“How can I avoid death taxes?” “Are there any death tax benefits for living in Florida?”
We hear these questions frequently when we are discussing estate planning with our clients here in the Tampa area. An estate plan may consist of a Last Will and Testament and/or a Revocable Living Trust. It also includes other very important documents such as Florida-specific Durable Powers of Attorney and advances directives for medical decision making, such as the Living Will and Designation of Health Care Surrogates.
When it comes to death taxes, here’s the good news… most of our clients do not have to fear any type of estate taxes (“death tax”) which could drastically reduce the wealth being inherited by their children upon their demise.
In general, the federal estate tax is a tax on the transfer of property upon an individual’s demise. This tax is imposed on taxable estates of U.S. citizens. As of 2017, the maximum tax rate for estates over $5,490,000 is 40%. In other words, an individual can pass up to a total of $5.49 million dollars to his or her beneficiaries without paying any federal estate tax. A married couple can pass along twice as much.
Good news for most of us living in Tampa as well as the rest of Florida. Florida does not have a separate estate tax, a tax assessed against the estate, or a separate inheritance tax, a tax assessed against the individual inheriting the funds. The only exception to the inheritance tax is if an individual inherits an Individual Retirement Account (“IRA”), which is subject to income tax, but not any sort of death tax.
With the high federal estate tax exclusion and no estate tax in Florida, this has made tax planning for our client’s eventual demise much easier. However, even though the IRS may not gobble up your estate with estate taxes, this doesn’t mean you aren’t rich enough to need estate planning. We suggest that all individuals, regardless of net worth, contemplate and establish an estate plan to make certain their desires are fulfilled. If you want to preserve your estate from erosion from a long term illness, then estate planning can accomplish this objective too. Let us help you if you live here in Tampa or any of the surrounding areas.