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Jadinah Naomi GustaveReviewsout of 4 reviews Jadinah Naomi GustaveClients’ ChoiceAward 2022
 

What is the Difference Between Estate Tax and Inheritance Tax?

ESTATE PLANNING Attorney, NONPROFIT, BROWARD, MIAMI Corporate, Business ATTORNEY, > Estate Planning  > What is the Difference Between Estate Tax and Inheritance Tax?

What is the Difference Between Estate Tax and Inheritance Tax?

When it comes to estate planning, taxation is absolutely something that needs to be considered, particularly if you have a high-asset estate. Taxation can be complicated for an estate, since there are both state and federal taxation requirements to consider, and the state taxes vary widely across the country. It can be hard to get clear on what exactly it is that you need to anticipate. For this reason, it is always a good idea to consult with an experienced estate attorney. They will be familiar with the state and federal taxes and requirements and can ensure that you develop an estate planning strategy with these in mind. In this post we will provide some general information on the two kinds of taxes that will affect your estate — inheritance taxes and estate taxes. 

What is an Inheritance Tax? 

An inheritance tax is a tax paid by the beneficiary of an inheritance. Inheritance taxes are not imposed federally. This means that beneficiaries do not need to report any inheritance that they receive as income (which they would then have to pay taxes on). Some states impose an inheritance tax on beneficiaries, however, if you are lucky enough to be living in the sunshine state you will not have to worry about that. Florida does not have an inheritance tax, so beneficiaries are free to enjoy their inheritance without having to worry about taxes. If the beneficiary lives in another state, they may want to consult with an attorney in their home state to ensure that they do not have any tax liability. 

What is an Estate Tax?

Unlike an inheritance tax which is paid by the beneficiary, an estate tax is paid by the estate before any assets are distributed. Some states have estate taxes, but again, the sunshine state comes through. Florida does not have an estate tax, so you will not have to plan for state taxes on your estate. However, the federal government does tax estates. The important thing to note is that only high-value estates are subject to this tax. Estates under $12.06 million in value are exempt from federal estate taxes. If you have a high value estate, however, this will be important to plan for. There are various tax strategies that can be used to reduce your tax liability and increase the exemption. For instance, if you are married, the exemption can be doubled. For this reason, it is important to consult with an attorney if you have a high value estate, especially considering that the federal estate tax rate can be up to 40%, which would significantly reduce the amount of assets available to your beneficiaries. 

Contact the SG Firm 

Estate planning can be complicated. Most people know that it is important to make a will, but few will consider things like planning ahead for tax consequences, that is why it is important to have an experienced estate lawyer on your side who can ensure that your estate plan reflects and supports your goals and wishes. Contact the SG Firm today to schedule a consultation. 

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