For instance, right now, you can convert a traditional IRA to a Roth IRA at a discount thanks to the low market rates. You may also want to consider gifting property that has taken a hit thanks to the downturn. For example, if you give away $15,000 of property as a gift, you won’t need to pay taxes, and they could see that grow exponentially once the markets recover. Essentially, you’re giving a much larger gift, even though it’s minimized at the moment.

Did you know that you can give $15,000 worth of gifts to anyone? You can give a tax-free gift to your children, friends, relatives or others without worrying about it influencing your estate negatively. Make a note only to give away stocks or assets with a gain in value.

This is a good time to move money out of your estate, if you need to. You may also want to consider giving away low-interest loans to relatives or loved ones you can trust to repay you. You may end up with gains in the future, but for now, you’ve lowered the value of your estate.

Planning for estate taxes can get tricky. Your attorney can help you look into other options if you want to reduce what you owe and prevent being charged an estate tax.

The federal government does not have an inheritance tax. The IRS does not consider most inheritances as income, except for withdrawals made from retirement accounts such as Individual Retirement Accounts (IRAs) and 401(k)s. The other exception is if someone inherits assets or property that generates interest or income. The income or interest generated from that transfer of property would be considered taxable income.

As of 2019, 6 states imposed inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland has both an estate and inheritance tax. The same was true for New Jersey until the estate tax was repealed in 2018. The inheritance tax is subject to certain thresholds. For example, in Iowa, there is no inheritance tax on estates with a value of less than $25,000. In Maryland, there is no inheritance tax on estates of less than $30,000.

A Florida resident generally isn’t subject to paying anything unless the decedent previously lived in a state that had an inheritance tax. An heir may have to pay something if they receive real property that is physically located in an inheritance tax state though.

Whether someone is subject to an inheritance tax may also depend on an heir’s relationship with the decedent. None of the aforementioned six states have inheritance taxes for surviving spouses or domestic partners. Children and grandchildren are exempt from the inheritance tax, except for in Nebraska and Pennsylvania. The inheritance tax ranges from 0% to 18% depending on the state and the value of the estate.

Inheritance tax laws can be quite tricky. It’s easy for you not to realize that you owe taxes or for you to pay more or less than you should. An estate tax attorney in Miami can aid you in identifying all the taxes that you need to pay so that you remain in compliance with all applicable laws.

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.

Many estates must file a federal estate tax return. When this is the case, it’s common for the estate to be frozen until the Internal Revenue Service (IRS) has taken the time to examine and process the tax return. If you are waiting for this process to be completed, it may be helpful for you to understand the typical timeline.

The timeline for processing IRS Form 706

It is best to file IRS Form 706 as soon as possible after the decedent’s death to maximize the efficiency of the process. The deadline to file the form is set to nine months after the date of death of the decedent. If the form is not filed within this time frame, it will be necessary to request a six-month extension. This can be done by making an application for extension using IRS Form 4768, Application for Extension of Time to File Estate Tax Return.

When IRS Form 706 is filed, it will take six to eight weeks for the IRS to process it. After this, it will take six to nine months for the IRS to issue a closing letter or to announce that an audit will take place.

If you are the executor of an estate, you should have a thorough understanding of issues relating to estate tax.

There are many ways to use estate planning strategies creatively so that your estate will not be subject to estate taxes. The following are some common strategies that estate planners implement when doing this.

Make donations to charities

When a person sets up a charitable trust, the assets held within will be exempt from taxes. Deciding to create a charitable trust has many benefits. Not only will you be able to avoid estate taxes, but you will also be able to take pleasure in knowing that a portion of your wealth will be used to help others for years to come.

Set up an irrevocable life insurance trust

Life insurance can be taxable after the insurance holder passes away. However, if you set up an irrevocable life insurance trust, you are essentially transferring the ownership over to another person, thereby avoiding its taxability.

Make gifts during your lifetime

Giving gifts can be a great pleasure. It is also possible to do without incurring taxes up to a certain amount. Therefore, you may want to consider giving gifts to your loved ones or charities during your lifetime.

If you want to minimize the taxes that your estate will be subject to at the end of your lifetime, you should make sure to incorporate a variety of strategies into your estate plan.

If you are involved in processing an estate on behalf of a loved one or if you are currently planning your own estate, it is important to have a good understanding of the current laws and financial limits regarding federal estate taxes.

What is the gross estate limit for the estate tax?

It is paramount that the gross estate is calculated first followed by deducting exemptions, since this can indicate whether the estate will be subject to estate taxes. After deductions of applicable exemptions, a person’s estate can be exempt from estate tax is it is under the value of $11,400,000 in 2019. This is a significant increase from 2017, when the estate tax limit was $5,490,000.

What are the estate tax exemptions?

The marital deduction is the main form of additional estate tax exemptions. It’s possible for a deceased person’s estate to pass tax-free to a surviving spouse. This can be done only if the spouse is a U.S. citizen. Other possible deductions include administrative expenses and funeral costs. Claims made against the state can also be exempt.

If you have further questions about estate tax exemptions and filing estate tax returns in Florida, you should consider both federal laws and state laws. Florida does not currently collect estate tax or inheritance tax.

According to Forbes, this one-time tax is also called the death tax, for obvious reasons. As of 2019, only estates worth more than $11.4 million are subject to the federal estate tax. However, in 2026, this drops back to $5 million. If your property and assets are worth more than $11.4 million now or $5 million after January 2026, your estate may be taxed between 18% and 40% of the overage of the exemption amount, due nine months after the date of your death.

Each asset you own is included in calculating your potential estate tax, including jewelry, artwork, furniture, real estate, stocks, bonds and bank accounts. You may avoid your loved ones having to pay the tax by gifting a large sum of your estate while you are alive. There are also numerous deductions available that can reduce this burden.

It is also reassuring to learn that Florida has no additional state estate tax, which many other states have. However, if you own property in another state, it may be subject to that state’s estate tax. This can be a complex area of law; therefore, this information should not replace the advice of a lawyer.

It is also important to consider that life events such as a marriage or divorce could have a significant impact on an estate plan. The same could be true in the event of a birth or death in the family. Individuals who have seen their net worth go up over the last several years may also want to review their estate plan to make sure that this wealth has been accounted for.

In addition to changes in federal tax laws, changes to a state’s tax laws could have an impact on an estate plan, although Florida doesn’t have a separate estate tax. However, these changes could be made without a lot of fanfare, which means that an individual may not know about them. Therefore, it is important to have regular meetings with financial advisers and other estate planning professionals to stay abreast of these potentially significant developments.

Those who want to keep their estate tax bill to a minimum may want to seek legal help when constructing an estate plan. Working with an attorney may also make it easier to review the plan as life events or tax code changes occur. An attorney may suggest creating a trust, using beneficiary designations or taking other steps to minimize estate taxes owed. Following this advice may allow more money to be distributed to beneficiaries.

FindLaw breaks estate taxes down into the taxes that will be paid by you, and ones that will be paid by the estate. Some states have inheritance tax laws. The inheritance tax is what you, the recipient of the state, will be paying. However, exemptions to this tax exist. Additionally, the rates can possibly vary depending on who inherited the property. For example, a spouse will typically have a lower rate. It should also be noted that inheritance taxes are being phased out in many states.

On the other hand, state death or estate taxes are typically covered by the estate itself. The rate can once again vary depending on who receives the property. It typically favors spouses or direct relatives as opposed to distant relatives. Like inheritance taxes, some states are also phasing this out.

Finally, there are pickup taxes. This occurs when the tax is filed, but the money is pulled out of what the estate is already paying to the IRS. This often is the case even in states with inheritance or estate taxes. This allows the recipient of an estate to not have to pay more than what the government is already receiving.

Due to the complex nature of tax laws and the potential severe penalties associated with filing incorrectly, you may want to seek out an attorney’s help during this process.

There are, in fact, legal ways that you can reduce estate taxes. A couple of them involve transferring assets as gifts. One type of transfer is known as a uniform transfer to minors, in which the gift is given to whoever is the child’s custodian. They will then use it on the child’s behalf until the child is of legal age and able to take over the assets for themselves.

Another type is known as a lifetime gift to children and grandchildren. Annual gifts of up to $12,000 can be given to your children and/or grandchildren without incurring any taxes. This is limited by person rather than by household, meaning multiple people in one house can be receiving $12,000 in untaxed gifts.

Marital transfers allow you to avoid taxes as well. Only spouses who are noncitizens will be taxed. Estate taxes must still be paid by the spouse on the taxable estate, however, meaning the taxes are simply deferred rather than eliminated.

Family limited partnerships are available if you have a business in the family and intend to pass it on to the next generation. This allows the partnership to be taxed at the children’s lower rates. There are other options for reducing estate tax as well, which you can view on the web page linked here.