If you are planning your estate as someone with a high amount of assets, you will likely be concerned about estate taxes. While estate taxes at death are faced by less than 1% of the American population, these individuals must do what they can to minimize the taxes that their estate will be subject to.
Smart tactics to avoid estate taxes
An overview of federal estate tax laws
When a person passes away, the contents of their estate will be subject to a wide range of fees and procedures. State laws can determine whether an estate will be subject to estate or inheritance taxes. However, federal law also has a large impact on when estates have to pay federal tax and under what circumstances exemptions occur.
What is the death tax?
You may assume that the only escape from taxes is death, but for some residents of Florida and elsewhere, this is not always the case. People above a certain wealth bracket may have their estates taxed upon their death. It is important for you to understand if you are subject to the federal estate tax and if so, how it affects the inheritance you leave to your loved ones.
It's generally a good idea to review an estate plan
Florida residents may feel as if they don't need to update their estate plan because nothing has changed since they created it. However, it is unlikely that literally nothing has taken place in the years or decades since a will, trust or other document was first drafted. For example, the Tax Cuts and Jobs Act resulted in a significant change to the tax code, and that alone may be enough to review how an estate plan is currently structured.
Do you pay estate taxes?
As Florida resident who is also the recipient of an estate, you will need to handle the estate taxes. You may be wondering what taxes, if any, you are personally responsible for covering. Matters of estate taxes can be quite complex, after all.
Can you reduce estate taxes?
Florida residents who are the recipient of an estate will likely have to deal with some form of estate tax, whether it's a death tax or an inheritance tax. But are there ways that you can reduce said taxes? We at the Law Offices of Frye & Vasquez, P.L., will walk you through your options.
What is gross estate?
Many people in Florida do not need to worry about their survivors paying estate tax after they die because they do not possess property/assets of sufficient value. However, if you are someone whose family members may be subject to an estate tax after you are gone, you need to understand how the Internal Revenue Service classifies your assets.
How does the new tax law affect estate planning?
As of January 2019, the federal Tax Cuts and Jobs Act officially became law and introduced sweeping changes affecting taxpayers in Florida. Provisions of the law can affect your existing estate plan in many different ways, so much so that it may be necessary to update or revise the plan you have in place. The most obvious provision pertaining to your plan is the increased estate tax exemption, but, according to The CPA Journal, the new law also affects insurance, investment locations and other decisions related to financial planning.
Are estate taxes fair?
If your estate exceeds a certain value at the time of your death in Florida, your heirs will have to pay an estate tax on it. Some people claim that this is not fair because it taxes the assets twice. The argument goes that the decedent paid income tax on the money upon initially earning it, and therefore, it is not fair to tax it again when the heirs receive it.
Are life insurance benefits taxable?
When creating an estate plan, it is important to think of ways you can pass on your inheritance without having to pay a host of taxes on your assets and possessions. Once you pass on, all of the things you have worked hard to amass, including your life insurance benefits, are distributed to the beneficiaries that are named in your last will and testament. There are however, ways that taxes can affect the overall amount of the life insurance policy and what is left to distribute to beneficiaries.
