---
title: The estate tax you should worry about
description: There's a lot of speculation about what will happen to the federal estate tax (or the "death tax," if you oppose it) next year. A…
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published: '2009-10-28T19:34:10.000Z'
modified: '2009-10-28T19:34:10.000Z'
section: Taxes
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![The estate tax you should worry about](https://img.money.com/2009/10/irs_building_taxes-ju-03221.jpg)

There's a lot of speculation about what will happen to the federal estate tax (or the "death tax," if you oppose it) next year. A handful of [bills](http://lawprofessors.typepad.com/trusts_estates_prof/page/2/) have been introduced in Congress recently, many of which would raise the current exemption from $3.5 million to $5 million and keep the tax rate at 45%. (Under current law, the estate tax disappears in 2010 but is reinstated in 2011 at 55% on estates larger than $1 million.)

Whether the exemption jumps from $3.5 million to $5 million -- or disappears altogether -- you may assume that you don't have an estate tax issue. Few of us leave behind that much wealth. But here's where many people go wrong: While you may not owe *federal* taxes you could be on the hook to your *state*.

That's right, nearly half of states have either an estate tax, an inheritance tax or a combination of both. And in many cases, the [state exemption](money.cnn.com/2009/05/18/pf/estate_plan.moneymag/index.htm) is much lower than what the Feds let you get away with these days. (If you recall, back at the start of the decade, the federal exemption was $675,000. In a vintage move, New Jersey and Rhode Island still peg their exemption at that level.)

On the bright side, the death tax rate is less in states -- no more than 20%. But check on your state's current law at your local department of revenue. ([Delaware](http://legis.delaware.gov/LIS/LIS145.NSF/vwLegislation/C84D6B0296714D42852575E4007BE66D?Opendocument) reinstated an estate tax this summer.) If your assets exceed the exemption level, speak with an [estate planning attorney](http://www.aaepa.com).

And while you've got taxes on your mind, don't forget to make [these tax-saving moves](http://money.cnn.com/2009/10/27/pf/taxes/year_end_tax_moves.moneymag/index.htm?postversion=2009102711) before the end of the year.

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