Guido's Weekend Financial Wisdom: Does Florida Have a State Death Tax?

What are state death taxes?

Just as the federal government can impose a federal estate tax, the individual states can impose a state estate tax. Estate taxes are imposed when property is transferred because of the property owner's death.

State estate taxes are called "death taxes"; because there are three types of estate tax that can be imposed: (1) an inheritance or succession tax, (2) an estate tax, or (3) a credit estate tax, also called a sponge tax or pickup tax (each type is discussed further below). Some states impose one type only and some states impose two. You need to be aware of state death taxes because they could be a significant liability to your estate.

Generally, states may impose state death taxes on certain property in your estate if (1) you are domiciled in that state, or (2) property you own at the time of your death is located in that state. The state in which your real estate and tangible personal property (e.g., cash, insurance proceeds, cars, furnishings, jewelry, or art objects) are located may impose state death taxes on that property. The state in which you are domiciled also may impose state death taxes on your intangible personal property (e.g., copyrights, patents, stocks, bonds, or notes).

Technical Note:"Domicile" is a legal term. It refers to the state in which you have a permanently

established residence and intend for that residence to be your permanent home. It is not a mere residence (e.g., a summer home or temporary move).

Example(s):Harriet lives in New York most of the year, but she also owns a condo in Florida, where she

lives during the winter. Harriet also owns a car and has $100,000 in mutual funds in New York, $90,000 in

a New York bank, and $25,000 in a Florida bank. Harriet dies. New York, Harriet's domicile, has the right to levy state death taxes on Harriet's New York home, furnishings, car, $100,000 in mutual funds, and $90,000 bank account. Florida has the right to levy state death taxes on Harriet's Florida condo, furnishings, and $25,000 bank account.

Caution:State death tax liabilities can result in multiple states if you have any of the following situations:

(1) multiple residences, (2) a business incorporated in a non-domiciliary state, (3) a company doing business in a non-domiciliary state, or (4) nonresident trusts.

Tip:Currently, only a few states and Puerto Rico impose a gift tax (tax imposed on transfers of property made during life) and some states impose a generation-skipping transfer tax (an additional tax imposed on transfers to persons who are more than one generation below you). Contact an attorney or your department of revenue or taxation to find out what is subject to these taxes, and when and how to file a return.