Taxes And Estate Planning
News that a person has inherited a large sum of money or a valuable asset may bring some initial joy and gratitude, however, it may also cause the heir to be concerned about taxes and how much will have to be paid before they can receive the inheritance. While some people may decide to deduct the taxes from the inheritance, this can be a problem if someone inherits an asset that he does not want to sell in order to raise the taxes.
There are generally two kinds of taxes that can be levied on property that is to be inherited. These are estate taxes and inheritance taxes. There are other taxes that may arise when property is transferred from one person to another, but these two are implicated when a person dies and another receives the deceased’s property as a result.
Estate taxes are taxes that are levied on the assets you have at the time of your death that make up your estate. In Florida, there is no estate tax on assets when a person dies. This is great news for potential heirs because estate taxes can be high depending on the value of the estate. While Florida has no state estate tax, when a person dies, his estate is still taxed on the federal level. There are exemption thresholds, and if a person’s estate is under the threshold after deductions and credits are applied, the person’s estate won’t have to pay this tax.
Inheritance taxes are taxes that are paid by the person who receives assets as part of an inheritance. The difference between this and the estate tax is that the person receiving the property pays the taxes and not the estate of the deceased. Fortunately, once again, Florida does not have an inheritance tax, and so a person inheriting property in Florida does not have to be concerned about this. In addition, there is no federal inheritance tax.
Even though there is no estate tax or inheritance tax to worry about in Florida, other tax issues such as, income taxes, gift tax, and capital gains, may affect the way a person decides to transfer assets to future heirs. In some cases, when certain transfers are made during the grantor’s lifetime as gifts, it may increase the amount the grantee has to pay in taxes from what the amount would be if the same transfer was made after the grantor’s death. Additionally, a grantor making gifts during his lifetime may be liable for gift taxes if the cost of the gift is over the gift exclusion amount. Some gifts are excluded from the gift tax, for example, expenses like tuition or medical bills can be paid on behalf of someone else and not be taxable as gifts.
Contact Us for Legal Assistance
Figuring out how tax related issues will affect your estate or your heirs after your death is a vital component of estate planning. To figure out the best way to plan your estate so that your heirs are not burdened with taxes or probate issues after your passing, you should consult an estate planning attorney. Call the experienced estate planning attorneys at the Millhorn Elder Law Planning Group located in The Villages, Florida today.