Planning For Estate and Gift Taxes
When one is planning out their estate, it is crucial to remember that both the federal and state governments have the right to collect taxes on an estate or inheritance, though state obligations in particular will vary depending on where you live. Florida has a reputation as a low-tax state, but it is still possible that estate or gift taxes will apply to you depending on where you may have lived previously. Either way, it is crucial that you get the right information and advice to ensure that everything with your estate is as it should be.
Many Different Taxes – But Not In Florida!
The Internal Revenue Service (IRS) defines a number of different taxes that can be collected on inheritances, gifts and estates by both the federal government and the states. Some states choose not to, but the right to do so is there. However, even at the federal level, there are exceptions and exemptions from having to pay certain taxes. Whether you qualify or not depends primarily on the taxable value of your estate or the gift you are giving, which is not always the same as the gross figure you calculate.
Florida abolished its estate, inheritance, and income taxes by amending its constitution in 2004, and also abolished its gift tax in the same year. For most people, this means that they simply do not have to worry about any of these state taxes. However, in some cases, a person who has moved to Florida and still has assets in another state may still have remaining obligations there – for example, if a deceased person lived in one state, but you, the inheritance recipient, live in Florida, that state’s inheritance tax may still apply to you.
The U.S. federal government does levy estate taxes, though the majority of estates are exempt from paying most of them due to their small value. As of 2020, the exemption amount (that is, the amount an estate must be valued over in order to owe estate tax) is $11.58 million, though it is slated to hit $11.7 million in 2021.
If your estate is lower in value than that figure, you do not have to file an estate tax return with the IRS. If you are married, and set up your estate the right way, you may even be able to double that exemption since it is portable for married couples.
The IRS does also impose a gift tax on transfers of property where the grantor does not expect anything of equal or greater value in return. However, every person has an annual gift tax exemption of $15,000, which means that in theory, you could gift your loved ones each up to $15,000 per year without having to pay a penny of tax. If you do give more than that, you must report the gift – but you would only wind up paying taxes if you ever reached your lifetime exemption, which is the same as the estate tax (roughly $11.6 million). The odds are very low for most people.
Call A Naples Estate Planning Attorney
If you have questions, concerns or just want to set up a complimentary consultation to discuss your personal legal issues in a confidential setting, contact James R. Nici, the Managing Partner of Nici Law Firm, a Naples estate planning attorney with almost 30 years of legal experience. This may be the first step toward ensuring all is how you want it to be going forward. Contact our offices today via our website, or on the telephone at 239-449-6150, to schedule your complimentary consultation.