Florida brings many new residents who want to take advantage of the weather and natural beauty. In addition, newcomers benefit from our tax structure that protects their estate when the time comes to pass it down. However, ensuring your affairs are managed correctly requires skilled guidance from an Orlando estate planning lawyer.
The Orlando Law Group is here to provide experienced legal advice for wills, trusts, and other critical elements of estate planning. While your heirs may get a break on state taxes, they will still need help from an Orlando federal estate tax lawyer to meet the federal tax requirements. To learn more about how to prepare your legacy, contact us for a free consultation today.
Does Florida have an estate tax?
Florida is one of many states that does not have an estate tax. While this is great news and one of the many reasons people move here, it does not mean your heirs will pay no taxes when you pass away.
They will still need to settle federal estate taxes. Estate taxes are paid on the total value of the estate, including property, cash, and other assets. The amount is taken out before your heirs receive their portions. However, estate taxes only apply to much larger values. For example, in 2023, the estate must be valued at $12.92 million or more to trigger federal estate taxes.
Florida inheritance and gift tax
While a few states charge heirs inheritance taxes on the property they inherit, Florida is not one of those. Spouses, children, stepchildren, parents, and other close relatives are exempt. There is also no federal inheritance tax. So overall, Florida is an excellent state for reducing taxes at the end of life and reducing the financial burden your family must bear at your death.
As far as gift tax goes, there is no gift tax in Florida. The 2017 Tax Cuts and Jobs Act (TCJA) doubled the allowable federal limit for gifts and estate valuations. The gift limit currently is $17,000 per person, which is added to a lifetime limit of $12.92 million given by one person to any one individual. This is also the valuation limit for estates before they are subject to federal estate tax. However, on January 1, 2026, the lifetime estate and gift tax exemptions will be cut in half and adjusted for inflation.
Understanding how this might affect your personal estate plans, as well as the tax burden of your heirs, is crucial to protect your holdings. You may wish to discuss creating trusts and other documents to transfer assets prior to your death with a skilled estate planning lawyer in Orlando.
|Resource: Is the inheritance I received taxable? (IRS)|
History of estate tax in Florida
Prior to December 31, 2004, Florida did have an estate tax that was based on federal law, allowing a credit for state death taxes on federal tax returns. When the federal government changed that credit to a deduction, that meant there was no longer a Florida estate tax since it was based on the federal credit.
For individuals who died after January 1, 2005, their estates would no longer have state estate taxes due and would only need to pay federal estate taxes if they met the $12.92 million threshold. Properties, retirement holdings, and other assets that go through probate court may still be subject to some taxes. The executor of an estate is responsible for ensuring they submit a tax return for the estate, which can be done with help from an Orlando federal estate tax attorney.
The current estate and gift limit of $12.92 million will “sunset” or end at the beginning of 2026, reverting back to the 2017 levels of around $5 million. This will be adjusted for inflation, so the final amount may vary somewhat.
How can an Orlando federal estate tax lawyer help me?
While there are fewer taxes to pay in Florida, that does not mean the tax burden is lower or can be overlooked. There are many federal taxes that will be owed throughout your lifetime and at your death. Working with an experienced and creative federal estate tax lawyer in Orlando can reduce what you and your heirs have to pay.
You can make use of tools such as trusts, gifts, and other financial instruments to plan the distribution of your estate. These can vastly decrease both the amount of taxes you pay on your estate and what your beneficiaries will face. However, these tools can be complicated, and after your passing, it is not the time to discover they were not used correctly.
While many people dislike considering their own mortality, one of the best ways to protect your family and your legacy is to take time to meet with an estate planning attorney. They can help you put all the documents in place and figure out what burden federal estate taxes will place on your assets.
What is the estate tax exemption in Florida?
If you wonder, “How much is estate tax in Florida?” the good news is that there is none. As a result, there is no exemption needed for state-level taxes. However, you can use many techniques to manage the federal tax burden.
For example, married couples may split their gifts to others. When they do so, they can gift an asset or cash worth up to $34,000 to one person, which combines their individual limits of $17,000 per person. Creating an irrevocable trust can also transfer assets with minimal tax liability and avoid probate.
Estate tax exemptions
Some of the most common approaches involve the use of spousal gifts, gifts to charitable organizations, medical gifts, and educational gifts to reduce what qualifies under the $12.92 million limit.
Transfers between spouses
Giving money, property, or other assets to your spouse who is a U.S. citizen is usually not taxed as a gift under federal law. The property must be given directly to the spouse, and there could be tax issues if they are not a lawful citizen of the U.S.
Gifts to charitable organizations
Transferring assets to charitable organizations is another way to avoid gift taxes. This can be done through direct gifting or setting up charitable trusts. These trusts allow the grantor to reduce their taxable personal income and benefit others. In many cases, the trusts will be funded so they can continue after the death of their benefactor.
If you use part of your estate to directly pay medical providers for the medical care of another person, that money is exempt from the gift tax limit. It cannot be paid to the recipient but must be given to the facility or doctor who supplied the care.
Similar to medical expenses, you can pay another person’s educational expenses and avoid gift taxes. The money must be given directly to the institution. This can aid a student with paying for tuition, housing, and books.
Commonly asked questions about estate tax in Florida
As accomplished and experienced federal estate tax attorneys in Orlando, we work with clients every day who need help managing their estate plans, wills, and trusts. They ask many of the same questions. If you have other concerns about estate tax in Florida, contact us to arrange a free consultation to learn more.
Do beneficiaries pay taxes on estate distributions?
In Florida, beneficiaries do not pay state taxes on estate distributions. Federal taxes are owed only if the estate value is greater than $12.92 million as of 2023, and this is generally paid by the estate itself prior to the distribution of the assets.
The only exception is when a beneficiary inherits an Individual Retirement Account (IRA). The Internal Revenue Service (IRS) will require them to take minimum yearly distributions from the account.
What’s the difference between an estate tax and an inheritance tax?
An estate tax is paid by the estate as an entity on all financial holdings, property, and other assets before any distributions occur. This is part of the executor’s duties, along with settling any claims against the estate.
An inheritance tax is paid by each inheritor on the value of the property or asset they received. This occurs after the item is transferred to their name.
Remember that Florida does not have estate taxes or inheritance taxes, although beneficiaries are still subject to federal estate tax laws.
Our Orlando federal estate tax lawyers are ready to help
If you are struggling to understand the best options for managing your current holdings and how to pass them down to others, you need to meet with a qualified and knowledgeable Orlando federal estate tax lawyer. Instead of wondering if you have taken advantage of every option to save yourself and your heirs a financial burden, you can rest easy knowing it is all managed.
The Orlando Law Group is ready to listen to your needs and discuss strategies that will fit your circumstances. We can educate you about the taxes you may owe and how to minimize them. We can also build an estate plan that can change as your needs do, allowing for marriage, divorce, new children and grandchildren, and other aspects of your life.
We offer integrity, skill, and years of experience helping individuals like you plan for their family’s future and inheritance. We work with financial and other experts to ensure you have the most robust and effective estate plan in place for your peace of mind. Contact us by calling (407) 512-4394 or by using our online form to schedule a free consultation today.
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