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Overview of Hawaii Estate Tax Laws in 2014

Understanding How Hawaii Estate Taxes Affect an Estate

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If you live in Hawaii, then you live in one of a handful of states that still collect a local death tax. The estates of Hawaii residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Hawaii, are subject to a local death tax under the following guidelines.

NOTE: State and local laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.

When is an estate subject to the Hawaii estate tax in 2014?

 

In 2014, an estate of a resident of Hawaii, or a nonresident of Hawaii but U.S. resident or citizen, is taxable in Hawaii and a Hawaii Estate Tax Return, Form M-6, is required to be filed if the taxable estate (determined using IRS Form 706, Part 2, line 3a) is $5,340,000 or greater. Nonetheless, if the decedent is survived by a spouse and the spouse is allowed to claim an election for transfer, or "portability," of the deceased spouse’s unused estate tax exclusion amount, then a Hawaii Estate Tax Return must be filed to make the election. See more on portability below.

The estate of a nonresident of the U.S., not a U.S. citizen, is taxable and a Hawaii Estate Tax Return is required to be filed if the taxable estate (determined using IRS Form 706-NA, Part II, line 1) is $60,000 or greater.

What Hawaii estate tax forms must be filed?

 

The personal representative or other fiduciary representing an estate that is subject to the Hawaii estate tax must complete and file the Hawaii Estate Tax Return, Form E-1.

Additional documents that must be filed with the Hawaii Department of Taxation when a Hawaii Estate Tax Return is required to filed are as follows:

  • IRS Form 706 (for the year of death) completed through Part 2, line 12, or IRS Form 706-NA completed through Part II, line 8
  • All federal schedules with federal Forms 712, as required
  • Death certificate
  • Will
  • Trusts
  • Power of appointment documents
  • A copy of another state’s estate tax return or foreign estate tax return, if the estate is subject to other estate taxes
  • Any valuations or appraisals

Note that for estates that are not required to file a Hawaii Estate Tax Return, the personal representative or person(s) in possession, control, or custody of the decedent's property must file a Request for Release, Form M-6A, with the Department of Taxation if the agent wishes to obtain a release which indicates that the personal representative or person(s) in possession, control, or custody is/are free from taxes under chapter 236E, Hawaii Revised Statutes (HRS).

Are transfers to a surviving spouse taxable?

 

Outright transfers to a surviving spouse are not taxable.

For married couples who have used AB Trust planning to reduce their federal estate tax bill, since the Hawaii estate tax exemption equals the federal estate tax exemption, a Hawaii death tax will not be due on the B Trust after the first spouse's death since there will not be a gap between the Hawaii exemption and the federal exemption.

Are transfers to a civil union partner taxable?

 

On January 1, 2012, civil unions became recognized in Hawaii. Civil unions entered into in a jurisdiction other than Hawaii are also recognized, provided that the relationship meets Hawaii’s eligibility requirements, has been entered into in accordance with the laws of the other jurisdiction, and can be documented. Hawaii law provides the Internal Revenue Code (IRC) sections and provisions referred to in Hawaii’s estate and generation-skipping transfer tax Laws that apply to a husband and wife, spouses, or person in a legal marital relationship will apply to partners in a civil union with the same force and effect as if they were “husband and wife”, “spouses”, or other terms that describe persons in a legal marital relationship.” Accordingly, references to “married”, “unmarried”, and “spouse” also means “in a civil union”, “not in a civil union”, and “civil union partner”, respectively.

Is portability of the Hawaii estate tax exeption allowed between spouses?

 

Yes, but portability of Hawaii's estate tax exemption applies only to decedents who die after January 25, 2012 and who were U.S. residents or U.S. citizens and validly married on the date of death (including Hawaii civil unions or the equivalent) and to nonresidents of U.S., not U.S. citizens, where allowed by any applicable treaty obligation of the United States.

What is the Hawaii estate tax rate?

 

The Hawaii estate tax rate is a progressive one that starts out at 5% and tops out at 16%.

When are the Hawaii estate tax return and tax payment due?

 

The Hawaii Estate Tax Return, Form M-6, must be filed, and any estate tax due must be paid, within 9 months of the decedent's date of death. An extension of time to file the Hawaii Estate Tax Return does not extend the time to pay any tax due.

An extension to file the Hawaii Estate Tax Return, Form M-6, is based on the federal extension to file the federal estate tax return. Hawaii does not have a separate extension form, but an automatic six-month extension to file Form M-6 will be granted if:

  1. A copy of the IRS approved extension to file the federal estate tax return, IRS Form 4768, is attached to Form M-6; and
  2. Form M-6 is filed by the due date specified by the IRS for filing the federal estate tax return.

Where are the Hawaii estate tax return filed and tax payment made?

 

Mail all required forms and any payment due to:

Hawaii Department of Taxation
P.O. Box 259
Honolulu, Hawaii 96809-0259

Where can I find additional information about Hawaii estate taxes?

 

For more information about Hawaii estate taxes, refer to the Department of Taxation's website: Hawaii Department of Taxation.

You may call customer service at 808-587-4242 or toll free at 1-800-222-3229; Telephone for the Hearing Impaired at 808-587-1418 or toll free at 1-800-887-8974; or send a fax to 808-587-1488.

You may also email the department at Taxpayer.Services@hawaii.gov

Correspondence may be mailed to:

Taxpayer Services Branch
P.O. Box 259
Honolulu, HI 96809-0259

Does Hawaii collect an inheritance tax?

 

Does Hawaii collect a local inheritance tax, which is a tax assessed against the share received by each individual beneficiary of an estate as opposed to an estate tax, which is assessed against the entire estate? The answer to this question is No, Hawaii no longer collects a state inheritance tax because it was replaced with a state estate tax under "The Estate and Transfer Tax Reform Act of 1983."

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