Are you a Florida resident? If so, you are lucky to live in a state that has no estate or inheritance tax. In fact, state statutes prohibit any kind of this tax from being levied. Floridians are, however, subject to the same federal estate tax as all other residents of the United States. These limits are currently so high, at $11.7 million for individuals and $23.4 million for married couples, that few Floridians need to worry about the tax. There is a bill in Congress, right now, that would lower these limits by approximately two-thirds each, to $3.5 million for individuals and $7 million for married couples, that would impact more Floridians. Let us review some estate planning tips Floridians need if they are nearing the proposed new federal estate tax limits.
1. Consider How Close You Are to the Proposed Limits. The proposed limits may be significantly lower than the current limits. They may or may not, however, end up impacting your estate if your estate size is hovering somewhere near the proposed limits. Assets can increase or decrease in value over time, and you may not know what the precise balance will be at the time of your death, particularly in stock-heavy assets. If you are concerned that your estate may just approach the limits, a gift-making approach may be less time-consuming and require less administration than creating a trust, which may be a better option if you are fairly certain your estate will exceed these new limits by a significant amount.
2. Make Gifts to Your Heirs Right Now. If your estate is just at the point where you might go over the federal estate tax exclusion limits, making annual gifts to your heirs can keep the balance below that limit. You can currently gift up to $15,000 per year from an individual to any given recipient, or $30,000 per year from a married couple to a given recipient. If you are married and you have three children and six grandchildren, you can gift up to $270,000 per year by making a $30,000 gift to each of the nine recipients. This means that after four years of such gifts, you will have removed over $1 million from your estate. If you may be approaching the tax limit by a number that is in the hundreds of thousands, rather than millions, this idea of giving your heirs their inheritance a little early is an easy approach.
3. Create a Trust. If you are fairly certain your estate size will significantly exceed the proposed estate tax limits, it may be the right time to look into an irrevocable trust, which can remove assets from your estate for tax purposes entirely. Consult with a qualified estate planning attorney in your local area to learn more.
For assistance in establishing your estate plan or updating your estate plan in a way that accounts for changes in the law and your personal circumstances, please reach out to our office to schedule an appointment.