Did you know that, although Florida does not have its own gift tax, inheritance tax, or estate tax, the federal government does? It can be very important to be aware of those taxes in your estate planning. Let us review three tips to keep in mind and discuss with your estate planning attorney because your estate may be one impacted by those taxes.
1. Take advantage of irrevocable trusts. Trusts can have many estate planning and asset protection benefits, but an irrevocable trust, one that can only be changed in limited circumstances, can have the added benefit of reducing the value of an estate for estate tax purposes. An experienced estate planning attorney can help you design an irrevocable trust to suit your estate planning and tax needs.
2. Use gifts to reduce the value of your estate. Gifting can be a more informal estate planning mechanism that allows you to reduce the value of your estate and avoid the estate tax. There are annual and lifetime limits for the amount you can gift before implicating taxes, but it can be worth consulting your estate planning attorney to see if your estate plan should include strategic gifting to your beneficiaries throughout your lifetime.
3. Tax laws are changing. One principle you should keep in mind in your estate planning is that tax laws may change. Although the current estate tax is only applicable to estates valued at over $11 million, President Joe Biden has indicated that he favors reducing the limit to $5 million, which is less than half of the current exemption. The President has also suggested that he would support increasing the estate tax rate so that estates subject to the tax will pay the tax at a higher rate. It can be important to keep in regular contact with your estate planning attorney so that you can make ample plans if your estate becomes subject to these tax changes.
For assistance in addressing potential estate tax implications and related issues, please contact our office to set up an appointment.