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Avoiding estate and gift taxes

Florida residents who have substantial assets might need to navigate the federal estate and gift tax laws. While these laws will not impact many people, they can affect the estates of very wealthy individuals.

The Tax Cuts and Jobs Act was passed in 2017. Part of that law included an increase of the federal estate tax exemption, and the exemption is adjusted annually for inflation. Currently, the exemption is $11.58 million per person. For married couples, that means their federal exemption is double that amount. The marital deduction can be transferred to a U.S. citizen spouse tax-free. While several states have a separate estate tax, Florida does not. This means that residents of Florida whose assets are located in the state will only need to concern themselves with the federal estate tax exemption.

Very wealthy individuals whose estates exceed the federal exemption limit might do a few things to fit within the exemption. If they do not, transferring their estates to their children may come with a hefty tax bill of up to a maximum of 40%. One way to reduce the size of the estate is to make gifts. However, there is an annual gift limit of $15,000 per recipient without triggering the gift tax. Charitable contributions, gifts to political organizations, and paying the educational expenses of others are all ways to reduce the size of an estate without triggering taxes.

While most people will not have to worry about the estate tax, those with very large holdings might benefit from talking to experienced estate planning lawyers who may explain various strategies for shielding their clients' estates from the estate and gift taxes. They might help their clients establish trusts, plan gifts and charitable contributions, and engage in other actions to protect their clients' interests.

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