Estate Tax Planning in Florida

Historically speaking, the federal estate tax is an excise tax levied on a person’s assets when he or she passes away. In actuality, it is neither a death tax nor an inheritance tax, but rather a transfer tax. There are three distinct aspects to federal estate taxes that comprise what is called the Unified Transfer Tax: Estate Taxes, Gift Taxes, and Generation-Skipping Transfer Taxes. Legal planning to avoid or minimize federal estate taxes is both a prudent and an important aspect of comprehensive estate planning.

In 2023, the federal estate tax exemption was increased dramatically, to $12,920,000 per person. Provided you own less than that amount of assets at the time of your death, you will pay no federal estate tax. However, in the event your assets are (or may be at the time of your passing) greater than this amount, it is important to discuss tax minimization strategies with your estate planning attorney. Because the federal estate tax limits are always subject to a reduction, it is also prudent to stay on top of the laws, and to stay in contact with your estate planning attorney.

Gift Taxes & Generation Skipping Transfer Tax Exemptions

Gift Tax

The unified credit concept ties the gift tax and the estate tax together. As mentioned, the lifetime gift and estate tax basic exclusion amount for 2023 is $12,920,000. Taxpayers use a unified estate and gift tax credit to offset the transfer taxes that would otherwise be paid on the transfer of assets, up to the exclusion amount of ,920,000. If a taxpayer uses his or her transfer tax credit by making lifetime gifts, the federal estate tax exemption at death is reduced by the amount of the unified credit that was used during life.

Note that annual exclusion gifts do not reduce the unified credit. The annual gift exclusion is currently $17,000. Married couples can combine their annual gift exclusion amounts to make tax-exempt gifts totaling $30,000 to as many individuals as they choose each year, without reducing their available unified credit.

Generation-Skipping Transfers

The generation-skipping transfer tax (GST) is levied in addition to gift or estate taxes on transfers made to a “skip person.”

A “skip person” is a person deemed to be two or more generations below the generation of the person making the gift to them. A trust will be considered a distribution to a skip person if no distributions from that trust can be made to “non-skip” persons.

For 2023, the generation-skipping tax exemption mirrors the federal estate tax exemption amount and tax rate ($12,920,000 million and 40%, respectively).

Florida Estate Taxes

Florida’s estate tax system is commonly referred to as a “pick up” tax because Florida picks up all or a portion of the credit for state death taxes allowed on the federal estate tax return (IRS Form 706 or 706NA). Since there is no longer a federal credit for state estate taxes on the federal estate tax return, there is no longer basis for the Florida estate tax. Florida has neither an estate tax (a tax paid by the estate) nor an inheritance tax (a tax paid by a recipient of a gift from an estate).

To stay informed about legislative developments and how they may affect your estate planning strategies, be sure to visit this website often, subscribe to our monthly e-newsletter, and follow my blog. If you are concerned about the tax liabilities created under your current estate plan, please call our office to schedule a consultation immediately.

Perlin Estate Planning & Probate assists clients with Estate Planning, Probate, Trust Administration, Elder Law, Long-Term Care Planning, Medicaid Planning, Veterans Benefits, Charitable Planning, Special Needs Planning, Estate Tax Planning, Business Succession Planning and Asset Protection in Miami, Coral Gables, Pinecrest, Miami Beach and the surrounding areas.

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