Because of current laws, estates in Florida are rarely taxed. As the Florida Department of Revenue points out, there is no state estate tax. Florida did away with its so-called “sponge” estate tax in 2005. Only if someone passed away prior to Dec. 31, 2004, is it necessary to file a Florida state estate tax return.

Certain estates may still be subject to the federal tax rate. The Internal Revenue Service notes that this year, the federal estate tax exemption is at $5.43 million. In other words, when someone’s cumulative assets are valued at less than that amount, no tax will be imposed. Estates valued at that limit or above will be subject to the tax rate, which tops out at 40 percent.

The representatives of the estates subject to the federal tax but not the state tax may need to file a form to ensure that the estate will not be taxed in Florida. The Florida Department of Revenue notes that there is an automatic tax lien placed on certain estates. To remove it, representatives will need to file the Affidavit of No Florida Estate Tax Due When Federal Return Is Required in each county in the state where the estate’s owner had real property.

There are several ways to minimize the federal estate tax due, such as the following:

  •        Place items in an AB trust, which leaves items to children but enables a spouse to use the trust.
  •        Make a tax-free gift of up to $14,000 a year per recipient.
  •        Pay for someone’s medical bills or tuition.
  •        Use charitable or life insurance trusts.

Understanding how estates are taxed can give Florida residents insight into making the most of their property. Using the proper tools can ensure that heirs, not the government, benefit from a decedent’s estate.

Luis E. Barreto