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Some Lakeland residents may be subject to inheritance tax

April 15 is quickly approaching, and many people in the Lakeland area are undoubtedly scurrying to prepare their personal income taxes by that date. For some individuals, this could mean dealing with inheritance tax. Although most filers will never have to worry about inheritance taxes, the people who do should at least understand the basics of how it works.

Under federal law, this tax is known as the Estate Tax, and it comes into play when a person dies and their estate transfers property to the decedent's heirs. However, the Estate Tax has undergone various changes during the past few years. In 2015, only those estates that have combined gross assets of more than $5,430,000 require filings for the Estate Tax. But, this is only a federal law. Florida no longer has an inheritance tax.

Of course, like all tax matters, the Estate Tax is not nearly as simple as it looks at first glance. First, the tax does not apply if the person passes their estate on to their surviving spouse. In other words, a person can pass on their entire estate to their surviving spouse without their spouse having to pay any tax on the estate transfer. In addition, certain deductions may apply that could reduce or even eliminate any possible tax burden on the transfer of the estate.

All areas of estate planning require understanding of a variety of applicable laws, including tax law. When an estate is substantial enough that the federal Estate Tax may be at issue, the heirs to that estate should have a thorough understanding of the law. A mistake when it comes to planning for and dealing with Estate Tax liability could be extremely costly to individuals, and should therefore be handled very carefully.

Source: IRS.gov, "Estate Tax," Accessed on March 6, 2015

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