Estate Planning in Florida — Tax-Smart Wealth Protection

No — Florida has NO state estate tax, NO state inheritance tax, and NO state income tax. This makes Florida one of the most tax-friendly states for wealth preservation and is a major reason high-net-worth individuals relocate here. However, the federal estate tax (40% rate on amounts exceeding the exemption) still applies to all U.S. residents regardless of state. With the federal exemption dropping from $13.61M to ~$7M in 2026, Florida residents with estates over $7M will owe federal estate tax even though they owe nothing to the state.

Even without state estate tax, Florida residents need estate planning for: (1) Federal estate tax — 40% on amounts over ~$7M after 2026. (2) Probate avoidance — Florida probate is public, takes 6-12 months, and costs 3-6% of estate value. (3) Homestead complications — Florida’s homestead laws restrict how you can leave your home to non-spouse heirs. (4) Creditor protection — proper trust structuring extends Florida’s strong asset protection. (5) Incapacity planning — Florida’s humid climate and aging population make healthcare directives critical. (6) Multi-state issues — many Florida residents still own property in their former state.

Florida’s homestead provision is both a powerful protection and a potential trap: (1) Creditor protection — your primary residence is protected from most creditors regardless of value. (2) Property tax benefit — Save Our Homes cap limits assessment increases to 3% per year. (3) Estate restriction — if you’re married, you CANNOT leave your homestead to anyone other than your spouse (you can leave it to your spouse outright or in a trust for their benefit). (4) Trust transfer — you CAN transfer your homestead to a revocable trust without losing protections, but the trust must be properly drafted. (5) Portability — the Save Our Homes benefit can be transferred to a new home within 2 years.

For most Florida residents, a revocable living trust is the foundation — it avoids probate (saving 3-6% of estate value), maintains privacy, and provides incapacity protection. Beyond that: (1) For estates over $7M — add irrevocable trusts (SLATs, ILITs, dynasty trusts) to remove assets from your taxable estate. (2) For real estate investors — consider a land trust for privacy plus an LLC for liability protection, owned by your revocable trust. (3) For business owners — a combination of buy-sell agreements, FLPs, and GRATs to freeze business value. (4) For snowbirds — ensure your trust properly addresses property in multiple states to avoid ancillary probate.

If you’re moving from a state with estate tax (NY, MA, CT, etc.), establishing Florida domicile can save hundreds of thousands. To properly establish FL domicile: (1) File a Declaration of Domicile with your FL county clerk. (2) Get a FL driver’s license and register to vote in FL. (3) Register vehicles in FL. (4) Use FL address for all financial accounts, tax returns, and legal documents. (5) Spend more than 183 days in FL. (6) Move ‘near and dear’ items to FL. (7) Join FL clubs, churches, doctors. Critical: Your former state (especially NY, CT) may audit your domicile change. Keep detailed records of your FL presence.

Florida real estate is included in your federal taxable estate at fair market value. Protection strategies: (1) Qualified Personal Residence Trust (QPRT) — transfer your home to heirs at a fraction of current value. (2) Irrevocable trust ownership — removes property from your estate (but you lose homestead protection). (3) Family Limited Partnership — hold investment properties at 30-40% valuation discounts. (4) Installment sale to IDGT — sell appreciated property to a trust, freezing value for estate tax purposes. (5) Annual gifting of fractional interests — leverage discounts and annual exclusions. Note: Your homestead is best left in your revocable trust to preserve all protections.

Florida business owners face unique challenges: (1) Business valuation — get a formal appraisal to establish baseline and identify discount opportunities. (2) Succession planning — who takes over? Family? Key employees? Sale? (3) Buy-sell agreement — funded by life insurance to provide liquidity. (4) Entity structuring — FL LLCs and S-Corps have different estate planning implications. (5) Asset protection — FL’s strong LLC charging order protection can be leveraged in estate planning. (6) Key person insurance — ensures business continuity. (7) GRAT or installment sale — freeze business value for estate tax purposes while retaining income during transition.

Florida estate planning costs range by complexity: Basic package (will, POA, healthcare directive): $1,500–$3,000. Revocable living trust package: $3,000–$7,000. Complex planning (irrevocable trusts, FLPs, business succession): $10,000–$30,000+. The ROI is substantial — a $15,000 estate plan that saves $1.5M in federal estate taxes delivers a 100:1 return. Additionally, proper planning avoids Florida probate costs (3-6% of estate value) — for a $5M estate, that’s $150K–$300K in probate fees avoided.

If you die intestate (without a will) in Florida: (1) Your spouse gets everything if all children are also your spouse’s children. (2) If you have children from another relationship, your spouse gets 50% and children split 50%. (3) Your estate goes through probate — public record, 6-12 months, 3-6% in fees. (4) A court appoints a personal representative (may not be who you’d choose). (5) Minor children’s inheritance is court-supervised until age 18 — then they get everything outright (no trust protection). (6) Your homestead passes to your spouse, but with restrictions that may not match your wishes.

Long-term care in Florida averages $9,000–$12,000/month for nursing home care. Without planning, this can devastate an estate. Strategies: (1) Long-term care insurance — best purchased before age 60. (2) Medicaid planning — irrevocable trusts can protect assets while qualifying for Medicaid (5-year lookback period). (3) Life insurance with LTC riders — provides both death benefit and care funding. (4) Annuity strategies — can convert countable assets to income stream for Medicaid purposes. (5) Lady Bird deed — allows you to retain homestead while planning for Medicaid. Start planning early — the 5-year Medicaid lookback means you need to act well before care is needed.