When children or other heirs think about their possible inheritance, it most often elicits a discussion about a positive sum of money, grandmother’s diamond ring or some other positive asset. The truth is that this isn’t the only type of inheritance an heir might be left with after the death of a loved one.
While some liabilities die with an individual, many of them do not. Heirs may inherit a debt or other negative asset that comes as a surprise during probate administration. A common type of negative asset an heir may receive in Florida is a tax liability or problem. In fact, the chief fiduciary officer of a bank with locations across the nation said that in his experience, “one in 10 estates have some tax issues.”
Inherited tax issues can present themselves in estate taxes or even a tax liability that was left unpaid by the testator. Each of these types of liability could be state, federal or both. Although Florida does not levy a state income tax against residents, an heir could inherit a state liability from a small business or even one that occurred in another state.
There have even been cases in which a testator left a surprise sum of money in overseas accounts. The only problem: the Internal Revenue Service never received its cut of the hidden assets.
No matter how a tax liability may arise, it can cut into the inheritance that a testator wanted to leave to their heirs.
One way to avoid leaving a tax liability that could eat into a legacy, is to have open communication with an estate planning attorney. Even those who are not drafting the plans but instead expect to receive an inheritance can talk over their tax concerns with a knowledgeable attorney in Florida.
Source: Chicago Tribune, “Plan now to avoid inheriting a tax mess,” Amy Feldman, Aug. 8, 2013
