Estate tax on a Florida villa – things to know before buying a home for sale in Florida

How inheritance tax, or estate tax as it is known in Florida, is applied depends on the residency status of the deceased and their heirs. A complicated system of thresholds and exemptions determines how much estate tax is due on your Florida villa and you should take this into account when looking at a home for sale in Florida. There are ways the proportion of your estate liable to tax can be reduced and these may involve the way a home for sale in Florida is purchased.

Wills and other matters concerning your Florida villa

Foreign wills are generally accepted by courts in Florida. You could possibly encounter administrative problems regarding the passing of your Florida villa because foreign wills can be challenged more easily. When looking at property to buy in Florida you should be aware that a jointly-owned house will pass automatically to the survivor.

How estate tax will affect your Florida villa

• Residents
  The worldwide assets of residents are taxed although those who have bought a home for sale in Florida will receive an exemption of $65,000. The proportion of an estate exceeding this amount is the sum which becomes liable to tax although a number of other deductions are permitted.

  If you transfer assets to a surviving spouse who is not resident then there will be no exemption although, as we will see later, there are ways around this. When a Florida villa is jointly owned with a spouse, the estate will be taxed at 50% of the value but in the case of a non-citizen the entire property is taxable.

• Non-residents
  

  An estate of a non-resident exceeding $60,000 is taxed at the same rate as US citizens and are entitled to the same deductions although there are no exemptions for non-resident spouses.

  How to buy a home for sale in Florida

  The decision how a home for sale in Florida is bought can greatly impact upon the amount of estate tax which must be paid. Married couples might consider establishing a qualified domestic trust and inserting into it their wills. This means estate tax liability may be deferred until the death of both spouses or the sale of a Florida villa.

  Buying a home for sale in Florida through a revocable trust is another option to minimise the impact of inheritance tax. The trust would own the property and the costs and problems associated with inheritance in Florida can be avoided.

  Other points concerning your Florida villa and estate tax

  Federal estate tax is linked to federal gift tax and both are charged at the same rate. This prevents lifetime giving being used as a method of evading tax on inheritance. The exemption amount may not be used during a persons lifetime.

  The Federal Generation Skipping Tax imposes a tax of 55% on assets which are transferred to grandchildren.

  As strange as it sounds, estate tax is something you should begin thinking about as soon as you start looking for a home for sale in Florida. At this stage a professional tax advisor will be able to take action and minimise the amount of estate tax payable on your Florida villa in the event of death.