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Planning to avoid estate taxes

On Behalf of | Jun 8, 2020 | Firm News |

If asked, most people in Pompano Beach would likely say that the estate planning process simply involves detailing how they want their assets dispersed. Yet there is a whole other aspect that needs consideration: limiting an estate’s liabilities.

One works for literally their entire life to accumulate assets to one day benefit their heirs. Liabilities levied against an estate limit the amount one has earmarked to pass on to beneficiaries. While one may think it possible to avoid expenses such as probate and outstanding debts, they may also accept the perceived inevitability of estate taxes.

Estate tax avoidance

Yet that may not be the case. Florida does not impose a state estate tax in its residents, and their is the possibility of avoiding having to pay federal estate taxes. This is due to the federal government establishing an estate tax threshold (an amount which, if an estate’s total taxable value is below it, allows estates to avoid taxes). Per Forbes Magazine, that amount for 2020 is $11.58 million.

Taking advantage of estate tax portability

Married couples also have the option of combining their estate tax exemption amounts to protect up to $23.16 million from tax. In order to take advantage of this option (known as “portability”), one must also utilize another tax benefit: the unlimited marital deduction. Leaving the entirety of one’s estate to their spouse upon their death allows one to protect their entire estate tax exemption allowance.

The Internal Revenue Service states that next the decedent’s surviving spouse must file an estate tax return within nine months of their death (a six-month extension is available if necessary) electing portability. This then rolls their deceased spouse’s unused estate tax exemption into their own.