The State of Florida charges a small tax on certain kinds of property. Most people pay it every year, but some rich people can avoid it by using special trusts or partnerships. These methods require some careful planning and follow specific rules. The annual intangible tax in Florida is a tax on certain types of intangible assets, like stocks and bonds. If you live in Florida or have a business there, you may have to pay this tax on your intangible assets. However, some assets are exempt from the tax, like cash, certificates of deposit, and certain retirement accounts. There are also exemptions for the first $20,000 of taxable property for individuals. Some people try to avoid the tax by converting their investments into exempt forms before the tax is assessed, but this can come with costs and potential taxes. The Irrevocable Intangible Tax Trust (IITT) is a way for individuals to avoid paying taxes on their assets by placing them in a trust managed by a trustee from another state. By transferring assets into the trust before the end of the year and then receiving them back after January 1 of the following year, individuals can avoid paying intangible taxes. This strategy requires trusting the trustee to follow the rules and make distributions to the beneficiary after a 30-day waiting period. Despite the costs of setting up the trust, it can be a cost-effective way for individuals with a lot of assets to avoid paying taxes in the long run. In Florida, if you are part of a general or limited partnership, your partnership interest is generally not taxed as part of your intangible assets. However, if the partnership is based in Florida, it will be subject to the intangible tax. The same goes for out-of-state partnerships if they have significant ties to Florida, like having their main office or doing a lot of business there. If Florida residents are actively managing partnership assets, those assets could also be subject to the tax. To avoid paying the tax, the partnership should be organized and managed outside of Florida. The Florida Department of Revenue will look at the specific details of each partnership to determine if it should be taxed. In contrast, if you transfer your assets to a trust in another state, the tax consequences are more predictable. In Florida, high net worth clients can use an IITT or a partnership to avoid paying the annual intangible tax. This is better than converting portfolios to exempt assets, which can be costly. The IITT is a good option because it provides certainty and the savings from the tax can cover the initial costs. It is recommended to consult with a tax professional for personalized advice.
Source: https://www.floridabar.org/the-florida-bar-journal/aggressive-planning-for-floridas-annual-intangible-tax/
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