Florida Estate Planning Methods for Reducing Your Estate Taxes
Estate tax is something that is commonly discussed in regard to Florida estate planning, but the fact is — estate tax is something only a limited number of people have to deal with. Estate tax laws are imposed by the federal government and only affect those parties with sizable estates. Currently, the exemption value is $11.4 million or less. This amount is triple the amount in 2009 of $3.5 million.
While the majority of people may not owe any federal estate tax, there may be some inheritance tax due depending on the state. These are to be paid by the heir or beneficiary who receives property from your estate. The amount owed will be based on that particular asset’s value. The recipient of the property is the one legally responsible for the inheritance tax, but it’s not uncommon to have people add a special provision for taxes in their estate plan. This provision states that the estate will pay the inheritance tax, so the beneficiary does not have to. Luckily, Florida does not impose any inheritance tax and an inheritance is not income to the beneficiary. But, if the beneficiary then goes and sells an inheritance asset, there can be tax on the gain or if a beneficiary receives income from an asset before actually receiving the asset, there might be income tax.
It’s important to plan ahead to ensure your family is not hit with an unexpected tax bill. When you retain an experienced West Palm Beach estate planning attorney, they will sit down with you and explain the best options for your particular situation. They are likely to recommend one or more of the following, which can help minimize the risk of estate taxes owed upon your death.
If an estate is large enough to trigger an estate tax, then gifting assets is one way to get around the estate tax. You can hand off portions of your estate to family members as gifts, up to a certain amount. For 2018, 2019, and 2020, the gift exemption amount has stayed the same — $15,000. This means you can give up to $15,000 to any one person without incurring taxes. It doubles to $30,000 if you are married and you file joint tax returns. The law doesn’t limit you on how many people you can give gifts to in a single year. There is an overall limit though of $11.4 million. This amount applies to both the gift tax and the estate tax simultaneously.
Make Charitable Donations
Another option is to donate part of your estate to a trusted charity of your choice. The best option is to create a charitable trust. There are two main types of charitable trusts — Charitable Lead Trusts (CLTs) and Charitable Remainder Trusts (CRTs). Your Florida estate planning attorney can walk you through the differences of each.
Irrevocable Life Insurance Trusts
Some people forget that life insurance proceeds are usually included in your estate, which can significantly increase your estate’s value. By removing the proceeds from your estate, it can lower the risk of owing estate taxes. Setting up an irrevocable life insurance trust transfers ownership to someone else. You cannot make changes to it, but the benefit is that your death benefits are not included in your taxable estate. This is something that needs to be done as soon as possible as the law says you have to count this as part of the estate if you die within three years of the transfer.
Contact a West Palm Beach Estate Planning Attorney
When you sit down with a knowledgeable West Palm Beach estate planning attorney, you’ll learn about more options in estate planning and how to avoid tax. Contact the Law Offices of Larry E. Bray, P.A. today to schedule an initial consultation.