Strategies for Multi-Millionaires Navigating the Rhode Island Estate Tax

Orisun Institute Scholar
May 15
4 min read

Rhode Island’s estate tax rules create a challenging environment for multimillionaires who want to protect their wealth. Unlike the federal estate tax exemption, which shields up to $15 million per person, Rhode Island’s state estate tax kicks in at just $1,838,056. This low threshold means many affluent residents face a steep tax bill when passing on their assets. This post explains how Rhode Island’s estate tax works, the new property tax surcharges targeting luxury homes, and practical strategies multimillionaires use to manage these financial pressures.

This information is for educational purposes only and should not be considered financial or legal advice.

Understanding Rhode Island’s Estate Tax Rules

Rhode Island imposes a state estate tax on estates valued above $1,838,056 as of 2026. This is much lower than the federal exemption, which protects estates up to $15 million per person. If a Rhode Island resident’s estate exceeds the state threshold, the entire estate—not just the amount above the limit—is subject to a progressive tax rate that can reach up to 16%.

A key point is that Rhode Island does not allow portability of the estate tax exemption between spouses. This means each spouse’s estate is taxed separately, which can increase the overall tax burden for married couples.

What Counts Toward the Estate Tax?

The estate tax applies to the total net estate, which includes:

Real estate holdings
Investments such as stocks and bonds
Life insurance proceeds
Other assets owned at death

Because real estate values in areas like Newport, Providence, and Watch Hill tend to be high, many multimillionaires find their estates quickly surpass the state exemption.

The Rising Concern Over New Tax Proposals

Local lawmakers and advocacy groups are discussing new tax proposals aimed at high earners. One example is a “millionaire’s tax” that could increase income or property taxes for the wealthiest residents. The Rhode Island Public Expenditure Council (RIPEC) has warned that such taxes could lead to an exodus of high-net-worth individuals from the state.

New Property Tax Surcharges

Rhode Island has introduced additional taxes targeting luxury real estate, including:

Real Estate Conveyance Tax Adjustment: Higher taxes on the sale of expensive properties.
Non-Owner Occupied Property Tax: Extra taxes on properties valued over $1 million that are not the owner’s primary residence.

These surcharges add to the financial pressure on multimillionaires who own multiple properties or investment real estate in the state.

How Multimillionaires Protect Their Wealth

Faced with these tax challenges, many affluent Rhode Islanders work with specialized local advisors. These professionals help navigate complex tax laws and residency rules to reduce tax exposure legally.

Strategies to Manage the Estate Tax Cliff

Irrevocable Trusts: Setting up irrevocable trusts can remove assets from the taxable estate. Form RI-706 is used to report these trusts to Rhode Island tax authorities.
Gifting Assets: Transferring assets during one’s lifetime can reduce the estate size.
Estate Planning with Local Advisors: Advisors help structure estates to avoid triggering the full tax on amounts just over the threshold.

Residency Planning to Avoid Tax Penalties

Rhode Island conducts strict residency audits to determine if individuals qualify as residents for tax purposes. Some multimillionaires establish residency in states like Florida, which has no state income tax and no estate tax, to reduce their tax burden.

Establishing Florida Residency: This involves meeting specific criteria such as spending a majority of the year in Florida, changing driver’s licenses, and filing tax returns there.
Managing Residency Audits: Local advisors help document and prove residency status to Rhode Island tax authorities.

Navigating Form RI-706 Filings

Form RI-706 is the estate tax return required for estates exceeding the exemption threshold. Filing this form correctly is critical to avoid penalties and ensure proper reporting of trusts and other estate planning tools.

What Rhode Island Multimillionaires Are Searching Online

Private search data shows affluent residents are focused on:

Rhode Island estate tax exemption thresholds for 2026
Avoiding non-owner occupied property taxes on homes over $1 million
Updates on millionaire tax proposals and their impact on migration
How to establish Florida residency to escape Rhode Island tax rules
Strategies involving irrevocable trusts and Form RI-706 filings

These searches reflect the urgency and complexity of managing wealth in Rhode Island’s current tax environment.

Practical Steps for Multimillionaires in Rhode Island

If you own significant assets in Rhode Island, consider these steps:

Review Your Estate Plan: Work with a local estate planning attorney to assess your current plan against the state’s tax rules.
Explore Trust Options: Irrevocable trusts can help reduce estate tax exposure.
Consider Residency Changes: If feasible, establish residency in a state with more favorable tax laws.
Stay Informed on Legislation: Monitor local tax proposals that could affect your financial situation.
Use Professional Advisors: Specialized tax and legal advisors provide guidance tailored to Rhode Island’s unique rules.

Final Thoughts

Rhode Island’s estate tax rules and new property tax surcharges create real challenges for multimillionaires. The low exemption threshold and lack of spousal portability mean many estates face significant taxes. New taxes targeting luxury properties add to the pressure. Multimillionaires use a combination of trusts, residency planning, and professional advice to protect their wealth.

Understanding these strategies and staying informed about local tax changes is essential. This knowledge helps you make informed decisions to manage your estate effectively.

For more detailed information, consult the Rhode Island Division of Taxation’s official estate tax updates here and the Rhode Island Public Expenditure Council’s reports on tax proposals.