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Inheritance Tax Protection in Florida

inheritance tax in naples florida

How to Reduce Estate and Inheritance Tax in Florida

The state of Florida does not have an inheritance or estate tax. Despite this, you may worry about taxes upon your beneficiaries. You do want to be aware of what taxes may be when estate planning. Even though you will not owe estate or inheritance tax at the state level, you may still owe federal estate tax. With proper planning, you can reduce any estate or inheritance tax.

As of 2022, the federal estate tax exemption is $12.06 million. The exemption is doubled to $24.12 million for married couples. This means that if you die in Naples, Florida with an estate valued less than the exemption, you will not owe any federal estate tax.

If you are worried that your estate will be greater than the federal estate tax exemption, you should reach out to a top Naples estate planning lawyer, like James Nici. There are various ways that you can minimize your estate taxes. Some of the most common strategies to reduce your estate tax in Naples are listed below. You can discuss these option’s with Mr. Nici and see if any work for you.

Marital Transfers

Transfers to your spouse, including a same-sex spouse, are not subject to estate tax. This strategy does not get rid of the estate; it just passes it down the line. Your spouse’s estate will have to pay estate taxes on the property when they pass away.

Lifetime Gifts or Spending

One way to reduce the value of your estate, and therefore, your estate tax liability is to spend or give your property while you are still alive. This is a good option for individuals confident that they will not run out of money during their lifetime.

If you give money away, it is important to be aware of the gift tax. The gift tax is a tax on the transfer of property by an individual to another while receiving nothing, or less than full value in return. As of 2022, you can give up to $16,000 to a person without triggering the gift tac. If you are married, the gift tax exemption doubles to $32,000. The gift tax does not include gifts to charities.

Gifts to Minors

Another strategy to lower the value of your estate in Naples is to give property to minors through the Uniform Transfers to Minors Act (UTMA). This act allows the gift of property to be transferred to underage children. Any amounts transferred to the UTMA account over the gift tax exclusion are taxed at the minor’s tax rate. A custodian (typically the parent) manages the property until the child becomes of legal age. If the conservator dies before the minor takes control of the assets, the account value will be included in the taxable estate.

If the UTMA account was created in a will or trust, the legal age means 21. Otherwise, the UTMA account terminates at age 18, unless there is a clear intent for the account to continue for a longer period. The maximum age that a UTMA account can last under Florida law is age 25.

Charitable Giving

You can reduce the value of your estate by giving away to charitable organizations, either during your lifetime or through your will or trust. If you give during your lifetime, you will receive an income tax deduction at the same time you are lowering the value of your estate.

If you create a charitable trust such as a Charitable Remainder Trust (CRT), you will receive an immediate charitable tax deduction against the income produced by the charitable trust. You will also receive a charitable estate deduction, so the amount you give away is not included in your taxable estate. The trust can be created in a way that lets you retain the right to use the gifted asset or income until your death.

Irrevocable Life Insurance Trust

Assets distributed through an irrevocable life insurance trust are not subject to estate tax when you die. The funds in the life insurance trust are used to pay premiums for one or more life insurance policies. Additionally, money placed in the trust is tax-deductible in that tax year.

Since it is an irrevocable trust, you (the grantor) cannot also be the trustee of the trust. Many people choose their spouse, adult child, or corporate entity.

Call A Naples Estate Planning Lawyer

If you have questions about  your estate plan and making sure that you have inheritance tax protection in Florida, please contact Nici Law Firm. James R. Nici is an experienced Naples estate planning attorney with over 25 years of experience. He is well versed in working with clients looking to protect their estate from burdensome taxation and can create an estate plan that fits your needs. Contact our office today at (239) 449-6150 or use our web form to set up a free consultation.

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