The Ins and Outs of the Florida Estate Tax

The Florida estate tax is connected to the federal estate tax, so if no federal estate tax is owed, then no Florida estate tax is owed. The tax law in 2001 changed the responsibilities of personal representatives of estates under federal and Florida law. A resident who passes away in Florida is subject to the Florida estate tax, while a nonresident is subject to the tax on their share of property in Florida. The tax act changed the responsibilities of personal representatives regarding estate taxes. When someone dies, their personal representative may need to file an estate tax return with the Florida Department of Revenue and pay any taxes owed. Whether they need to do this depends on how much the person’s estate is worth. If the estate is worth a lot, the personal representative will need to file the tax return and provide certain documents to the DOR. The DOR will then figure out how much tax is owed and issue a final certificate once it’s been paid. If someone dies and their estate pays too much Florida estate tax, the person in charge of the estate can ask for a refund. They have four years from when the estate paid the tax to ask for the money back. If it takes longer to figure out the federal estate tax, they have 60 days after that to ask for the refund. If the person who died owned property in another state and had to pay tax there, they should follow the rules to get a refund from Florida. If someone who died owned property in different states, the person handling their estate may have to deal with claims from multiple states about where the person lived. A Florida law says that a court’s decision about where the person lived isn’t definite proof. If the person in charge of the estate pays the estate tax to Florida because the person was a resident there, and another state says the person lived there, too, then Florida’s Department of Revenue must be allowed to join the case or be a part of any agreement. If the person in charge pays the other state’s tax and asks for a refund from Florida, they can’t get a refund if the Revenue department wasn’t part of the case or an agreement.

There’s also a rule that lets the person in charge of the estate get a credit if the person who died had to pay federal estate taxes on someone else’s estate within two years before they died. For example, if a dad dies and his estate had to pay federal taxes, and then his son dies and his estate has to pay taxes, too, the son’s estate can get a credit for what the dad’s estate paid. In Florida, if someone dies and leaves money or property to their son, the state might charge a tax on it. However, if the son already paid a federal tax on the money or property, and that tax was high enough to cover the Florida tax, then the son doesn’t have to pay the Florida tax. The Florida Supreme Court made this decision in 1969. If the federal tax was $2,000,000 and the son already got credits for some of that money, then he might not owe any Florida tax at all. But if he didn’t get enough credits, then he might still have to pay some Florida tax. The personal representative should know that the credit for prior transfers on the federal estate tax return depends on the amount paid to the IRS, not the state. Also, the IRS limits the credit for prior transfers based on the amount of state death taxes. There are also tax recapture provisions that impose additional estate tax if specific property is sold within 10 years of the death, and the additional tax must be paid within six months. The amount of additional tax due is tied to the law in effect at the time of the death. IRC §2056A allows for a qualified domestic trust to defer federal estate tax when property is transferred from a U.S. citizen to a surviving spouse who is a foreign national. The personal representative can make an election to defer the taxes currently due, with certain distributions exempt from the taxes. The additional federal estate tax must be paid at a later date, based on a formula provided in the IRC. The personal representative must file appropriate forms with the Department of Revenue and pay any additional Florida estate tax due. If someone dies and leaves a lot of money and property, their estate has to pay taxes on it. But sometimes the person in charge of the estate can ask to delay paying some of the taxes for a few years or in installments. However, they can only do this for certain kinds of assets. If they choose to delay paying the IRS, they have to delay paying the Florida tax too. And they can only delay the Florida tax if the IRS lets them delay their taxes first. If the person in charge of a deceased person’s estate needs to sell property and get rid of a lien, they can ask the Department of Revenue for a release using a special form. If the deceased person lived in Florida, the Department of Revenue may release the lien without needing payment of the Florida estate tax if less than half of the Florida real estate is sold. If more than half is sold, a portion of the estate tax may need to be paid. If the deceased person didn’t live in Florida, a portion of the value of the Florida real estate that is sold may need to be paid to the Department of Revenue. If the person in charge of the estate sells the Florida real estate and gets full payment for it, the lien will be removed from the property and attached to the payment received. They can also get a court order to remove the lien if the money is used to pay the estate’s expenses.

There is also a tax called the Generation-Skipping Transfer Tax that applies to certain transfers of property after a person’s death. If the deceased person lived in Florida, the tax is based on a federal tax credit, and if they didn’t live in Florida, the tax is based on the ratio of Florida property to the total property. The Tax Act made changes to the estate tax in Florida. From 2001 to 2004, the tax was reduced or eliminated for people who died during those years. Then, from 2005 to 2010, the tax was completely eliminated for anyone who died in Florida or owned property there. But starting in 2011, the tax came back for residents and nonresidents who owned property in Florida when they died. During the period of January 1, 2005, through December 31, 2010, a personal representative will need to file a Florida estate tax return for certain deceased individuals, even if no tax is actually owed. They will also need to check if the deceased person owned property in multiple states, if there were any IRS audits or changes, and if there are any disputes about where the person lived. If a person died before 2005, the personal representative will need to file a Florida estate tax return and pay any tax due. The tax laws also changed for the period of January 1, 2004, through December 31, 2010, so the personal representative will need to determine if a deceased person is subject to the Florida GST tax and file a return and pay the tax if necessary. If no tax is due, then the personal representative doesn’t have to do anything. In Florida, a lawyer representing someone in charge of a deceased person’s estate needs to understand state and federal estate taxes. Even though Florida doesn’t have an estate tax for people who died between 2005 and 2010, the personal representative still may need to file tax returns. There are specific rules and deadlines to follow, and it’s important for the lawyer to keep track of everything. It’s a complex area of law, but it’s important for the personal representative to get it right. Benjamin A. Jablow is a tax attorney for the Florida Department of Revenue. He focuses on corporate income tax and estate tax. He received his law degree from Creighton University and his LL.M.

Source: https://www.floridabar.org/the-florida-bar-journal/the-ins-and-outs-of-the-florida-estate-tax/