Managing estate taxes in Florida
Florida does not have an estate or inheritance tax, but wealthy residents of the Sunshine State may want to do some advance planning in order to reduce or eliminate their heirs’ exposure to the federal estate tax. There are several ways that those who are concerned about losing some of their fortunes to the authorities can reduce their overall burden. The federal estate tax exemption in 2016 is set at $5.45 million.
People can give all of their money to their U.S. citizen spouse without triggering any estate tax event. In addition, the unused portion of the tax exemption can be carried over to a surviving spouse, although an affirmative election must be made. Another way of reducing an estate is by making gifts during lifetime, as the federal gift tax laws allow gifts of up to $14,000 per recipient each year without incurring any gift tax.
Many states do in fact have an estate tax, and exemptions are often far lower than the federal one. Moving from a state that has one, such as Connecticut or New York, to a state that does not, such as Florida, could result in a considerable amount of savings.
There are several other ways of reducing the size of a taxable estate that an attorney who has experience in these types of estate planning matters can recommend. Putting a life insurance policy into an irrevocable life insurance trust is one, but such a strategy can be expensive to implement. Gifts during one’s lifetime to qualifying non-profit organizations is another.