Florida residents no longer have to pay a Florida estate tax, but there are forms you may need to fill out. You should also be aware of federal estate taxes or estate taxes charged by another estate.
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This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.
What is the Florida estate tax?
There is no longer an inheritance tax in Florida. Prior to 2005, inheritance taxes were based on a federal tax credit that no longer exists.
What is the Florida estate tax lien?
Under Florida statute 198.22, there is an automatic lien against Florida estates for the purposes of ensuring that estate taxes are paid in full. Even though the removal of the federal credit means Florida residents won’t have a Florida estate tax liability, the lien still automatically applies to any Florida estate.
You must fill out a form to remove the lien.
- If the estate is not required to file a federal estate tax return, use Form DR-312 Affidavit of No Florida Estate Tax Due.
- If the estate is required to file a federal estate tax return, use Form DR-313 Affidavit of No Florida Estate Tax Due When Federal Return is Required.
Who has to file a federal estate tax return?
In 2022, an estate generally must file a tax return if it is worth $12,060,000 or more. The amount may include both the gross estate as well as previous gifts in excess of the gift tax exemption.
The federal estate tax exemption adjusts each year for inflation.
See this IRS guide for more information.
Can a Florida resident be liable for estate taxes in another state?
First, the fact that someone died in Florida doesn’t mean that they’re a Florida resident, even if they had a home there. This is something to pay close attention to if they were a snowbird or otherwise had multiple homes.
State residency is generally based on factors such as the address on their driver’s license, car registration, and voter registration. Other factors, such as the time they spent in each state per year, may also apply.
It’s important for the estate’s executor to confirm the decedent’s state of legal residence. If it’s not clear, you may need to ask an estate attorney.
Additionally, a legal Florida resident can still owe estate taxes in other states. This would often be because of owning a house, other real estate, business, or other assets in that state.
Check with each state where the person lived or owned assets for its estate tax requirements.
What other taxes does an estate need to pay?
The estate’s executor is also responsible for filing the decedent’s final income tax return and taking care of any other tax obligations.
One of the most important steps is to make sure that any property taxes are paid. In Florida, either the decedent or the estate needs to pay the property tax bill issued in the fall by March 31st. If they owned property in another state, that state might have a different deadline.
If the estate includes vehicles, don’t drive them until whoever is inheriting each vehicle has their own insurance coverage and transfers the registration into their name.
What estate planning strategies can help you reduce estate taxes?
For federal estate tax planning, the most typical move is to try to reduce the size of the taxable estate.
In terms of state estate taxes, if you have assets in multiple states, you may want to move assets to a state with low or no estate taxes like Florida.
For example, say you’re a resident of a northern state with high estate taxes, own a second home in Florida, and have a large investment portfolio. You may want to establish Florida residency and change your accounts so that they’re legally held in Florida. The goal would be to make sure your investment portfolio is subject to Florida estate tax and not the other state’s.
If you have real property, the situation is more difficult since you can’t move it from one state to another. If you want to keep it as-is, you may want to see if you would be under the estate tax exemption for the other state and not owe estate taxes. You might also want to look into gifting or selling it to a family member.
If you’re most concerned about reducing estate taxes and the house has no sentimental value, you may want to consider selling it and then investing the money or buying a Florida house.
Estate planning is complicated, and there are many potential moves you can make depending on your situation. If you want to reduce potential estate taxes, schedule a consultation with an estate planning lawyer or accountant.