Do I Owe Taxes on Inheritance?

Attorneys' advice on how to avoid tax burdens after the death of a loved one

By

“Nothing is certain but death and taxes,” so they say. But if you live in Florida, it’s very unlikely you’ll end up paying death taxes. 
 
Florida is one of 32 states with no estate or inheritance tax, so estates are taxed only under federal law. Florida’s constitution actually prohibits the state from collecting an estate tax—or an income tax, for that matter.  
 
And last year, Congress doubled the federal estate-tax exemption, from $5.6 million for an individual and $11.2 million for a couple to $11.18 million for an individual and $22.4 million for a couple, beginning this year through Jan. 1, 2026. That means you may now leave or give away up to $11.18 million without owing any federal estate tax.
 
“The estate tax will apply to fewer people now,” says estate planning and probate shareholder Mary Karr at Gunster in Miami. 
 
Only an estimated 1,700 estates per year across the country—fewer than 0.1 percent of all deaths—will owe federal estate taxes under the new law, according to the nonpartisan Tax Policy Center in D.C.
 
Some Floridians will have to pay up. The 2017 Forbes billionaire list included 51 Floridians, mostly in South Florida.
 
“There are not many couples in Central Florida that are worth more than $22 million,” notes estate planning and probate attorney Mary Merrell Bailey, managing partner of Your Caring Law Firm in Maitland.
 
Things can be trickier for those who live in Florida part time. For anyone living part of the time in one of the 18 states (and D.C.) with an estate and/or inheritance tax, it may have to be proven they were really a Florida resident to avoid paying the taxes. 
 
There can be a fight between the heirs and the other state. So the state of Connecticut—which has an estate tax—may argue that the deceased person was a resident of that state, says Frank T. Adams, estate planning and probate shareholder with Dunwody White & Landon in Coral Gables. Authorities look at such factors as where you got your driver’s license and mail and went to the doctor.
 
Adams adds, “If they own real property in those other states, they still may owe taxes. If I own real estate in New York and I’ve never lived in New York, I can still owe New York taxes.”
 
Despite the larger federal exemption for estate taxes, “many traditional estate tax planning techniques still apply. They just apply to a smaller number of people,” Karr says.
 
Attorneys have to consider, “If someone has $9 million, do we worry about the estate tax?” Adams says. Planning would be different for a 50-year-old, with more ability to earn money, than a 90-year-old. 
 
In 2026, wealthy Floridians might need their estate plans tweaked unless Congress renews the higher exemptions. “When the law starts to sunset,” Bailey says, “we might have to do a lot of changes.” 

Florida

For those with wealth above the exemption level, here are some strategies for avoiding taxes:
 
Lifetime gifting
As of this year, the amount of tax-free money you can give a family member each year goes from $14,000 to $15,000. Say an older couple has six married children and 17 grandchildren. They can each give $15,000 tax-free in 2018 to every family member, or close to $900,000 overall. They can also pay private school or college tuition, as well as their own medical bills and health insurance premiums, Adams says. He adds that a couple or individual “has to be comfortable that they won’t outspend or outlive their money.” 
 
Grantor-retained annuity trust (GRAT)
A person who creates this type of trust can transfer assets into the GRAT for a certain period of time and receive annual annuity payments. When the GRAT ends, if the original assets have outperformed the payments, the remainder passes to the beneficiaries.
 
Credit shelter trust
This type of trust is not funded until a person dies. Assets placed in these trusts at death can go to the surviving spouse and descendants. They are not subject to the estate tax, and their appreciation also may not be subject to estate taxation.

Other Featured Articles

Finding a Personal Injury Attorney in New York City

Painless tips to incorporate into your search

 

Can a Business Provide Your Private Information to ICE?

Yes, and though it’s against the law, illegal immigrants in Washington may still be deported

 

What is a 529 Plan?

Tax advantages help maximize savings for college

 

See More Legal Issue Articles »

Share:
Page Generated: 0.22551918029785 sec