One of the main goals of the estate planning process is to preserve as much of your personal wealth as possible to pass on to your heirs in Florida. Yet despite your best efforts, the perception is that there is little that you can do to avoid certain estate administration expenses. One of these is estate taxes.
Yet is that perception a reality? Florida does not impose a local estate tax (nor does it levy an inheritance tax against those who benefit from another’s estate). This means that the only potential tax burden your estate may face comes from the federal level. Yet you may even limit (or avoid) that liability with the right plan in place.
Reviewing the federal estate tax exemption
Avoiding estate taxes becomes a possibility thanks to the federal estate tax exemption. According to information shared by the Internal Revenue Service, the exemption threshold for 2021 is $11.7 million. This elevated amount means that very few states will actually face estate taxes.
Yet even if the total taxable value of your estate approaches the threshold amount, you could potentially double your exemption by taking advantage of estate tax portability.
Planning for portability
Portability refers to the sharing of tax benefits between eligible parties. Specifically in regards to estate taxes, you or your spouse can claim the other’s unused exemption amount. Should you choose to leave your entire estate to your spouse upon your death, that amount passes tax-free thanks to another tax benefit (the unlimited marital deduction). This preserves your entire estate tax exemption. Your spouse can then claim your exemption (and combine it with their own) by filing an estate tax return electing portability the same year you die. This allows you both to preserve up to $23.4 million from taxes for the benefit of your beneficiaries.