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Help explaining how inheritance tax will affect your loved ones

Just about everyone in Florida -- and across the nation for that matter -- have a plan to leave assets behind to their loves ones when they pass away. Oftentimes accounted for in a will, the portions of your assets that you leave behind will become an inheritance to your loved ones. But as important as it is to tell your beneficiaries about their inheritance, it is more important to explain how it will be taxed later on.

Though it may seem silly to some, the transferring of property to a loved one after you pass away is subject to federal estate tax. Sometimes referred to as the death tax, this tax is only required for estates above a certain amount. In 2014, that amount was set at $5.34 million. For taxes paid this year, the threshold jumps to $5.43 million.

As you can see, most estates don't have to file a federal estate tax return when a person dies. It's worth pointing out though, that the IRS does take into consideration everything you own, as well as other interests, which could raise the value of your estate. So even if you think you fall below the threshold, you might be surprised to learn that you aren't and that your loved ones' inheritance is subject to tax.

As with most elements of estate planning, it's a good idea to talk to a lawyer about death taxes and whether or not your estate will be affected by them. If your lawyer is experienced with estate planning, they can easily help you determine the exact size of your estate and explain how both federal and state laws will apply to it. You can then relay this information to your beneficiaries so that they will know what to expect when you are deceased.

Source: The Internal Revenue Service, "Estate Tax," Accessed May 21, 2015

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