Florida Estate Tax Guide [Updated for 2021]

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Paul Sundin, CPA

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If you live in the state of Florida or have assets in the state of Florida, I have some good news for you. There is no Florida estate tax. Florida is one of 38 states that does not assess estate tax.

But don’t forget about the federal estate tax rules. In this guide, we will break down the estate tax rules and give you a few tips along the way.

Florida estate tax

It does not matter how large or small the estate is, no estate tax is levied. But don’t forget about the federal estate tax. If your estate is larger than the annual exemption amount, you could owe tax. 

But the good news is that it is only assessed in one out of every 100 estates. So most people won’t have to worry about it.

If you’re a resident of Florida and want to protect your family’s assets from the estate tax, it’s important to know the ins and outs of the state’s tax laws. The Internal Revenue Code governs this tax and can be found in Chapter 198 of the Florida Statutes.

However, the Florida estate taxes are separate from the federal estate tax. Therefore, if you’re thinking about leaving your property to your family, you should make sure that you do some estate planning.

The state of Florida does not assess inheritance and estate taxes, which means that no portion of the estate will be taxed by the state. The law also states that Floridians no longer have to pay state taxes on certain intangible goods. Unlike other states, Floridians no longer have to pay an estate tax on these items.

The estate tax in Florida is calculated based on the fair market value of the estate assets. This means that if your assets appreciate in value, you won’t have to worry about paying taxes on those values.

As long as your Florida estate tax payment exceeds the amount of your other state’s tax, you won’t be penalized. Regardless of how much you own in the state, you should keep an eye on the tax rates for your loved ones. There are many ways to make sure that your Florida estate taxes are paid properly.

If you’re planning to pass your assets on to your family, you may want to consider the estate tax. Although the state of Florida does not assess an inheritance tax or an estate levy, Florida doesn’t charge one.

As a result, no portion of what you leave to your family will go to the state. Furthermore, Floridians no longer have to pay state taxes on certain intangible goods, as the law requiring that they do so was repealed in 2007.

If you’re a Florida resident, your estate will be subject to state taxes. The state’s estate tax is collected on property acquired from the deceased’s estate, as well as on a gift from a loved one.

While it’s not a state tax, it is collected by the Internal Revenue Service as part of a unified gift and death tax. The resulting state taxes are imposed when you pass away, so you must prepare and pay them when they’re due.

The Florida estate tax is different from other states. In addition, it can be difficult to calculate the amount of taxes owed after a person dies. The federal estate tax, however, only applies to estates worth $11,580,000 for a single person or $23.1 million for a couple.

Its exemption used to be lower than half of this amount. However, the 2018 Tax Cuts & Jobs Act doubled the exemption to minimize the tax burden on wealthy families.

While the federal estate tax allows for a unified credit, the Florida estate tax does not. Depending on your individual circumstances, it is important to calculate the exact amount of the Florida estate tax when you transfer your property to your beneficiaries.

You must also pay taxes for taxes on your spouse’s side of the divorce if you’re in a relationship where the couple was married before the death. There’s no such thing as a “family” in the state of Georgia. The state is responsible for enforcing the state’s laws in its own way.

Unless you’re married to a Florida resident, you’ll have to pay the Florida estate tax. You don’t have to pay it if you’re not a resident of Florida, but if you’re a resident of another state, you should still file the return. If the state doesn’t collect the tax, you should not pay it at all. If you’re a non-resident, you’ll need to pay the federal estate taxes.

In Florida, the constitution protects residents and their heirs from state estate taxes. If you’re a resident, the state’s constitution doesn’t apply to you. Your heirs may have to pay the federal estate tax if you’re not a citizen of Florida.

Even if you’re a U.S. citizen, the Florida estate tax exemption amount is still $11.4 million. If your estate is worth less than this, you’ll need to pay the federal income tax, as well as any possible federal income taxes.

What is the estate tax and how is it collected?

Just like it sounds, estate taxes are assessed by the IRS on the net assets of a person who has recently passed away. But any state assessment and the federal assessment will allow you to exclude a certain amount. This is also called the exemption amount or lifetime credit.

Some people call it the death tax. Whatever you happen to call it, there is a lot of planning that needs to be done in order to limit any exposure to it. 

Estate tax is different from what is called the inheritance tax. This is an assessment on funds after they’ve been passed on to the beneficiaries. The federal government does not have an inheritance tax, but some states do.

Gift tax and inheritance tax

More good news for you. There is no inheritance tax in the state of Florida but you could be assessed inheritance tax based on assets owned in other states.

So if you live in a state that has an inheritance tax you may owe tax even though the assets were in the state of Florida. But again, most states have a minimum threshold and most people will fall below the threshold.

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Florida also has no gift tax. The federal government allows $15,000 a year to be gifted to any friend, relative or associate.

Federal estate tax

The federal state tax has been around for decades, but has changed constantly over the years. We also have some pending estate tax changes that are coming in the near future. Make sure you pay attention to changes at the federal level in addition to the state you reside in.

The federal estate tax is simple in nature, but complex in the calculation. You must calculate your gross estate and then you can deduct liabilities and debts, administrative expenses, and funeral and other costs. Whatever is remaining must be below the federal exemption amount. If it is, there is no filing requirement. But if not you must file a tax return and pay the estate tax.

The federal estate tax is imposed on the net fair market value of the deceased person’s estate. This includes the probate estate and non-probate assets such as life insurance, pension, and retirement assets and property owned in joint tenancy.

The probate estate is the property administered by the state probate court process to pay administrative expenses and distribute the property to creditors and beneficiaries of the decedent. The decedent’s will controls the distribution of probate property, or if none, by the state laws of intestacy and by the probate laws of the state or states in which the probate estate is administered.

Probate property may include real property (land, buildings) or personal property (stocks, bonds, etc.). The federal estate tax is imposed after the application of the unified credit. The Credit permits a person to transfer a certain amount tax-free. The estate tax is integrated with taxes on lifetime giving.

The estate tax is imposed upon the amount of the taxable estate and the amount of adjusted taxable gifts made during the decedent’s lifetime. Adjusted taxable gifts are gifts made by the decedent after December 31, 1976, other than gifts that are includable in the decedent’s gross estate. There are exclusions from taxable gifts, and these will be discussed below. The applicable credit amount is applied both to adjusted taxable gifts made during a lifetime and the taxable estate that passes at death.

How to Eliminate or Avoid the Florida Estate Tax

Since Florida does not levy an estate tax, you don’t have to worry much at the state level. But federal estate taxes are another issue. There are some strategies that you can use to minimize any estate tax liability. Make sure you address the following and discuss with your CPA:

  • Grantor Retained Annuity Trusts (GRATs) 
  • Crummey Trusts 
  • Charitable Remainder Trusts (CRUT)
  • Grantor Retained Income Trusts (GRIT)
  • Grantor Retained Unitrusts (GRUTs)
  • Qualified Terminable Interest Property (QTIP)
  • Intentionally Defective Grantor Trust (IDGT)
  • 529 Plans
  • Direct Medical and Tuition Payments 
  • Gifts Below Annual Exemption
  • Qualified Personal Residence Trusts (QPRTs) 
  • Minor Trusts 
  • Donor-Advised Funds
  • Irrevocable Life Insurance Trust (ILIT)
  • Special Valuation of Farms and Businesses
  • Family Limited Partnerships (FLPs)
  • Dynasty Trusts
  • Charitable Gift Annuity

Final Takeaway

Florida is a very popular place and thousands of Americans are moving to the state. It has a reputation for being a low tax state. There is no income tax so retirement income, Social Security, and business income is excluded. Retirees always do well in the state of Florida.

The state has a sales tax of 6%. This will be combine with local taxes to approximate 8%. This is consistent with most states. However, property taxes tend to be a little bit on the high side. Just make sure you compare the entire tax picture before you move to the state.

Since Florida has no estate tax, gift tax or inheritance tax, there isn’t much tax planning that needs to be done at the state level. But make sure you review your federal estate situation. A qualified CPA or estate attorney can assist you in these complex matters.

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