Estate Tax: Who Pays It?

Proper Estate Planning Tips for Determining Who is Responsible for Paying the Estate Tax.

When people think about estate planning, they usually focus on who will receive their assets at death.  An equally important question that often gets overlooked is if estate tax is owed, who actually bears the estate tax?  This issue is known as “estate tax apportionment.”

A helpful way to think about apportionment is to imagine the estate as a pie.  Each beneficiary receives a slice, some perhaps larger than others.   Estate tax apportionment determines which slices of that pie are reduced, and by how much, in order to satisfy the federal estate tax. Why does this matter?  Depending on how the estate plan allocates the liability for estate taxes, one beneficiary’s share may be reduced significantly to cover estate taxes while another’s share remains untouched. 

For property passing under a will or a revocable trust, Florida law provides default rules when the governing document does not specify how taxes should be apportioned.  Florida follows a modified equitable apportionment system. Generally speaking, the property that generates the tax liability bears the tax.  To determine a beneficiary’s share of the federal estate tax liability, the net tax is allocated to each interest included in the measure of the tax in proportion to its relative value. Below is an illustration of this calculation. 

Step 1: When is there a federal estate tax due?

As of January 1, 2026, the federal estate and gift tax exemption is $15,000,000 per individual ($30,000,000 for a married couple), reduced by any taxable gifts made during life.  Anything over that amount is taxed at a rate of 40%.  Florida does not impose a state estate tax.

Example: Assume John, an unmarried Florida resident, dies in 2026 with a gross estate of $20,000,000, and has not made any taxable gifts during his life.

• Gross Estate: $20,000,000.
• Basic Exclusion Amount: $15,000,000.
• Taxable Estate: $5,000,000 ($20,000,000 – $15,000,000).
• Federal Estate Tax: $2,000,000 (40% x $5,000,000).

The apportionment rules determine which beneficiaries ultimately bear the $2,000,000 estate tax burden.

Step 2: Interests included in the measure of the tax.

Section 733.817 of the Florida Statutes first allocates the net tax among the interests that generate estate tax in proportion to their relative values, unless a special rule applies.  The statute then apportions the tax liability under a series of ordering rules.  For trusts and wills, Florida law provides different results depending on which interest generate the tax. 

If a nonresiduary interest (i.e., a specific gift made before the residuary bequest) causes an estate tax, the tax is charged first to the residuary beneficiaries, and if the residuary interests are insufficient to satisfy the tax obligation, the balance is apportioned among the nonresiduary beneficiaries in proportion to the value of their respective interests that generate the tax. 

If the estate tax is generated due to the residuary interests, the tax is charged among those residuary beneficiaries in proportion to the value each beneficiary receives.  If the residuary portion is insufficient to pay the tax, the remaining tax obligation is apportioned among the nonresiduary beneficiaries in proportion to the value of their respective interests that generate the tax.  Importantly, if a portion of the residuary estate qualifies for a deduction that does not generate an estate tax (i.e., a marital deduction), that portion is excluded from the tax calculation, effectively shifting the tax burden to the non-deductible interests. 

Flexibility with drafting.

Florida law allows a will or a trust to override the default apportionment rules, but the direction must be express.  Accordingly, if you want a different result, your will or revocable trust must clearly say so.  With the right planning and advice, your estate planning documents can do more than just reduce the overall tax bill, they can direct who bears the cost.  Careful drafting can shift the burden of tax among beneficiaries, preserve a marital or charitable plan, or ensure that one beneficiary is not disproportionately charged for taxes generated by another transfer.

If you would like to discuss how your estate planning documents address tax apportionment or explore planning strategies tailored to your situation, please contact our office at (561) 626-2101.