As you can guess from the title, this article is all about inheritance. Chances are, if you have received an inheritance (or if you will be getting one in the future), you have a few questions about how the process works. In this article, we’ll discuss the ins and outs of this common estate planning question.

What Is An Inheritance?

Giving and receiving an inheritance has been going on for centuries. It is the practice of receiving titles, debts, privileges, rights, obligations, and private property when an individual dies. The rules of inheritance have changed vastly over time, and they differ from society to society. What we consider inheritance here might not be the same in China, India, or Africa.

Examples of inheritance include bequeathments such as cash, investments (bonds, stocks, etc.), cars, antiques, art, real estate, jewelry, and more. The value can range from the hundreds to the millions, and, in most countries, inherited assets are taxed. An inheritance tax is often nicknamed “the death duty,” or, more colloquially, “the last twist of a taxman’s knife.”

Currently, there are six American states that have inheritance taxes: Iowa, Nebraska, Maryland, Kentucky, Pennsylvania, and New Jersey. In most of these states, assets bequeathed to a spouse cannot be taxed. And, in some cases, kids are exempt from these taxes. But, if you don’t fit under one of those exceptions, be prepared to get taxed.

What Does Florida Say?

Florida does not have an inheritance tax, nor does it have a gift tax. It also got rid of its estate tax in 2004, and this lenient taxation is why a lot of people move down to the Sunshine State. That said, other states’ inheritance taxes might still apply to you, even if you live in Florida. If the deceased lived in Pennsylvania, for example, and he or she bequeathed something to you, P.A. tax laws would govern. This means that you need to check the laws of the state in which the deceased lived to determine taxation.

As far as the gift tax goes, though Florida does not have it, the federal government certainly does. The federal tax exemption is $17,000 for 2023, and your lifetime exemption is $12.92 million. Remember, you are subject to both state and federal laws.

What A Trust Can Do For You

A trust is a useful tool when it comes to inheritances. If you are expecting an inheritance from someone (or if you are planning to leave one), setting up a trust to deal with these assets is a very good idea. For one, it allows you to pass assets to your beneficiaries without having to deal with probate court. Trusts are a lot like wills, except they avoid state probate requirements, a helpful feature that cuts down on their court expenses.

Below are some of the benefits of trusts:

· A trust protects heirs from your creditors.

· A trust will avoid probate (as aforementioned).

· A trust will give you control of the asset, depending on the type you set up.

· Assets are able to stay in a trust for several generations.

Benefits aside, trusts are not for everyone, and they do come with their disadvantages, such as their costs (this is especially true for a revocable trust). While trusts don’t have the expenses of probate court, making them revocable (and therefore more controllable) can have negative consequences as far as estate duty, stamp duty, and asset protection go.

If this all sounds confusing, don’t worry. When it comes to questions of inheritance, no matter whether you’re bequeathing or receiving, a WFP estate planning attorney can help you. A trust needs to follow certain rules in Florida, and a lawyer will be able to ensure that you dot your Is and cross your Ts when forming one.