There may come a time in your life when someone asks you to be an executor of their estate or lists you as a beneficiary in a last will and testament. In either case, you must navigate a process that typically includes signing documents and, as executor, carrying out numerous tasks that fulfill the duty you accepted. Those receiving an inheritance from a Florida estate might be wondering whether their gift is taxable.
If a decedent passed away on or before December 31, 2004, his or her executor filed a federal estate tax return. Beyond that date, however, the court abolished the estate tax. If you are an executor to someone’s estate who died on or after January 1, 2005, you may need to sign specific forms that remove the tax lien.
Inheritance tax and income tax are not the same
If you’re distributing assets to beneficiaries as an executor to a Florida estate or receiving an inheritance through the same, you may think that you will have to claim your gift as income on your federal tax returns, but that is not true. The federal government only issues a tax on estates valued at a specific dollar amount.
Inheritance doesn’t count as income for federal taxes, and since Florida abolished its inheritance tax (in accordance with dates mentioned earlier and in conjunction with the proper forms filed by the estate representative), you will not pay taxes on the gift from your loved one who has died.
Make sure you understand Florida estate laws
Each state has its own estate tax regulations. If your benefactor resided in Florida, then the laws of this state will apply regarding your inheritance. In some cases, a beneficiary may owe tax on an income-bearing inheritance, such as a rental property. Overlooking a requirement or not paying a tax that is due because you weren’t aware that you owed it can cause serious legal problems.
Estate taxes are a complex issue. If you don’t have a background in Florida estate law or as a Certified Public Accountant, you’d be wise to discuss your inheritance or your duties as an executor with someone who understands probate laws and can provide guidance and support. This type of support can minimize stress when inheritance issues arise that you do not feel equipped to handle on your own.