As the executor of an estate, you have a responsibility to the deceased party who named you as executor, the heirs and beneficiaries who will receive assets from the estate, and anyone with an outstanding debt owed by the deceased parties. In fact, failing to properly resolve someone’s financial affairs is one of the riskiest mistakes an executor can make.
An executor has an obligation to resolve someone’s outstanding financial issues during estate administration. If they fail to repay debts and instead distribute assets to beneficiaries with amounts still owed to private creditors or possibly taxing authorities, the executor could find themselves the focus of legal proceedings and financially responsible for those unpaid amounts.
Taxes, in particular, are important to resolve as early as possible during estate administration. You may already know that you have to file income taxes on behalf of the deceased. In addition to the tax liabilities of the testator as an individual, the estate itself could be subject to estate taxes.
Does Florida assess estate taxes?
It is possible for an estate to have tax liability at both the state and federal levels. Thankfully, Florida is not among the minority of states that collect estate taxes at the state level. However, those who died in Florida, as in any other state, will potentially have to pay federal estate taxes, provided that the total value of the estate exceeds the exemption limit currently in place.
When does the federal government start collecting state taxes?
The federal estate tax is progressive. That means that the more an estate’s value exceeds the exempt amount for an estate, the higher the percentage of tax the federal government will levy against the estate. The maximum tax rate is up to 40%.
However, an estate has to be worth $11,580,000 before any estate tax applies. It is common practice for those with large estates to plan ahead to reduce the value of their estate, possibly with the creation of a trust, in order to limit tax liabilities. Verifying the value of the estate and ensuring that you pay the estate taxes as appropriate or necessary is a critical part of doing your job as the executor.