Northern Death Taxes - Another Reason To Be a Floridian
Do you live in FL and own northern real estate? If you are considering becoming a Floridian, state death taxes imposed by northern states may be the best reason to make the move now and become a Floridian. It’s important to remember that even if you are already a Floridian you may be surprised to learn that you could be subject to state death taxes if you own property outside of Florida.
Florida does not impose a state death tax, however, sixteen states do impose an estate tax and eight states impose an inheritance tax. Many of these states are the same states that Neapolitans flee in the winter and return to in the summer. The northern states that impose estate and inheritance taxes do so at rates of up to 19%. Additionally, while the Federal estate tax exemption is presently $5,120,000, the exemption for state death taxes imposed by northern states may be as little as $338,333. This means that an individual who dies domiciled in a state other than Florida who would otherwise pay no Federal death tax may owe substantial state death tax. For example, an Ohio resident with a $2,000,000 estate will owe approximately $114,700 in Ohio death tax, a Massachusetts resident with a $3,500,000 estate will owe approximately $209,000 in Massachusetts death tax and a New York resident with a $5,000,000 estate will owe approximately $352,000 in New York death tax. Meanwhile, a Florida resident with a $5,000,000 estate will owe no death tax.
Changing your primary residence and becoming a Florida domiciliary may substantially reduce your state death tax liability. However, if you continue to own real property in a northern state, it will be necessary to do more than just become a Floridian to completely avoid these taxes. This is true because most states that impose a death tax also impose the tax on non-residents who own real and tangible personal property located within that state.
Because owning real property in a state with a death tax may generate significant state death taxes regardless of where you are domiciled, estate planning strategies to reduce or eliminate the state death tax liability should be considered. In planning for out of state property several issues must be considered.
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