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Florida Will vs. Trust

Us caretaker types are always thinking about how to make sure we leave our loved ones in the best financial position after we pass on. A good planner creates a will, to leave behind bank account assets, properties, and anything else of value. Though a great planner delves a little deeper and researches the tax implications that come with leaving behind money or stuff. One of the first things to weigh is the Florida will vs. trust. Which has better tax rates for your particular situation?

There isn’t always that much of a tax difference between a will and a trust. Though if you are a non-U.S. citizen, there are enormous and unavoidable tax differences you need to consider.

Did you know that the U.S. the estate tax is based on the worldwide estate? The estate tax is a tax on your right to transfer property at your death, through a will for example. The estate tax limit (aka the amount of tax the government will charge on the value of the money and property a person owned at the time of death) is very high for non-citizens. Non-U.S. citizens can expect to pay upwards of 20 to 40%! Remember, that would be 40% of the entire international estate, not just the property located in the U.S.

There is an estate tax exemption that shields some of the estate from taxes. For U.S. citizens, the exemption covers $5.45 million per person. So if the estate is worth less than five and a half millions dollars then there is no tax.

That’s all great, but what about everyone else? For non-U.S. citizens, the exemption only covers $60,000. So any amount of your worldwide estate over $60,000 is subject to the estate tax. See this article for a chart of some of the different rates that apply.

If you’re not a citizen of the U.S. you probably want to protect your loved ones by avoiding a ridiculous estate tax bill. Well, first check if your estate is even worth more than $60,000 after liens and creditors take their share. If the estate is worth $60,000 or less, you can just create a Florida will without worrying about the estate tax.

Though if your estate is worth more than $60,000, consider setting up a Florida trust.  None of the money you transfer to the trust will be subject to the federal estate tax.

Of course, once a loved one (beneficiary) withdraws from the trust, that money will likely be taxable income. However, this shouldn’t concern you too much. Florida is one of the best states in the United States to domicile a trust. Florida is “tax friendly” to local trusts, because there is no state income tax, gift tax, estate tax, intangible tax, or a generation-skipping transfer tax – all of which other states would impose on your trust to some extent.

If you have any questions about the benefits of a Florida will vs. trust, or about your own estate or tax needs, contact Boyer Law Firm today.

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