it's valuable information to have on hand as you plan for the future of your estate [source: Retirement Living Information Center].