Not too many people give any thought to their choice of state residency relative to the estate tax.  Sure, plenty of folks decide to live in states like Florida because we have no income tax (although anyone who lives here knows that you get taxed in many other ways – high sales tax, license fees, etc).  How about deciding where to live based on potential estate tax?

Most of us know by know that the federal estate tax exemption is large.  $5.12 million for 2012, up from $5 million in 2011, due to indexing for inflation.  What about state estate tax exemptions?  Before 2005, Florida had an estate tax that was often called the “sponge” or “pick-up” tax, which was the amount that was allowed as a state estate tax deduction on the federal estate tax return.  For the time-being, there is no state estate tax deduction allowed on the federal estate tax return, which means that Florida does not collect an estate tax.

Many other states followed that rule, so that their tax revenues took a dip.  To address that, certain states enacted a stand alone estate tax.  You can review this map to learn about those exemptions, and perhaps pick your new state of residence.   For more information, this Forbes/MSN article is worth a quick read.