Challenging Estate Tax Case Law for Migrating Taxpayers

Audrey G. Young
Of Counsel, Trusts & Estates Department
Published: Estate Planning, a Thomson Reuters publication
February 11, 2021

Originally published in Estate Planning, a Thomson Reuters publication (February 2021)

For the migratory surviving spouse, the taxation of a QTIP trust created in another state for his or her benefit is far from settled. Several state courts have ruled favorably for the taxing authorities in such state estate tax cases. The common issue across these cases is whether upon the second death of a married couple, the resident state of the surviving spouse may impose an estate tax on trust assets held in a marital trust created by a predeceased spouse, who died a domiciliary of another state. The latest case upheld Massachusetts’s assessment of estate tax on a New York state QTIP trust where the surviving spouse relocated to Massachusetts from New York following the death of her husband.

Back in 2001 when the U.S. Treasury commenced “decoupling” the federal estate tax with the result that states no longer collected a portion of the remitted taxes, more than 20 states opted to create their own “stand alone” estate tax so that they would continue to collect death taxes from their residents. At the same time, many of these states chose to set their state exemption amount below the then federal exemption amount. With the increase in the federal exemption amount to $11.70 million this year, the gulf between the applicable state exemption and the federal exemption amount has widened to as much as $10.70 million.

To read the full article, click here.