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Proper estate planning can head off relatives' tax liabilities


Many residents of Florida are aware that there are several reasons to come up with a solid estate plan. End of life issues such as healthcare proxies, retirement income and powers of attorney are all important components of estate planning, but those plans should also take into consideration the question of tax liabilities on the estate.

A head trust officer at Bank of the West estimates that about ten percent of estates face some sort of tax issue. Sometimes this means that the estate has unpaid federal or state taxes, as sometimes occur when people become seriously ill toward the end of life. It can also include state inheritance or estate taxes, as well. These taxes are often triggered at a much lower level than the federal estate tax. Estate taxes are assessed against the estate, while inheritance taxes target the individual beneficiaries.

The result of failing to plan for these sorts of taxes often means that the intent of the testator can be thwarted, as different beneficiaries might be taxed differently, leaving them with vastly different amounts of inheritance when the testator meant the shares to be equal.

Many Floridians need to be especially aware of these issues as they live in Florida for a portion of the year and have another residence elsewhere. When a person fitting that description dies, the estate may have to deal with two separate states attempting to collect taxes. For this reason it is important to explore the legal ways in which one can collect evidence of domicile in the state with the more lenient tax laws, and to have only minimal ties to the other state.

People considering an estate plan must ensure they are up to date on the legal and tax ramifications of each portion of the plan, and that they know what the consequences are of each action that they take. Otherwise, they may end up giving their loved ones more than they bargained for.


Source: Florida Today, "What to do when you inherit a tax mess," Amy Feldman, July 11, 2013

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