Florida does not impose a state estate tax. That fact leads many families to assume there is no tax issue to address after a death. The assumption is correct for most Florida estates, but it is wrong for estates above the federal exemption threshold, and the consequences of getting the federal filing wrong fall on the personal representative personally. The IRS can assess the representative for unpaid estate tax, interest, and penalties if the estate is distributed to beneficiaries before tax obligations are resolved. Understanding when federal filing is required, what the return must contain, and what the portability election can do for a surviving spouse is essential before any estate closes.
When a Federal Estate Tax Return Is Required
The federal estate tax applies to estates with a gross value exceeding the applicable exemption amount, which is indexed for inflation and adjusted periodically by Congress. For deaths in 2024, the exemption is $13.61 million per individual. Estates below that threshold generally do not owe federal estate tax. However, a return may still need to be filed for a different reason: to preserve the deceased spouse’s unused exemption for the surviving spouse through the portability election.
A qualified estate tax filing attorney in Florida can assess whether Form 706 is required for a specific estate, whether the portability election creates value even when no tax is owed, and how to position the return to minimize exposure to audit.
Portability and Why It Matters Even for Non-Taxable Estates
The portability election allows the surviving spouse to use the deceased spouse’s unused federal exemption in addition to their own. If the first spouse to die had an estate well below the exemption threshold, their unused exemption can be transferred to the surviving spouse, effectively doubling the surviving spouse’s shelter. To make this election, the personal representative must file Form 706 within five years of the date of death, even if no estate tax is owed. Many families miss this election because no one told them a return was necessary when the first spouse’s estate was not taxable. The missed portability election can result in a much larger estate tax bill when the second spouse dies.
The Personal Representative’s Liability for Federal Tax
The personal representative is responsible for filing Form 706 when required and for paying any estate tax due before distributing estate assets to beneficiaries. If assets are distributed before the tax is paid and the estate cannot satisfy the tax debt, the IRS can pursue the personal representative personally under 31 U.S.C. Section 3713, which holds fiduciaries personally liable for tax payments made in the wrong priority order. This is one of the most serious financial risks a personal representative can face, and it is entirely preventable through proper tax analysis before any distributions are made.
The Estate Closing Letter
After a Form 706 is filed and the IRS reviews it, the agency can issue an estate closing letter confirming that the return has been accepted. This letter provides the personal representative with protection against later IRS challenges of the return. Obtaining the closing letter before final distribution protects the representative from post-distribution tax assessments that would otherwise have to be clawed back from beneficiaries. The IRS Form 706 instructions and current exemption amounts are updated annually and reflect the applicable rules for each tax year. A Florida estate with assets in the range where portability matters, or where the gross estate approaches the exemption threshold, warrants a specific tax analysis before the personal representative proceeds with any distribution.
