You might be asking yourself, ‘what difference does it make whether the gross value of the estate consists of a simple 3 bedroom house valued at $100,000 or is valued at $10 Million?’ The answer to this question has both a legal implication as well as a practical implication.
Legal Implication
From a legal perspective, if the decedent is a U.S. citizen or resident and the decedent's death occurred in 2016, a Federal estate tax return (IRS Form 706) must be filed if the gross estate of the decedent, increased by the decedent's adjusted taxable gifts and specific gift tax exemption, is valued at more than the filing threshold for the year of the decedent's death. The filing threshold for 2016 is $5,450,000 and the filing threshold for 2015 is $5,430,000. An estate tax return also must be filed if the estate elects to transfer any deceased spousal unused exclusion (DSUE) amount to a surviving spouse, regardless of the size of the gross estate or amount of adjusted taxable gifts. The election to transfer a DSUE amount to a surviving spouse is known as the portability election.
The estate tax return must be filed within nine months after the decedent's date of death, or within fifteen months of the decedent's date of death if a six month extension of time for filing the estate tax return had been obtained.
Generally speaking, a Florida estate tax return is not required, and there will be no Florida estate tax imposed, on those estates of decedents domiciled in Florida that are not required to file a Federal estate tax return (IRS Form 706) (see Section 198.02, F.S.). However, other state taxes may very well be imposed under other situations, such as … if the estate involves generation skipping transfers, whether such transfers involved were that of resident decedents (see Section 198.021, F.S.), non-resident decedents (see Section 198.031, F.S.) or alien decedents (see Section 198.04, F.S.) owning property situate in Florida. A careful analysis and review of all applicable state and federal tax laws by an appropriate tax attorney or CPA is recommended when administering an estate here in Florida.
Practical Implication
What if the total gross value of the estate is less than the threshold amounts named above (i.e. less than $5.45Million in 2016)? Will the gross value of the estate be considered by the attorney when drafting the testator’s Last Will & Testament and/or Trust? Notwithstanding lower valued estates, the value of the estate will many times dictate the type of testamentary document that will be drafted on behalf of the client. As a general rule, the higher the value of the estate the more creative the attorney might be and the more consideration will be given to the tax ramifications upon the administration of the estate. If the gross value of the estate is less than $250,000, and the only beneficiaries of the decedent are the adult children of the decedent, the drafting attorney may very well draft what we call a ‘simple will.’ If, on the other hand, the gross value of the estate is between $1.5 - $2.5 Million, and the beneficiaries of the decedent are minor children, with one of the kids having special needs, the drafting attorney may very well draft what we call a ‘simple will’ with testamentary trust provisions to make distributions to pre-determined trustee(s) who will, in turn, make financial provisions for the health, education and welfare of the minor children, with special provisions for funding to address the special needs of the special needs child.
Summary:
The objective of the estate planning attorney should include the desire to tailor the terms of the Last Will & Testament and/or Trust to specifically meet the needs of the client. As you can see, even if the value of the estate is far less than the $5.45 Million threshold needed to require the filing of a Federal estate tax return (IRS Form 706), the drafting of the testamentary device can be far from ‘simple.’
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