Perhaps the primary purpose of estate planning is to protect your assets and preserve their value for future generations. Unfortunately, taxes can significantly reduce the value of your estate. Understanding how estate taxes will apply to your estate and what exemptions are available is vital to successful estate planning. South Florida estate tax planning attorney Steven Silverman can help you and your family develop an estate plan that minimizes your potential tax liabilities.
The Federal Estate Tax
Thankfully, Florida has no estate tax. For people with sizable estates, however, one of the greatest hazards to transferring your wealth is the federal estate tax, which will tax transfers at a rate of 40%. Your taxable estate will be determined by the total value of all assets in your estate less any debts or other liabilities. Fortunately, there are exemptions available.
The Marital Exemption
First, there is an unlimited marital deduction, meaning that spouses can transfer assets to each other tax-free with no limitation. As a result, your entire estate will pass tax-free if your spouse is the sole heir of your estate.
The Estate Tax Exemption
Second, there is an $11.58 million estate tax exemption for individuals and a $23.16 million exemption for married couples, amounts which are adjusted annually for inflation. The exemption essentially means that if your estate is valued at less than $11.58 million, it will pass to your heirs with no federal estate tax. If it is valued at more than $11.58, any amount in excess of the exemption will be taxed at 40%.
The Gift Tax Exemption
There is no separate or additional Florida gift tax. In 2021 there is an annual gift tax exclusion of $15,000, which applies to each person you make a gift to. If you give more than the annual exclusion amount to a particular person, you begin to reduce your lifetime gift and estate tax exemption. In most cases, you won’t pay a gift tax unless you exceed your lifetime gift and tax exemption.
The gift tax exemption is a very powerful tool for reducing your tax liability and careful estate planning strategy is important in order to maximize the value of these exemptions and minimize the potential tax consequences. An experienced estate tax planning attorney can develop a fully-customized estate plan that addresses these issues and preserve the value of your estate for the next generation.
Another tool that is available to married spouses is called “portability.” This allows one spouse to take advantage of another spouse’s unused estate tax exemption, thereby increasing the amount of their own exemption and reducing their taxable estate. For example, let’s say that you die and transfer your entire estate to your wife, leaving an unused exemption of approximately $3 million. Your wife’s estate can claim that $3 million unused exemption when she passes away in addition to any other exemptions her estate may be entitled to claim.
Work with South Florida Estate Tax Planning Attorney Steven Silverman
Estate taxes are complicated, and unfortunately, can have a significant impact on the value of your estate. However, careful estate planning can minimize your tax liability and protect the value of the estate you worked so hard to build. To discuss how our firm can help you protect your wealth, call us today at 305-666-6111 or email us to schedule an appointment.