Estate Plan Decisions Should Not Be Based on Who Is in the White House

On the eve of one of the most contentious elections in U.S. history, it’s no surprise that Florida residents are uneasy about the next resident of the White House. However, it is worth noting that the occupant of the Oval Office has little effect on how your assets will be distributed to your heirs after you are gone.

State Laws Affect Your Estate Plan More Than the Federal Government

The federal government can make changes that involve estate taxes, the federal income tax rate, or capital gains, but the changes that have the biggest impact on estate plans are decided at the state level. Each state has the ability to decide which taxes will be imposed on residents during and after their lifetimes.

Unlike many other states, Florida does not impose inheritance taxes, gift taxes, or taxes on intangible personal property—removing some of the highest costs to heirs upon a loved one’s passing. The Florida Constitution prohibits income tax or inheritance tax, so it would take a state constitutional amendment (with 60% voter approval) to overturn the policy—making it unlikely to change in the next several years.

While Florida residents need not worry about a president’s effect on their estate plans, they should consider other factors, such as:

  • Property taxes in other states. If you own property in multiple states, you may still owe inheritance or estate taxes for real estate located outside of Florida. This could also require an ancillary probate—or several, if you own property in multiple locations. However, if these assets are transferred into a trust, they may escape taxation as well as probate on your passing.
  • Florida guardianship laws. Florida law stipulates that a surviving parent remains the natural guardian of minor children upon the death of the first parent. However, if both parents pass away and no guardian has been declared, the question of who will raise your children becomes more complicated. Your relatives will have to go to court to establish legal guardianship, during which time your children may be taken into state care.
  • Your future health care. If it has been a few years since you created your Health Care Directive and Living Will, you may need to review them to make sure they reflect your current wishes. For example, your choice of health care surrogate may be unable to serve, or you could have changed your mind about treatment during your end-of-life care.
  • Corporate taxes. Unlike individuals, businesses and organizations are required to pay income taxes in Florida. The state corporate tax is based on federal taxable income, but there may be tax planning strategies that can reduce overall liability for businesses.
  • Exceptions to income tax. Most inheritances are not taxed in Florida, with one exception: benefits received from certain retirement accounts. If your child receives a distribution from a traditional IRA or 401(k) plan, the amount taken from the plan will be taxable. Taxes can also be assessed on some pension plans and investment account benefits. State law allows this because the account holder would have been liable for taxation on withdrawal, so the tax liability passes to the beneficiary.
  • Property that generates income. While there are no taxes on an inheritance itself, there may be taxes if a beneficiary receives property that generates income. However, this is usually limited to the income that was received before the property was transferred to heirs.
  • Citizenship concerns. If you or any of your beneficiaries are not United States citizens, taxes could potentially be levied upon your death. For example, if you own property in Florida but are not a permanent U.S. resident, your heirs who are non-citizens may not be able to inherit tax-free (including your spouse).

Let Us Walk You Through Life’s Changes

At Yolofsky Law, we don’t just draft documents. Our estate planning legal team can help you make informed and empowered decisions about life and death, both for yourself and the people you love. As your Personal Family Lawyer®, we can help you articulate your wishes and legally protect your loved ones for years to come. Give us a call today to discuss your options with our trusted advisors.

Related Links:

Vital Documents All Floridians Should Have in Their Estate Plans

7 Events That Trigger a Review of Your Estate Plan

Why You Need a Last Will and Testament as Soon as Possible