How is the Rhode Island Division of Taxation involved with the Probate Process?

A probate estate cannot be closed in the probate court without submitting an estate tax clearance letter issued by the Rhode Island Division of Taxation.  A fiduciary must file an estate tax return with the Rhode Island Division of Taxation whether estate taxes are due or not.

Rhode Island imposes estate taxes if the decedent’s estate exceeds $1,595,156 (in 2021). This number is called the Rhode Island estate tax exemption equivalent. The exempt amount is attached to an index that goes up a few thousand dollars each year.

The Rhode Island Division of Taxation casts a wider net than the probate court.  The taxable estate includes all of the assets controlled by the decedent, including joint property, retirement accounts, life insurance, annuities, real estate, vehicles, jewelry, and household furniture.

Even if the decedent’s estate exceeds $1,579,922, estate taxes may not be due.  Assets passing to a surviving spouse can qualify for the unlimited marital deduction. There is a charitable deduction for assets left to qualified charities. When an estate exceeds the exemption amount and there are no deductions, the Rhode Island estate tax rate graduates from 7.2% to 16%.

There is a $50 fee paid to the Rhode Island Division of Taxation at the time the estate tax return is filed whether or not estate taxes are due.

The examples below illustrate how the Rhode Island estate tax is calculated:

  1. $700,000 taxable estate made up of bank accounts and real estate = $0 estate tax as the amount is below the exemption amount and the identity of the recipient does not matter.
  2. $2,000,000 taxable estate passing to the surviving spouse = $0 estate tax as there is a marital deduction for property passing to the surviving spouse even if the amount exceeds the exemption amount.
  3. $2,000,000 taxable estate all passing to the decedent’s children = $29,110 RI estate tax in 2021
  4. $3,000,000 taxable estate all passing to the decedent’s children = $108,310 RI estate tax in 2021
  5. $6,000,000 taxable estate all passing to the decedent’s children = $440,310 RI estate tax in 2021
  6. $2,000,000 taxable estate with $1,000,000 passing to the decedent’s children and $1,000,000 passing to a qualified charity = $0 estate tax as the $1,000,000 passing to the children is less than the exemption amount and the $1,000,000 passing to the charity qualifies for the charitable deduction.

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