Good news for taxpayers: Starting in January, fewer estates being passed to heirs will trigger Rhode Island’s estate tax, so beneficiaries will wind up getting more money.

It’s because of legislation approved by the General Assembly and signed into law by Governor Carcieri on June 30.

In general, Rhode Island’s estate tax kicks in if the total value of your estate (such as real estate, savings, investments and such) exceeds a certain threshold, currently $675,000.

However, effective Jan. 1, 2010, the threshold will jump to $850,000, an increase of about 26 percent.

That one change will mean more money for your beneficiaries.

For example, if Edith dies today, leaving behind an estate worth $850,000, Rhode Island takes the first $25,200; her beneficiaries carve up what’s left.

But if Edith dies on or after Jan. 1, 2010, leaving behind an estate worth $850,000, the state gets nothing; her beneficiaries get the full $850,000.

So that’s good news for recipients of smaller estates.

Not clear, however, is whether recipients of larger estates will reap some savings, too.

The new law isn’t clear on this point, said Providence lawyer David T. Riedel, chairman of the Rhode Island Bar Association’s Committee on Probate and Trust, and Patricia A. Thompson, former president of the Rhode Island Society of Certified Public Accountants.

State Tax Administrator David M. Sullivan agrees. “We have been looking at the new language in the estate-tax law and how the higher threshold will interact with the tax rates,” Sullivan told me. “I agree with the practitioners; this section of the law is not totally clear.”

The Rhode Island Division of Taxation will issue new regulations later this year that will clarify the change in the law and outline how to calculate the estate tax, Sullivan said.

But for estates valued at $850,000 or less, there’s no doubt: The new law means they won’t be subject to Rhode Island’s estate tax, and that’s a positive development, Riedel said.

“We’ve been arguing for years to get them to increase” the threshold, Riedel told me in an interview at Adler, Pollock & Sheehan, a law firm in Providence, where he is a partner.

Rhode Island’s $675,000 estate-tax threshold was tied with New Jersey’s for the lowest in the nation, he said.

At the new level of $850,000, “We’re still the lowest in New England, but not the lowest in the country,” Riedel said.

The change is “a sign that [state officials] recognize there’s an issue with the estate tax. It’s part of the problem that makes Rhode Island less attractive” from a tax perspective, he said.

Thompson said the new law will directly benefit those with estates of $850,000 or less. “They’ve just saved themselves [up to] $25,200 in estate tax, so that’s more that goes to the heirs,” Thompson told me when I met with her at Piccerelli Gilstein & Co. LLP, a CPA firm in Providence, where she is tax partner.

The estate tax — also known as the death tax — generally applies to your net taxable estate.

In other words, it generally applies to the fair market value of the real estate, savings and many other assets you leave behind, after subtracting such items as mortgage and other such debts; administration expenses, such as legal, accounting and court fees; and funeral expenses, Riedel said.

If you’re married and leave it all to your spouse, there generally is no tax.

But if you’re widowed or otherwise single, the death tax can kick in if the value of your estate exceeds a certain amount, sometimes called a threshold or exemption amount.

In general, the lower the threshold, the more likely than an estate will trigger the tax.

In Connecticut, the estate-tax threshold is $2 million.

In Massachusetts, it is $1 million.

Rhode Island’s was set at $675,000 by the General Assembly in 2001, and has not changed since.

Had it been linked to inflation, it would be about $812,744 today.

Carcieri wanted to increase the threshold to $1 million. The General Assembly agreed to raise it, but to $850,000, and that’s what became law.

However, the law will also raise the threshold each year thereafter with inflation.

If you have a formal estate plan, you probably won’t need to repeatedly revise it, Riedel said.

“Most of us have been writing our plans” so that a specific dollar figure is not listed, he said.

Instead, most estate plans use broader language that essentially says to use whatever Rhode Island threshold figure is currently in effect, he said.

“This change is a modest change which won’t, in and of itself, require changes to many existing plans,” he said.

Still, it’s worth checking with your adviser from time to time to make sure your plan is current, especially if you have a large estate, or if you’ve had a change in your circumstances.

The bottom line is this: At long last, the threshold on Rhode Island’s death tax will be going up.

If your estate is $850,000 or less, there’ll be no tax due, so all of your estate can pass to your beneficiaries. That’s good news for you, and for your beneficiaries.

What if your estate is larger than $850,000? There’ll probably be some savings, too, but we’ll have to see what the Division of Taxation concludes when it issues new regulations later this year.

TODAY’S TIP: Don’t forget that the federal death tax threshold is $3.5 million for this year.

What happens to that figure in the future, however, is up in the air; it’ll depend on what — if anything — Congress does this year.

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