Why Estate Tax Planning in Florida is Important

Many people retire to Florida because of its weather and lack of state income tax. However, the federal government seeks its share after you pass. An estate planning attorney can help you set up a trust to minimize that tax burden.

Another very important reason for using an estate lawyer to help you set up a plan is that anything can happen at any time. A trust can help with asset protection should you become incapacitated. It can also allow a loved one to handle your affairs until you are well enough to do it yourself.

You do not have to be a certain age to create an estate plan. In fact, if you are over 18 and own assets, regardless of the value, you should create an estate plan.

Types of Trusts for Minimizing the Estate Tax Burden

Florida has several types of trusts that can help minimize your tax burden, including:

Revocable Living Trust

One of the most common trusts in Florida is a revocable living trust. This flexible estate planning tool allows you to keep control over your assets during your lifetime and specifies how your assets should be distributed upon your death. A revocable living trust can help avoid probate and minimize estate taxes.

Irrevocable Life Insurance Trust

When you need a trust to hold life insurance policies, you can use an irrevocable life insurance trust. When you place your life insurance policies in this trust, the proceeds from the policy can be excluded from the taxable estate. This trust is needed (but not required) if your estate is valued at over $12.92 million.

Qualified Personal Residence Trust

You can transfer your primary residence to a qualified personal residence trust and still keep your right to live in it for a certain number of years as dictated by the trust. In the trust, list the number of years you expect to live – you have a right to stay in the house until then. This is one of the ways you can minimize your tax burden. If you are still alive when the time ends, you can pay rent to the estate, which further reduces your estate tax burden.

Charitable Remainder Trust

When you wish to give to a charitable organization, you can choose a charitable remainder trust. Any assets placed in this trust provide income to beneficiaries for a set time. If there is anything left in the trust, the remaining assets go to the charity you choose.

Dynasty Trust

Use a dynasty trust to provide for multiple generations. You can preserve wealth for the long term, plus reduce estate taxes for each generation so that your grandchildren and great-grandchildren can enjoy your wealth. The asset protection attorneys at France Law Firm can help you set up a dynasty trust.

Contact France Law Firm

While Florida offers many benefits because of its tax laws, the federal government is still going to use the long arm of the Internal Revenue Service to collect what it can get. You can use one or more trusts to minimize the tax burden for your heirs. Contact the probate attorneys at France Law Firm for a consultation to discuss a new estate plan or to update a current estate plan.

The post Estate Tax Planning: Utilizing Trusts to Minimize Tax Burden on Your Heirs appeared first on France Law Firm.

Whom should I hire to represent me and prepare and file the tax return?

The International Revenue Service cannot make recommendations about certain individuals, but there are several factors to consider, such as:

1. How complex is the transfer?
2. How large is the transfer?
3. Do I need an attorney, CPA, Enrolled Agent (EA) or other professional(s)?

For most simple, small transfers (less than the annual exclusion amount) you may not need the services of a professional.

However, if the transfer is large, complicated, or both, then these actions should be considered; it is a good idea to discuss the matter with several attorneys and CPAs or EAs. Ask about how much experience they have had, and ask for referrals. This process should be similar to locating a good physical. Locate other individuals that have had similar experiences and ask for recommendations. Finally, after the individual(s) are employed and begin to work on transfer matters, make sure the lines of communication remain open so that there are no surprises.

Finally, people who make gifts as part of their overall estate and financial plan often engage the services of both attorneys and CPAs, EAs, and other professionals. The attorney usually handles wills, trusts, and transfer documents that are involved and reviews the impact of documents on the gift tax return and overall plan. The CPA or EA often handles the actual return preparation and some representation of the donor in matters with the IRS. However, some attorneys handle all the work. CPAs or EAs may also handle most of the work, but cannot take care of wills, trusts, deeds, and other matters where a new license is required. In addition, other professionals (such as appraisals, surveyors, financial advisors, and others) may need to be engaged during this time.

Do I have to talk to the IRS during an examination?

You do not have to be present during an examination unless the IRS representatives need to ask specific questions. Although you may represent yourself during an examination, most donors prefer that the professional(s) they have employed handle this phase of the examination. You may delegate authority for this by executing Form 2848 “Power of Attorney.”

What if I disagree with the examination proposals?

You have many rights and avenues of appeal if you disagree with any proposals made by the IRS. See publications 1 and 5 for an explanation of these options.

What if I sell property that that has been given to me?

The general rule is that your basis in the property is the same as the basis for the donor. For example, if you were given stock that the donor had purchased for $10 per share (and that was his or her basis), and you later sold it for $100 per share, you would pay income tax on a gain of $90 per share. Take note that the rules are different for property acquired from an estate. Most information for this page came from the Internal Revenue Code: Chapter 12—Gift Tax (generally Internal Revenue Code 2501 and following, related regulations and other sources).

Can a married same sex donor claim the gift tax marital deduction for a transfer to his or her spouse?

For federal tax purposes, the terms “spouse,” “husband,” and “wife” includes individuals of the same sex who are lawfully married under the laws of a state who were lawfully married under the laws of a state whose laws authorize the marriage of two individuals of the same sex and who remain married. Also, the Service will recognize a marriage of individuals of the same sex that was validly created under the laws of the state of celebration even if the married couple resides in a state that does not recognize the validity of same-sex marriages.

However, the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term “marriage” does not include such formal relationships.

Gifts to your spouse are eligible for the marital deduction.

If you have any questions or are involved in a gift taxation situation, contact France Law Firm today! We’re happy to help you make this process as easy as possible.

The post Gift Tax: Part Two appeared first on France Law Firm.

Generally speaking, the gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer t be a gift or not. The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

Here are some frequently asked questions regarding gift taxes:

Who pays the gift tax?
The donor is generally responsible for paying the gift tax. Under special arrangements, the done may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

What is considered a gift?
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.

What can be excluded from gifts?
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts:

1. Gifts that are not more than the annual exclusion for the calendar year.
2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
3. Gifts to your spouse.
4. Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

May I deduct gifts on my income tax return?
Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 559, Survivors, Executors, and Administrators.

How many annual exclusions are available?
The annual exclusion applies to gifts to each done. In other words, if you give each of your children $11,000 in 2002-2005, $12,000 in 2006-2008, $13,000 in 2009-2012, and $14,000 on or after January 1, 2013, the annual exclusion applies to each gift. The annual exclusion for 2014, 2015, and 2016 is $14,000.

What if my spouse and I want to give away property that we own together?
You are each entitled to the annual exclusion amount on the gift. Together, you can give $22,000 to each done (2002-2005) or $24,000 (2006-2008), $26,000 (2009-2012) and $28,000 on or after January 1, 2013 (including 2014, 2015, and 2016).

What other information do I need to include with the return?
Refer to Form 709, 709 Instructions and Publication 559. Among other items listed:

1. Copies of appraisals.
2. Copies of relevant documents regarding the transfer.
3. Documentation of any unusual items shown on the return (partially gifted assets, other items relevant to the transfer(s)).

What is “Fair Market Value?”
Fair Market Value is defined as: “The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.” As per Regulation 20.20131-1.

These are just a few of the many questions that are commonly asked regarding gift taxation. Keep an eye out for the second installment in this series, where we’ll wrap up the FAQs.

The post Gift Tax: Part One appeared first on France Law Firm.