Rhode Island Estate Tax

Many Rhode Island estates that aren’t large enough to owe federal estate tax may still owe an estate tax to Rhode Island. For deaths in 2011, estates of more than $859,350 are subject to the Rhode Island estate tax; the exemption amount is adjusted for inflation each year.

Which Estates Must File

If the estate of a Rhode Island resident has a gross value of more than $859,350, the executor must file a Rhode Island estate tax return. Deductions may reduce the amount of the taxable estate, so that the estate may not actually end up owing any tax. But a tax return must still be filed.

The estates of nonresidents may also need to file a Rhode Island estate tax return, if the person owned valuable Rhode Island real estate or other tangible assets that were kept in the state.

Calculating the Value of the Gross Estate

To determine whether or not a state estate tax return will be required, add up the value of the deceased person’s gross estate. Count everything the deceased person owned, including:

• Bank accounts, certificates of deposit, and investment accounts, including those for which a payable-on-death beneficiary was named
• Real estate in Rhode Island
• Vehicles and other personal property kept in the state
• Proceeds from life insurance policies on the deceased person’s life, unless that person didn’t own the policy
• Retirement account funds
• Business interests (whether the business was a sole proprietorship, limited liability company, or small corporation)

If any assets were owned with someone else, count only the value of the deceased person’s share. For example, if the deceased person owned a house with his spouse, include half of its value. If, however, property was owned in joint tenancy with someone else, then include the total value except for funds that the other person contributed.

Also include these assets:

• Taxable gifts made during life. If the deceased person made large gifts (more than the annual exclusion amount, which is currently $13,000 per year per recipient), then add the taxable amount of those gifts to the value of the estate.
• Some transfers made in the three years before death. If the deceased person transferred a life insurance policy to an irrevocable life insurance trust within three years of death, the value of the policy must also be included in the estate.
• Assets held in a trust. The value of assets held in a revocable living trust or other trusts the deceased person controlled is included in the taxable estate.

Forms to File

The Rhode Island estate tax return, Form 100A, must be filed nine months after the death; it must be accompanied by a death certificate, a filing fee (currently $50) and any tax due. If a federal return is required, you must file a copy of it as well. If the deceased person owned real estate in Rhode Island, you must also file (in triplicate) Form T-77, a discharge of lien. If certain securities were owned, Form T-79, an estate tax waiver, must also be filed (in duplicate).

You can request an extension of time to file with Form RI-4768.

Estate tax forms and instructions are available from the Rhode Island Division of Taxation.

How Much Tax Will Be Due?

The Rhode Island estate tax rate is much lower than the federal estate tax rate; the maximum rate, for very large estates, is 16%.

No ‘Portability’ for Spouses in Rhode Island

Beginning with deaths in 2011, federal tax law allows spouses to share their individual federal estate tax exemptions. If the first spouse to die doesn’t use up of his or her entire $5 million federal estate tax exemption, then after the second spouse dies, his or her estate can use anything that was left over by the first spouse. This is called “portability” of exemptions.

Rhode Island does not allow spouses to share their individual exemptions with each other.

Property Left to a Surviving Spouse

Property left to a surviving spouse is exempt from both state and federal estate tax, no matter what the amount. Because neither Rhode Island nor the federal government recognizes same-sex marriage, same-sex couples cannot leave assets to their spouses free of estate tax.

Get Expert Advice

Even if you’re comfortable with tax returns or have a regular income tax preparer you like, if you have to file an estate tax return, it’s time for expert help. Hire a lawyer or CPA who has experience with Rhode Island estate tax returns and procedures.  Both state and federal returns are long and complicated; the fee of an experienced tax preparer may be several thousand dollars, but it will be worth it.