Skip to Content Top

Estate Planning in Florida: What You Need to Know About Taxes and Inheritance

two people discussing documents

Florida is known for its sunny weather, sandy beaches, and favorable tax environment. However, when it comes to estate planning, it's essential to understand the intricacies of the state's tax laws to ensure you protect your inheritance and minimize your tax liability. This blog post will explore key strategies for navigating Florida's estate tax landscape and provide useful tips for safeguarding your assets.

1. Understand Florida's lack of estate and inheritance taxes

One of the most attractive aspects of estate planning in Florida is the absence of state-level estate or inheritance taxes. This means that when you pass away, your heirs will not be subject to any state taxes on the inheritance they receive. However, it's important to note that federal estate taxes may still apply, depending on the size of your estate. As of 2021, the federal estate tax exemption is $11.7 million for individuals and $23.4 million for married couples. Estates exceeding these thresholds may be subject to federal estate taxes of up to 40%.

2. Leverage Florida's homestead exemption

Florida's homestead exemption is a powerful tool for protecting your primary residence from creditors and reducing your property tax burden. The exemption allows homeowners to exempt up to $50,000 of their home's assessed value from property taxes. Additionally, the homestead exemption protects your home from being seized by creditors, with some exceptions, such as IRS liens and mortgage foreclosures. To qualify for the homestead exemption, you must be a Florida resident and use the property as your primary residence.

3. Utilize trusts to minimize federal estate taxes

For estates that exceed the federal estate tax exemption, utilizing trusts can be an effective way to minimize tax liability. Trusts allow you to transfer assets to beneficiaries while maintaining control over the assets' distribution. Some common trusts used for estate planning in Florida include:

  • Revocable living trusts: These trusts can be altered or revoked during your lifetime and allow you to avoid probate, maintain privacy, and provide for the management of your assets in the event of incapacity.
  • Irrevocable life insurance trusts (ILIT): By placing your life insurance policy in an ILIT, the proceeds from the policy will not be included in your taxable estate, potentially saving your beneficiaries from significant estate taxes.
  • Charitable remainder trusts (CRT): These trusts provide income to beneficiaries for a specified period, after which the remaining assets are donated to a designated charity. CRTs can help reduce your taxable estate while also supporting a charitable cause.

4. Plan for potential changes to estate tax laws

Estate tax laws are subject to change, and it's important to stay informed about potential shifts in legislation that could impact your estate planning strategy. For example, the federal estate tax exemption is set to revert to its pre-2018 level of $5 million (adjusted for inflation) in 2026, unless Congress takes action to extend the current exemption. By working with an experienced estate planning attorney, you can ensure that your estate plan is flexible and adaptable to changes in tax laws.

5. Consult with an experienced estate planning attorney

Navigating Florida's estate tax landscape can be complex, and it's crucial to work with an experienced estate planning attorney to ensure your assets are protected and your tax liability is minimized. At Bilu Law, we specialize in estate planning in Florida and can help you develop a comprehensive plan tailored to your unique needs and goals. Contact us today to schedule a consultation and learn more about how we can help you safeguard your inheritance.