Managing an estate comes with legal obligations that must be adhered to within the bound and scope of the law. If you have been chosen to represent an estate, you need to pay special attention to Palm City federal estate tax. While Florida does not have estate taxes, you still have to pay federal taxes. To ensure that you have done so properly, reach out to an experienced attorney today.
Residents in Martin County may be relieved to find that Florida does not have a state estate tax. However, there is a federal estate tax that may apply though to estates larger than $12,920,000 (as of 2023). This exemption amount can be doubled for a married couple due to portability, meaning that a married couple may potentially exempt up to $25,840,000 in estate assets. Additionally, those figures may be diminished if a client has made large lifetime gifts. Those limits are set to fall in 2026 to a projected $6 million to $7 million per person exemption.
For residents inquiring of the rate of tax, the federal tax rate on estates in Palm City is 40%.
Form 706 is an estate tax return filed with the federal government. It is required to be filed for all taxable estates. In addition, it is generally recommended that Form 706 be filed if the decedent was survived by a spouse whose estate could come close to the federal estate tax exemption amount upon his or her death.
Any financial asset that the client owned during life, including interest in any jointly held accounts or jointly held property and life insurance policies, must be listed on the estate tax return. Those assets are typically valued as of the date of death but it is sometimes possible to use an alternate evaluation date that is six months after the decedent’s date of death.
Importantly, a federal estate tax return Form 706 is due nine months after the decedent’s date of death but a request for a six-month extension is possible. Documents that need to be submitted with the estate tax return include a death certificate and certified copy of the will (if any), as well as copies of appraisals.
A personal representative may also need to file a form 1040 individual income tax return for the period of time covering January 1 in the year of the decedent’s date of death up until the decedent’s date of death. In addition, Form 1041 may need to be filed covering the period of time from date of death forward to end of the fiscal or calendar year. If the estate is open for more than a year, then a subsequent Form 1041 may need to be filed.
One important item to keep in mind regarding estate taxes is a concept known as an unlimited marital deduction. What that means is that a person may receive a deduction for estate tax purposes for any money left to a surviving spouse provided that it is has been done in compliance with federal tax law. Another concept of which to be aware involves the concept of adjusted basis and the idea that there is a full step-up in adjusted basis on a decedent’s date of death. For example, if the decedent bought stock in a company for $5/share, and that stock appreciated to $100/share by the date of death, there is no capital gains tax owed on the $95/share increase in stock value. This is crucial for a personal representative to understand when addressing estate taxes in Palm City.
Outside of estate taxes, it is extremely important to also consider family dynamics and the preservation of family harmony. Not everyone in the family gets along well together. Those dynamics must be taken into account when naming fiduciaries as part of an estate plan. In addition, the concept of asset protection for beneficiaries should be discussed when planning an estate.
There are several ways to mitigate the impact of estate taxes. One is through proper use of the unlimited marital deduction. Another is by maximizing exempt assets left to beneficiaries so that those assets are not taxed again when distributed to future generations. Charitable giving is another important concept that should be explored when looking to mitigate estate taxes. Finally, lifetime giving through advanced planning techniques may be able to lower the size of the taxable estate.
Fulfilling the fiduciary duties left to you by a decedent is hard work, especially if you are not familiar with the laws regarding estates in Martin County. Instead of hoping for an ideal outcome and that you have addressed any and all issues, consider working with an attorney who can assist with Palm City estate taxes. Reach out today.