Will My Florida Estate Be Taxed?
For many, one of the many attractive perks of living in Florida is the absence of many state taxes – there is no state income tax, and for many years running the state has had one of the lowest tax burdens in the country. However, when dealing with your estate planning, you may still have to deal with estate taxes, as well as potential gift taxes depending on how you structure your will. If you have questions or concerns, it may be a good idea to consult a Florida estate planning attorney.
An estate tax is a tax on your right to transfer property upon death, and it applies to any estate transferred via will or intestacy law. The majority of U.S. states – Florida included – do not levy a tax on estates, though the federal government does if the estate is large enough. Florida also does not collect an inheritance tax – money paid after the property has been transferred to your heirs – but depending on your specific situation, other states’ inheritance tax laws may apply to you, especially if you recently moved or still retain property in other states.
While estate tax is often talked about as though it will bankrupt one’s heirs, in truth, the federal estate tax is only collected on estates that are valued at more than $11,580,000 per person ($23.1 million per couple). The exemption used to be less than half of that, but the 2018 Tax Cuts & Jobs Act doubled it to minimize the likelihood that wealthy estates will be taxed appropriately. The only taxes that most people will owe on a Florida estate are the individual’s last federal income tax return, and if applicable, the estate’s federal income tax return.
Federal Gift Tax
The other tax that Floridians may encounter when trying to get their estate planning squared away is the specter of gift taxes. A gift tax is paid on any transfer of property during the giver’s lifetime – not just in a probate situation, but anytime a taxable gift is made. Florida does not have a gift tax as of 2018, but the Internal Revenue Service (IRS) may collect it as part of the “unified” estate and gift tax. Gift taxes are collected throughout one’s lifetime, while estate taxes are collected (if at all) after a person’s passing, but they are taxed in the same manner. If, for example, you gave your children taxable gifts valued at $3 million over your lifetime, and your estate after your passing was valued at $13 million, you would then owe tax on the value over $11.2 million.
While the specter of paying gift tax can seem intimidating, in truth, many common gifts are not taxable, including tuition, gifts to your spouse, gifts to certain specific charities, and so on. If you do make taxable gifts, however, you will need to file a federal gift tax return, so that the amounts are recorded. However, this can be an extremely convoluted and difficult process; if you do need to file a gift tax return, it is a good idea to consult an attorney, as the potential to make errors is simply too high to complete it alone.
A Florida Estate & Gift Tax Attorney Can Help You
Tax law is complex at the best of times, but because of its unified nature, estate and gift tax questions can be even worse. If you have questions about federal estate or gift taxes, our Tampa estate planning attorneys at the Nici Law Firm can sit down with you to try and make sure they are answered. Call us today at (239) 449-6150 or use our web form to set up a free consultation.