As most of us learn by the time we reach adulthood, government often seems to view everything it sees as a potential source of tax revenue. As one President of the United States wryly noted toward the end of the 20th Century, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” It’s difficult to disagree with that assessment when you examine the various types of taxes imposed by government at every level of society.
One of the more controversial taxes, however, involves a tax on the inheritance received by heirs when a loved one dies – a tax imposed by a number of states and the federal government (though the federal law uses a combination of estate and gift taxes to accomplish the same tax goal). If you’ve spent years saving and investing in an attempt to ensure that you have something to leave behind to your heirs when you die, you may not be thrilled at the prospect of them forfeiting part of their inheritance to the government. As you prepare your estate plan, it’s important to consider how a future Florida inheritance tax might impact the assets you leave for your loved ones.
What About Today’s Inheritance Tax?
You may have noticed that the word “future” was used to describe the Florida inheritance tax. There’s a very good reason for that, and it has to do with the fact that Florida currently has no inheritance tax. The state also repealed its filing requirement for the Florida Estate Tax Return back in 2013, freeing residents from any concerns over a state estate tax as well. So, if you live in Florida, the law as it currently stands ensures that your heirs will not have to worry about the state trying to impose either of those types of taxes.
Of course, all of that is dependent upon existing law remaining as it is currently written. Though many of these current laws have been passed with the idea that they are permanent, that permanency is a fragile thing. The reality is that future legislators could dramatically alter the current legal framework. It is important to remember, after all, that Florida once had something that was known as a “pick up” tax. That tax was linked to the federal estate tax, and allowed the state to tax the estate if it was large enough to be subjected to the estate tax imposed by the federal government. That tax system was repealed in 2005, but taxes have a way of returning when you least expect them.
The very fact that the state once imposed a variation of the estate tax should serve as a reminder to today’s estate planners that tomorrow’s legal and tax landscape cannot necessarily be predicted with pinpoint accuracy. Effective estate planning strategies should be designed in a way that protects assets against not only the risks they currently face, but those that are likely to manifest in the future as well.
It is equally important to remember that there is still a federal estate tax out there looming over estates in excess of $5.45 million in total value. Obviously, very few estates are likely to be subject to that tax, given its high exemption rate – but that could also change in the future. Just fifteen years ago, that federal estate tax was being levied on estates that contained assets worth more than $675,000. That limit increased over the years, until a “permanent” tax exemption limit was set at more than $5 million in 2013, with inflation adjustments for subsequent years. Once again, though, permanent doesn’t always mean “forever” when you’re talking about laws. In fact, at least one 2016 Presidential candidate is on record as supporting a reduction in the current exemption rate of $5.45 million dollar so that the estate tax would apply to estates valued at more than $3.5 million – a move that would make the tax applicable to twice as many estates, if some estimates are to be believed.
So much for permanent, right?
How Can You Prepare for an Uncertain Future?
It might be tempting to throw up your hands and just give up on efforts to protect your estate from taxes that could change at any time. After all, if permanent tax changes can be undone, then what can you do to cope with that uncertainty? The answer is simple: get serious about your estate planning and get the help you need to create a strategy that can protect and grow your assets over time, even in the midst of changing laws.
The right legal experts can help you to create a plan that makes the most of all of the options available to people just like you – helping you to ensure that your estate is protected against estate tax and inheritance tax exposure that might manifest years from now as existing laws are changed by future legislators. You can’t predict what the future can bring, but you can do your best to prepare for it using options like living trusts, your annual gift exclusion, the marital deduction for assets, and more.
At Robert Kulas Attorneys at Law, we certainly understand why anyone might be worried about a future inheritance or estate tax in Florida. Laws evolve over time, and we all have to adapt our life strategies to ensure that we keep pace with new changes. Fortunately, our legal team has the expertise and experience that you need to create an estate plan that can stand the test of time, with asset protection plans and tax mitigation strategies that can help you to safeguard your estate for the benefit of your heirs. You can’t always stop change from coming, but you can make certain that you’ve done all you can do to protect yourself from its worst effects. Give us a call at (772) 398-0720 today or contact us online to learn how we can help you begin that effort.