One part of estate planning that many people are concerned about is how taxes will impact their remaining assets and their loved ones’ inheritances. Some prefer to plan around the impact of taxes, while others attempt to avoid taxes on their estate altogether.
Many variables could affect your estate’s tax burden, including where you call home when you pass away. If you are thinking about moving out of state, you may want to consider the impact a new state could have on your existing estate plan.
Here’s what you should know about the changes 2021 may bring regarding state death taxes.
No change in Florida
There are only a handful of states with an inheritance or estate tax, and Florida is not one of them. If you currently live in Florida or are thinking about moving to the Sunshine State, you will currently not have to worry about estate taxes.
Another benefit to being a Florida resident is that your loved one(s) may not need to pay inheritance taxes. However, depending on the amount of what your beneficiaries receive, they could face capital gains taxes.
Increases in other states
After a challenging year in 2020, many states are looking for ways to make up for lost tax dollars. Some states want to increase their revenue by raising estate and inheritance taxes for 2021.
Still, other states that previously did away with estate taxes may now seek to reinstate them. For example, the Virginia legislature is looking at a bill that would reconsider adding an estate tax.
In addition to changes in state estate taxes, current federal legislation could lower the federal tax exemption regarding inheritance and estate taxes from $11.58 million per person to $5 million per person in 2026. However, President Joe Biden has called for making changes even sooner.