Tax and Related Estate Planning Matters
Domain overview
Tax and Related Estate Planning Matters tests the federal transfer tax system as it applies to Florida estates and the Florida tax facts that planners must know. Expect gross estate inclusion, the marital and charitable deductions, portability, basis, GST, and return deadlines. Florida itself imposes no estate or inheritance tax.
Core rules
- The federal estate tax applies to the taxable estate plus adjusted taxable gifts. The basic exclusion amount is indexed; for 2025 it is $13,990,000 per person. The annual gift tax exclusion for 2025 is $19,000 per donee.
- Gross estate includes property owned at death, retained interests under § 2036, revocable transfers under § 2038, powers of appointment under § 2041, and life insurance proceeds under § 2042.
- The marital deduction under § 2056 and the charitable deduction under § 2055 reduce the taxable estate. A QTIP election under § 2056(b)(7) qualifies property for the marital deduction while keeping it out of the surviving spouse's estate at the first death.
- Portability allows a surviving spouse to use the deceased spouse's unused exclusion amount. A timely Form 706 is required; a late portability-only election may be available for up to five years under current IRS procedure.
- Basis: property acquired from a decedent generally takes a new basis equal to fair market value at death under § 1014. Lifetime gifts carry over the donor's basis under § 1015. Florida is not a community property state.
- Alternate valuation under § 2032 may reduce both the gross estate and the estate tax, but it must be elected on a timely return and cannot be used merely to reduce income tax basis.
- Form 706 is due nine months after death, extendable six months. Form 709 is due April 15 of the following year. Estate and trust income tax returns use Form 1041, with a 65-day election under § 663(b) to treat distributions as made by year-end.
Worked example
Parent dies owning stock with a $100,000 basis and $1,000,000 value. The estate is below the exclusion amount, so no estate tax is due. Heirs take a $1,000,000 basis under § 1014 and can sell for $1,000,000 with no gain. If Parent had instead given the stock away during life, the heirs would carry over the $100,000 basis and face $900,000 of gain on the same sale.
Traps that cost marks
Assuming Florida has a state estate tax; missing the portability election; using alternate valuation to increase basis; forgetting that life insurance proceeds can be included under § 2042; and treating a QTIP election as eliminating tax at the survivor's death.