Benefits of Estate Tax Planning

Do you need to be worried about estate taxes? You may not believe you are “rich enough” to pay federal estate taxes now, but changes are coming at the end of 2025 that could trigger a significant tax liability for your heirs and your estate. To fight this, take advantage of the benefits of estate tax planning now, and avoid making the IRS an unintended beneficiary of your estate.

Is Your Estate Big Enough to Worry About Estate Tax Planning?

Since 2017, many Florida residents have been all but ignoring the possibility of estate taxes eating into their estates. That is because the 2017 Tax Cuts and Jobs Act significantly increased the lifetime exemption amount before federal estate taxes could be issued. Since Florida has no state-level estate tax, the only people concerned about estate tax planning were those whose assets totaled $13.61 million for an individual, or $27.22 million for a married couple (including inflation adjustments for 2024).

However, the Tax Cuts and Jobs Act is scheduled to “sunset” on December 31, 2025. Unless Congress passes new legislation in the next year and a half, the federal estate tax exemption will drastically reduce back to pre-2017 levels. It is estimated that as of January 1, 2026, estate taxes will apply to individuals’ estates worth $6-7 million and couples’ estates worth $12-15 million. The estate tax is a whopping 40% over those amounts. That means far more families will see a substantial share of their loved ones’ estates go to the IRS instead of their intended beneficiaries. In addition, if you own land outside of Florida, your estate may be required to pay inheritance taxes attributable to that land, if there is an estate tax in that state with a lower exemption than the federal exemption (Florida has no inheritance tax). Depending on the results of the election, a more dramatic increase of estate tax rates and a reduction of the exemption to $3.5 million per person is certainly possible.

Benefits of Estate Tax Planning

If your estate may exceed the taxable threshold after the Tax Cuts and Jobs Act “sunsets” now is the time to consider estate tax planning. Being proactive, and building tax considerations into your estate plan can make it easier for your personal representative to resolve your estate after your death, and make sure that more of your assets pass to your beneficiaries, rather than the IRS.

Planning Saves Money

The most obvious reason to engage in estate tax planning now is to avoid paying more taxes than you have to in the future. By taking advantage of various deductions, tax credits, and tax-advantaged irrevocable trust planning, you can pay fewer taxes while you are alive and also shelter a greater portion of your assets from taxes on your estate. This will reduce the chances that your personal representative will need to liquidate heirloom property or the family homestead and increase the funds that will pass to your loved ones after your death.

Proactive Estate Tax Planning Provides Certainty

With the Tax Cuts and Jobs Act heading toward sunset, this is a period of significant uncertainty for people planning their estates. Using proactive strategies can account for future changes in the law and provide you with certainty that your affairs will be managed appropriately. A robust estate tax plan accounts for the way the law is now, and provides options for what to do when things change. By beginning your estate tax planning early, you can develop a relationship with a knowledgeable and experienced estate tax attorney who can guide you through future changes and make sure your assets will be safe no matter what comes next.

Use Estate Tax Planning to Maximize Retirement Funds

By beginning your estate tax planning while you are still working, you can develop a plan that will make the most of your retirement accounts. Many people maintain both pre- and post-tax retirement accounts, stocks, and investment portfolios all designed to provide for their post-retirement needs, and leave a legacy for their family after they are gone. However, the IRS treats 401(k) accounts and certain IRAs differently. Understanding those differences and using them to your advantage can help you maximize your retirement investments, and reduce the taxes and penalties you have to pay when it comes time to use those accounts.

Estate Tax Planning Strategies for Individuals and Families

The good news is that there are a variety of estate tax planning strategies available to reduce the tax impact on your estate and your beneficiaries. You can establish a revocable or irrevocable trust to shield your assets, or give funds to your loved ones as gifts or in tax-advantaged accounts. You may also be able to use beneficiary designations or joint accounts to ensure that assets pass directly to your closest beneficiaries, without involving the IRS or the Florida Probate Court. Finally, by using charitable donations, you can claim tax deductions that will further reduce the amount of taxes your estate must pay. Talk to your estate planning attorney about which assets will and will not be counted in measuring your taxable estate. With effective and proactive estate tax planning, you will be able to reduce, or even eliminate, the portion of your assets that must be paid to the government after your death.

Get Help from a Florida Estate Tax Attorney

At Harrison Estate Law, we are uniquely equipped to handle your family’s estate tax planning and address the uncertainty created by changing laws. We can help you consider strategies that will minimize tax consequences, and make sure your assets will be well-managed after your death. We are happy to help you set up a new estate plan or update your existing plan to better protect your assets and reflect your priorities. Please contact us online or via email or call 352-559-9828 to schedule a free consultation. If you don’t live close to Gainesville, we are happy to set up a phone or Zoom call. We also have extended evening and weekend appointments available upon request.