One of the most frequently asked questions by clients is if they have to pay estate taxes on their inheritance.
A lot of clients who need to go through the probate process to receive their inheritance ask this question because a friend or family member told them they will have to pay taxes on the money. However, the answer most of the time is no.
The current federal estate tax exemption amounts are $5.43 million per individual. What this means is, if the decedent passes away with less than $5,430,000.00 then there is no tax liability. Today, 99.8% of estates do not pay estate taxes. Estates over $5.43 million have to pay estate taxes on the value of the estate assets over that amount. The top tax rate is 40%, but on average, estates pay about 16%.
Florida does not have a state estate tax. The following states do have a state estate tax: Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Tennessee, Vermont and Washington. If the decedent owns property in any of these states, they will have to pay estate taxes on the value of the assets located within these states.
There is a lot of misinformation on this topic.