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The Florida estate tax: updated.

Most lawyers are familiar with the recent changes made to the Internal Revenue Code (1) by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Pub. L. No. 111-312) (the 2010 tax act) relating to the federal estate tax. However, the same lawyers may not be aware of the impact the 2010 tax act had on the Florida estate tax provided in F.S. Ch. 198.

This article is an update to "The Ins and Outs of the Florida Estate" (The Florida Bar Journal, Vol. 79, No. 1, Jan. 2005) and will discuss which decedents' estates are subject to the Florida estate tax and will address the responsibilities of a personal representative and provisions of the Florida probate code.

Changes Made by the 2010 Tax Act

The 2010 tax act extended the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (Pub. L. No. 107-16) (the 2001 tax act) relating to the federal estate tax. The 2001 tax act phased out the state death tax credit provided in I.R.C. [section] 2011, effective January 1, 2005, through December 31, 2010. The 2010 tax act extended the phase out through December 31, 2012. Therefore, the IRC does not permit an estate of a decedent to claim a credit for state death taxes paid for the period January 1, 2005, through December 31, 2012. Instead, an estate is entitled to claim a state death tax deduction provided in I.R.C. [section] 2058.

Section 301(a) of the 2010 tax act retroactively imposed the federal estate tax on the estates of decedents that died after December 31, 2009, and before January 1, 2011, with adjustments to calculate the tax. Section 301(c) provides an election to estates of decedents who died in 2010 to elect to either pay the federal estate tax or opt out of estate tax and provide for a carryover basis with certain adjustment to certain property included in the federal gross estate.

Section 304 of the 2010 tax act also extended the sunset provisions for the federal estate tax through January 1, 2013, provided in [section] 901 of the 2001 tax act.

The Florida Estate Tax

* Filing Requirements--F.S. [section] 198.01(2) defines a personal representative as "the executor, administrator, or curator of the decedent, or, if there is no executor, administrator, or curator appointed, qualified, and acting, then any person who is in the actual or constructive possession of any property included in the gross estate of the decedent...." A personal representative is required to file any required Florida estate tax return with the Florida Department of Revenue and to pay any tax due.

The requirement to file a Florida estate tax return is found in F.S. [section] 198.13. The statute provides that a personal representative file a Florida estate tax return with the department when the estate is required to file a federal estate tax return. Therefore, a personal representative needs to be aware of three dates and time periods. The first date is January 1, 2005, and the estates of the decedents who died prior to January 1, 2005. The second date is January 1, 2013, and those decedents who died after January 1, 2005, but before that date. The final period is the decedents who will die on or after January 1, 2013.

For estates of decedents who died prior to January 1, 2005, a personal representative is required to file form F-706 with the department if the personal representative was required to file IRS form 706 or 706-NA with the IRS. The personal representative is also required to pay any Florida estate tax due to the department. If no federal return is due, then the personal representative completes form DR-312 and files it with the probate court and records the form in the public records of the county where the decedent owned real property.

For estates of decedents who died on or after January 1, 2005, and before January 1, 2013, no Florida estate tax is due. The Florida estate tax is tied directly to the state death tax credit provided in I.R.C. [section] 2011. The Florida estate tax is computed in F.S. [section] 198.02 for resident decedents and in F.S. [section] 198.03 for nonresident decedents. Since the 2010 tax act reduced the state death tax credit to zero for this period, the Florida estate tax rate is also zero.

A personal representative should file form DR-312 for an estate of a decedent who is not required to file IRS form 706 or 706-NA. A personal representative who is required to file IRS form 706 or 706-NA for this period is no longer required to file form F-706 with the department. A personal representative should file form DR-313 with the probate court and in the public records of the county in which the decedent owned real property. Forms DR-312 and DR-313 are used to clear the Florida tax lien provided in F.S. [section] 198.22. The forms are permitted by F.S. [section] 198.32(2) only when a personal representative is not required to file a Florida estate tax return and no tax is due.

A personal representative of an estate of a decedent who died in 2010 is entitled to make an election to opt out of the federal estate tax. The election is provided in [section] 301(c) of the 2010 tax act. The personal representative would file IRS form 8939 and comply with I.R.C. [section] 1022. If the personal representative made the election, then the personal representative should use form DR-312 to release the lien on real property.

The Florida Legislature enacted F.S. [section] 198.13(4) to eliminate the requirement to file an estate tax return with the department for the period January 1, 2005, through December 31, 2012. However, the flush language provides this provision does not apply to estates of decedents who die after December 31, 2012. The statute contemplates the sunset language provided in the 2001 and 2010 tax acts may come into effect.

A personal representative of an estate of a decedent who dies on or after January 1, 2013, should be aware of the sunset provisions of the 2001 and 2010 tax acts. If the provisions of the tax acts relating to the federal estate tax sunset, then a personal representative will file returns and pay the Florida estate tax as provided above relating to estates of decedents who died prior to January 1, 2005. If the provisions of the tax acts relating to the federal estate tax are extended in whole or in part, then the personal representative will need to review F.S. Ch. 198 to determine whether a Florida estate tax return is due and if any tax is due.

* Recapture, Qualified Domestic Trusts, I.R.C. [section] 6166, and Refunds --A personal representative of an estate of a decedent who died prior to January 1, 2005, may have made an election pursuant to I.R.C. [section] 2032A for special valuation of property included in the federal gross estate. I.R.C. [section] 2032A(c)(1) provides that the personal representative must pay additional federal estate tax to the IRS within 10 years of the sale of the property or when the property, in whole or in part, no longer qualifies for the use. At that time, a personal representative is required to compute the additional tax due and pay the tax within six months. The estate is entitled to claim the state death tax credit for the additional federal estate tax due. A copy of IRS form 706A should be filed with the department together with the additional Florida estate tax due.

A personal representative of an estate of a U.S. citizen married to a non-U.S. citizen may have made an election pursuant to I.R.C. [section] 2056A to create a qualified domestic trust for an estate of a decedent who died prior to January 1, 2005. The trust permits the estate to defer the federal estate due at the decedent's death. I.R.C. [section] 2056A(b) requires a personal representative to pay the deferred estate tax to the IRS upon the distribution of nonhardship principal to the non-U.S. citizen spouse or upon the death of the spouse. The deferred estate tax is computed using the state death tax credit. IRS form 706-QDT is due on the 15th day of the month following a distribution of non-hardship principal to the non-U.S. citizen spouse. The final payment is due on the 15th day of the fourth month following the death of the non-U.S. citizen spouse. The personal representative is also required to file IRS form 706-QDT with the department and remit the deferred Florida estate tax.

The Florida and federal estate tax is due within nine months following the death of a decedent. A personal representative may have made the election to pay the federal estate tax pursuant to I.R.C. [section] 6166. The personal representative for an estate of a decedent who died prior to January 1, 2005, may have also made the election to pay the Florida estate tax pursuant to I.R.C. [section] 6166. If the election was made, then the personal representative will be required to make annual payments to the department. However, the interest rates provided in I.R.C. [section] 6166 are different than the rates provided in F.S. [section] 213.235.

A personal representative may apply for a refund of Florida estate tax paid to the department for a decedent who died prior to January 1, 2005. F.S. [section] 198.29(2) provides that a refund claim must be made within four years of the date the Florida estate tax was paid to the department or within 60 days of a final determination of the federal estate tax, whichever shall last occur. A final determination of the federal estate tax occurs upon one of the following events: 1) the IRS issues a closing letter; 2) an order of a federal court; and 3) the date the IRS refunds federal estate tax to the personal representative or the date that the federal estate tax is credited against another tax obligation of the decedent. A final determination does not include a determination of the portion of the state death tax credit that is due to another state. If the personal representative anticipates that there will be a dispute as to the amount of the state death credit that is due between states, the personal representative should file a refund claim within the appropriate time period in order to timely request a refund of Florida estate tax.

* Probate--A creditor of a decedent may make a claim within two years of the death of a decedent pursuant to F.S. [section] 733.710(1). A personal representative of a probate estate can reduce the two-year period to three months following the publication of the notice to creditors pursuant to F.S. [section] 733.702(1). The personal representative must file a notice to creditors as provided in F.S. [section] 733.2121. A personal representative is required by F.S. [section] 733.2121(3)(e) to file a notice to creditors with the Department of Revenue. The statute further provides that the personal representative may serve a copy of the probate inventory on the department in lieu of filing the notice to creditors.

Conclusion

A lawyer who represents a personal representative of a decedent's estate needs to be aware of filing obligations to the department and payment of tax due. For decedents who died prior to January 1, 2005, the lawyer may also advise the personal representative about additional Florida estate tax due or how to file a refund claim. For estates of decedents who died on or after January 1, 2005, through December 31, 2012, a lawyer should advise the personal representative how to clear title to real property. For decedents who die on or after January 1, 2012, a lawyer should be aware of the sunset provisions contained in the 2001 and 2010 tax acts and plan to advise the personal representative of the potential consequences of the federal law on the Florida state tax.

(1) All references are to the Internal Revenue Code of 1986, as amended.

Benjamin A. Jablow is a board certified tax attorney who is an assistant general counsel for the Florida Department of Revenue, where his focus is primarily in corporate income tax, insurance premium tax, and estate tax. He received his J.D. from Creighton University and his LL.M. in taxation from the University of Florida. The statements made in this article do not reflect the official position or opinions of the Florida Department of Revenue.

This column is submitted on behalf of the Tax Section, Domenick R. Lioce, chair, and Michael D. Miller and Benjamin Jablow, editors.
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Title Annotation:Tax Law
Author:Jablow, Benjamin A.
Publication:Florida Bar Journal
Date:Jan 1, 2012
Words:2162
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