2020 Inheritance Taxes in Florida
2020 Inheritance Taxes in Florida
Florida does not have a separate inheritance (“death”) tax.
The federal government, however, imposes an estate tax that applies to residents of all states.
The federal estate tax only applies if the value of the estate exceeds $11.4 million (2019), and the tax that’s incurred is paid out of the estate/trust rather than by the beneficiaries.
With the estate tax level so high, very few people/estates need to worry about the federal estate tax.
When property is transferred to an heir after the passing away of the original owner, federal inheritance tax is paid.
Also known as estate taxes, inheritance taxes are calculated based on the fair market value of the property transferred to the beneficiary of the estate.
The estate tax may sound complex and expensive, but it’s important to realize that it only applies to wealthy households.
Most Americans don’t have to worry about it.
Specifically, all Americans are allowed to exclude a certain amount of assets from their taxable estate, known as the lifetime exemption.
This amount is adjusted for inflation over time and is $11.58 million per person for 2020.
Note that this is a per person figure.
Married couples can exclude twice this amount, or $23.16 million.
If your spouse dies before you do and leaves you their assets, you can use both exemptions when leaving your estate to your heirs.
Technically, this is structured as a tax credit.
Estate tax is calculated on all of your assets when you die, and there’s a nonrefundable credit equal to the tax that would be charged on the lifetime exemption ($4,577,800 in 2020).
This may sound complicated, but the end result is actually quite simple: Any assets left to your heirs will be taxed at a 0% rate up to $11.58 million and at a 40% rate beyond that amount.
In other words, if you die with $20 million in assets that you leave to heirs, your calculated estate tax would be 40% of the $8.42 million that is in excess of your lifetime exclusion, or $3,368,000.
It’s also important to point out that estate taxes aren’t paid by people who inherit the property.
Rather, any estate taxes due are paid directly by the estate before it is distributed to heirs.
And if there aren’t enough liquid assets to pay the estate taxes due, property can be sold to pay the estate’s tax bill.
Life Insurance Estate Planning in Florida
Life insurance for the wealthy is a tool with a multitude of uses.
From a tax perspective life insurance is good because:
The death benefit is tax-free.
The cash values grow tax-free.
Inheritance taxes can be avoided by having the policy owned outside the estates of the insureds, and will pass potentially to the next generation, and maybe even other generations, without ever being taxed.
Life insurance can be used for:
Business succession planning
Equalization of the estate between children
While the wealthy typically combine their coverages under one insurer, life insurance is the lone exception because high-net-worth carriers do not offer it.
But make no mistake: Life insurance can save millions in estate taxes when the party is over.
Life insurance definitely fits in.
The wealthy want to pass their money on to the next generation, not to Uncle Sam, so they use life insurance as a low-cost hedge to cover their estate tax.
How Life Insurance works in Estate Planning
Here’s how life insurance can pull off that trick.
Say somebody has $20 million in assets.
Currently, you can pass on $10 million of that tax-free between the husband and wife to the next generation. That remaining $10 million is open to estate taxes, so roughly half of that is going to go toward paying estate taxes, which means they will give up $5 million.
So to pass on more of the $10 million, they will leverage by buying a life insurance policy to cover $5 million. Yes, government will still get their tax, but they will only get half of the $5 million.
4 Benefits of Life Insurance Estate Planning
When it comes to the wealthy, life insurance has a lot of significant benefits. Having this kind of asset helps to alleviate taxes, and offers lots of potential for additional cash accumulation over time.
This is ideal, since the larger an individual’s income, the higher their annual taxes will be.
Different types of permanent life insurance also offer significant investment options that are non-taxable.
For those who are wondering why the wealthy buy life insurance, there are a few main reasons.
While they are specific to those with larger incomes, life insurance is still an ideal asset for any individual, despite their financial situation.
Here are some reasons why the wealthy buy life insurance:
To Make Donations
To Leave Equal Inheritances
For End-of-Life Taxes
Those with an abundant amount of money understandably want to keep as much of it as possible.
Life insurance is just one of the ways that Americans can protect their hard-earned incomes without having to give lots back to the government.
Life insurance is not just for the wealthy.
While people with large incomes commonly utilize this asset, any American with any income can use it to their advantage.
For those who are unsure about how to best use their money, it’s ideal to work with a trusted financial advisor.
This individual can discuss the policies available, and which might be most ideal for a person’s situation.
The wealthy buy insurance to protect their income; however, all Americans should consider the benefits of having a life insurance policy.
Where is the Best Place to Get Life Insurance?
There are many opportunities in USA to buy life insurance.
Which means that there are a lot of insurance companies that offer this.
They can be competitive with each other.
Many think that life insurance is going to be the same no matter where one buys it.
This is not true.
Insurance companies will offer different incentives.
Mintco Financial is an independent Insurance Broker and financial planning, will help you with your Life Insurance Planning/Esatte Planning in Florida.
Call us at 813-964-7100
Email us at info@mintcoFinancial.com
Get a free quote at www.mintcofinancial.com