Federal Estate Taxes

Florida does not have an estate tax. However, federal estate tax may still be due on a Florida resident's estate, depending on the value of the gross estate. The gross estate includes trust assets, assets held in the decedent's name, jointly held property, accounts designating a beneficiary, life insurance, annuities, etc. The estate tax return (IRS form 706) is due 9 months after death.

Our elder law attorneys are available for consultation regarding wealth transfer and tax planning strategies that may minimize your heirs' estate tax burden.  Our Florida elder care attorneys will be happy to review your estate plan to make sure it is up-to-date with regard to tax planning, or help you establish one, so that your planning takes best advantage of current laws.   

Federal Estate Tax & Gift Tax Rates: Tax Reconciliation Act of 2001 

Update Jan. 1, 2010: It is widely anticipated that Congress will act this year to reinstate the federal estate tax, which was repealed for the year 2010 per the Tax Reconciliation Act of 2001. The exclusion and top tax rate will be set at that time. If the tax is reinstated, it may be made retroactive to Jan. 1, 2010. Congress also has not yet taken action with respect to the federal tax situation for 2011.

Federal estate and federal gift taxes are based on the Tax Reconciliation Act of 2001.  A summary of its provisions appear below. The Act is confusing to many because it contains a "sunset provision."  This means that all of the changes created by the 2001 law will be automatically repealed unless Congress affirmatively acts to retain those changes for the year 2011 and beyond.  As a result, the Act repeals the estate tax only with respect to persons dying in the calendar year 2010.  

Gift Tax:

Not repealed.

Generation Skipping Transfer Tax: 

The exemption from the GST tax will generally mirror the increasing applicable exclusion amounts for the estate tax, and the GST tax rate will decrease along with estate tax rates.  The GST tax will be repealed as of Jan. 1, 2010, unless Congress takes affirmative action to reinstate it.  Note however that direct gifts to grandchildren and more remote descendants after the GST tax repeal date will still be subject to gift tax.

Carryover Basis at Death: 

While many applaud the end of the estate tax, its repeal will likely present other tax challenges for heirs.  This is because the end of the estate tax will also eliminate the step up in basis heirs currently enjoy.  The step-up in basis means that an individual who inherits an asset receives an income tax basis in the asset equal to the fair market value of that asset on the decedent's date of death.  For example, if an individual purchased a share of stock for $10.00, and if upon his or her death the fair market value of the stock was $500.00, the decedent's heir would received the stock with a $500.00 income tax basis. If the heir then immediately sold the stock for $500.00, there would be no capital gains tax to be paid.  Under the provisions of the Tax Reconciliation, this step-up in basis will be eliminated for some larger estates.

Rate Schedule of Exclusion Amounts, Estate Tax and Gift Tax

The estate and generation skipping transfer tax will be repealed for the estates of persons dying in 2010. Until then, the amount a person can pass to heirs tax-free (i.e., the applicable "exclusion" amount) will be gradually increased, and the estate tax rates gradually decreased, During this phase-out period, the estate/gift tax still remains a significant one, ranging from 45% to 50%. The chart below summarizes these changes.