Our CPA friend Lars and his rich Uncle Nils are having one of their regular dinners at the oddly named restaurant Guy. Nils has heard that the State of Washington's legislature, desperate for funds, is talking about doubling the already-high estate tax rate for its residents. He's thinking about moving.
Nils has been on the internet and describes some of his findings to Lars. A minority of states impose an estate tax. Washington's tax starts at 10% on estates over $2 million, and goes up to 19% for larger amounts. It's one of the highest in the nation.
Nils knows a couple of guys who have already declared other states their home now. Some states are better than others. California has an income tax that significantly undermines the benefit of moving, unless one manages to do it just before one dies. Nevada is better, with neither an income tax nor an estate tax, but few people seem to be talking about moving there.
Moving to California wouldn't be so radical for Nils as it sounds. He already has a house there. He would just need to change a bunch of things like car and voter registrations and Lutheran church memberships, and spend a little more time there than he already does.
Even Nils recognizes that the time is probably not right for some of his cronies to become Californians. They are leaving their estates to their wives. This means that the estate tax can be deferred until both of them have died. The probability that both will die soon is small, so it's premature for them to start paying California income tax. And for all we know the laws of both California and Washington will change before long.
Nils doesn't have quite the same luxury as his friends. He's leaving a significant gift to Sylvia in his Living Trust, but the gifts to other relatives will be large also. So he doesn't have the benefit of a joint life expectancy, to make the state estate tax issue seem remote.