Estate Planning · Sub-Topic

Florida Estate Tax Planning and Reduction

26 U.S.C. §§ 2001–2801 (federal estate, gift & GST tax); Fla. Const. art. VII, § 5; Fla. Stat. Ch. 198

Florida imposes no state estate tax and no inheritance tax. What remains is the federal estate tax — a flat 40% on everything above the exemption, which is $15 million per person in 2026. Most Florida families owe nothing. Families above that line, or approaching it, can usually reduce or eliminate the tax entirely with planning done while both spouses are alive.

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What it is

The federal estate tax is a transfer tax on the total value of everything you own or control at death — real estate, brokerage and bank accounts, retirement accounts, business interests, and, for most people surprisingly, the full death benefit of life insurance you own. That total is your "gross estate" under 26 U.S.C. § 2031. Debts, administration expenses, charitable gifts, and transfers to a surviving spouse come out of it to produce the taxable estate.

Against the taxable estate you apply the unified credit, which shelters the basic exclusion amount — $15 million per person for deaths in 2026, indexed for inflation in later years. The One Big Beautiful Bill Act of 2025 made that figure permanent, ending the scheduled 2026 sunset that had dominated estate tax planning for the prior decade. Everything above the exclusion is taxed at 40%.

The exclusion is "unified," meaning the same pot covers lifetime gifts and death transfers. Taxable gifts made during life — anything above the annual exclusion of $19,000 per recipient in 2026 — consume exclusion that would otherwise be available at death. A parallel generation-skipping transfer (GST) tax under Chapter 13 applies its own $15 million exemption to transfers that skip a generation, and it is not automatically allocated in the way most people assume.

Florida's own estate tax, in Fla. Stat. Ch. 198, was written to capture the old federal state death tax credit. That credit was phased out by Congress and disappeared entirely for deaths after December 31, 2004, and Fla. Const. art. VII, § 5 bars the Legislature from imposing a larger one. The practical result: a Florida decedent's estate owes Florida nothing. Florida also has no inheritance tax, so beneficiaries receive their inheritance free of state-level tax.

Two exceptions catch Florida families off guard. First, a Florida resident who owns real estate or tangible property physically located in a state that does have an estate or inheritance tax — New York, Massachusetts, Illinois, Pennsylvania, and about a dozen others — can owe that state's tax on that property. Second, a non-U.S.-citizen, non-domiciliary who owns Florida real estate gets an exemption of only $60,000, not $15 million, under 26 U.S.C. § 2102. Foreign owners of Central Florida property routinely discover this only after a death.

Federal Estate and Gift Tax Numbers for 2026

The figures below govern deaths and gifts occurring in 2026. They are indexed for inflation and change annually — confirm the current year's numbers before acting on them.

Item	2026 Figure	Notes
Federal estate & gift tax exemption	$15,000,000 per person	Basic exclusion amount for 2026 under the One Big Beautiful Bill Act; indexed for inflation thereafter.
Married couple's combined exemption	$30,000,000	Only if portability is properly elected on a timely Form 706 at the first death, or a credit shelter trust is used.
Top federal estate tax rate	40%	Flat rate on the taxable estate above the exemption.
Annual gift tax exclusion	$19,000 per recipient	$38,000 per recipient for a married couple electing to split gifts. No return required for present-interest gifts at or below this amount.
GST tax exemption	$15,000,000 per person	Separate exemption for transfers to grandchildren and later generations. Allocation is a return election, not automatic in every case.
Florida estate tax	$0 — none	Fla. Stat. Ch. 198 tracked the repealed federal credit; no Florida estate tax is due for deaths after December 31, 2004.
Florida inheritance tax	$0 — none	Florida has never imposed a tax on beneficiaries receiving an inheritance.
Non-resident alien exemption (U.S.-situs assets)	$60,000	26 U.S.C. § 2102. Applies to foreign owners of Florida real estate absent a favorable estate tax treaty.
Form 706 filing deadline	9 months after death	Automatic 6-month extension available on Form 4768. The extension extends time to file, not time to pay.

Figures are current as of 2026 and are provided for general information. Inflation adjustments and legislative changes occur regularly.

Who Actually Needs Estate Tax Planning in Florida

With a $15 million per-person exemption, the federal estate tax reaches a small fraction of Florida families. Planning is worth doing when one or more of the following is true:

Your combined net worth — including life insurance death benefits and retirement accounts — is above roughly $10 million, or is growing toward the exemption. Planning done early costs far less and moves far more value than planning done late.
You own a closely held business, professional practice, or commercial real estate that is hard to value and harder to sell. Illiquid estates face the tax with no cash to pay it, and the payment is due nine months after death.
You own concentrated or rapidly appreciating assets — pre-IPO equity, development land, a large real estate portfolio. Freezing today's value and shifting future growth out of the estate is where the largest savings come from.
You own real estate in a state that has its own estate or inheritance tax, even though you are a Florida resident. That state taxes the property regardless of your Florida domicile.
You have recently moved to Florida from a state with an estate or inheritance tax and want the domicile change to actually stick.
You are not a U.S. citizen, or your spouse is not a U.S. citizen. The unlimited marital deduction under § 2056 does not apply to a non-citizen spouse without a Qualified Domestic Trust (QDOT), and a non-domiciliary's exemption on U.S. property is $60,000.
You want to move wealth to grandchildren or later generations, which triggers the separate GST tax and requires deliberate exemption allocation.
Your spouse has died within the last five years and no Form 706 was filed. The unused exemption — potentially $15 million — may still be recoverable through a late portability election.

If your estate is comfortably below the exemption, the more valuable conversation is usually about basis, not estate tax. Assets held until death receive a stepped-up income tax basis under § 1014, which can be worth more to your children than any transfer tax maneuver. Aggressive lifetime gifting by a family that will never owe estate tax often costs the next generation real money in capital gains. See our Florida revocable trust and will page for the planning that fits most families.

Estate Tax Reduction Strategies We Use

There is no single estate tax strategy. Effective planning layers several techniques, sequenced around your asset mix, your liquidity, and how much control you are willing to give up. These are the tools that do the most work in Florida estates:

Portability of the Deceased Spouse's Unused Exemption

26 U.S.C. § 2010(c)(4); Rev. Proc. 2022-32

When the first spouse dies, any unused exemption can be transferred to the survivor — but only if a complete and timely Form 706 is filed making the election, even when no tax is owed and no return would otherwise be required. Missing it can waste $15 million of exemption. Rev. Proc. 2022-32 allows a simplified late election up to five years after death for estates not otherwise required to file, which rescues many families who did nothing at the first death. Portability does not apply to the GST exemption, which is one reason it is not a complete substitute for trust planning.

Credit Shelter (Bypass) Trust

Fla. Stat. Ch. 736; 26 U.S.C. § 2041

At the first death, an amount up to the deceased spouse's exemption funds a trust that pays income — and principal under an ascertainable standard — to the surviving spouse, but is not included in the survivor's estate at the second death. Unlike portability, everything the trust earns and appreciates after the first death also escapes estate tax, and the deceased spouse's GST exemption can be allocated to it. It also protects the children's inheritance if the survivor remarries. The trade-off is the loss of a second basis step-up on the trust assets, which is why many modern plans build in flexibility rather than mandating the funding.

Disclaimer and Clayton QTIP Structures

26 U.S.C. §§ 2518, 2056(b)(7); Treas. Reg. § 20.2056(b)-7(d)(3)

Rather than locking in a structure years before death, the plan can leave the decision to the surviving spouse or executor. A disclaimer trust lets the survivor decline assets within nine months, sending them into a bypass trust only if that is advantageous under the law and asset values in effect at the time. A Clayton QTIP goes further, letting the executor decide by election how much of the marital trust is treated as QTIP and how much drops into a credit shelter trust. Both convert a guess about future law into a decision made with actual facts.

Annual Exclusion and Direct-Payment Gifting

26 U.S.C. §§ 2503(b), 2503(e)

Gifts of $19,000 per recipient per year (2026) do not use exemption and do not require a gift tax return. A married couple can move $38,000 per recipient per year. On top of that, tuition paid directly to a school and medical expenses paid directly to a provider are unlimited and entirely excluded under § 2503(e) — the payment must go to the institution, not to the family member. A family with several children and grandchildren can shift meaningful value every year with no tax cost and no exemption used.

Spousal Lifetime Access Trust (SLAT)

26 U.S.C. §§ 2036, 2511; Fla. Stat. § 736.0505

One spouse makes a completed gift to an irrevocable trust for the benefit of the other spouse and the children. The gift and all future appreciation leave the taxable estate, while the family retains indirect access through distributions to the beneficiary spouse. SLATs are the most-used large-gift vehicle for married couples who want to lock in exemption without giving up all access. They require careful drafting to avoid the reciprocal trust doctrine when both spouses create one, and the access disappears on divorce or the beneficiary spouse's death — that risk has to be understood going in.

Irrevocable Life Insurance Trust (ILIT)

26 U.S.C. §§ 2042, 2035

Life insurance you own is fully includable in your gross estate — a $5 million policy adds $5 million to the taxable estate and, at 40%, $2 million of tax. A properly structured ILIT owns the policy instead, keeping the death benefit outside the estate while providing the family tax-free liquidity to pay the estate tax that is due. ILITs are the standard answer for illiquid estates built around a business or real estate. Transferring an existing policy into an ILIT triggers the three-year rule of § 2035, so new policies are generally issued to the trust from the outset.

Grantor Retained Annuity Trust (GRAT)

26 U.S.C. § 2702; Treas. Reg. § 25.2702-3

You transfer an appreciating asset to a trust and retain an annuity stream for a fixed term. If the asset outperforms the IRS § 7520 rate, the excess passes to your children with little or no gift tax and little or no exemption used. GRATs work best for concentrated positions expected to appreciate sharply — closely held stock before a liquidity event, or Florida real estate in a rising market. The principal risk is mortality: if you die during the term, the assets come back into the estate, which is why shorter rolling terms are common.

Qualified Personal Residence Trust (QPRT)

26 U.S.C. § 2702(a)(3)(A)(ii)

A residence or vacation home is transferred to a trust while you retain the right to live in it for a term of years. The gift is valued at a discount reflecting your retained use, so a high-value property moves to the next generation at a fraction of its worth — and all appreciation during the term is outside the estate. Well suited to Florida second homes and waterfront property. At the end of the term you must pay fair market rent to continue living there, which itself moves more value out of the estate.

Family Limited Partnership / LLC with Valuation Discounts

26 U.S.C. § 2704; Rev. Rul. 93-12

Family real estate or an operating business is contributed to an entity, and non-controlling interests are gifted or sold to children and trusts. Because a minority interest in a closely held entity cannot be sold freely or used to force distributions, it is worth less than a pro-rata slice of the underlying assets — discounts for lack of control and lack of marketability commonly run 15–35%. The structure must have a real non-tax business purpose and be respected in operation; entities run casually are regularly attacked under § 2036 and collapsed back into the estate.

Sale to an Intentionally Defective Grantor Trust (IDGT)

26 U.S.C. §§ 671–679; Rev. Rul. 85-13, Rev. Rul. 2004-64

Assets are sold to an irrevocable trust that is a grantor trust for income tax purposes but outside the estate for transfer tax purposes. The sale itself is not a taxable event because you are, in effect, selling to yourself for income tax purposes; the trust pays with a promissory note at the applicable federal rate. All appreciation above that rate accrues outside the estate, and your continued payment of the trust's income tax further reduces the estate without being treated as an additional gift. Frequently combined with discounted entity interests for compounding effect.

Charitable Remainder and Charitable Lead Trusts

26 U.S.C. §§ 664, 170, 2055, 2522

A charitable remainder trust pays you or your family an income stream for life or a term, with the remainder to charity — producing a current income tax deduction, deferring capital gain on the sale of an appreciated asset inside the trust, and removing the remainder from the taxable estate. A charitable lead trust runs the other direction, paying charity first and passing the remainder to family at a reduced transfer tax cost. Both are efficient answers when a low-basis, highly appreciated asset needs to be sold and charitable intent already exists.

GST Planning and Dynasty Trusts

26 U.S.C. §§ 2601–2664; Fla. Stat. § 689.225

Allocating GST exemption to a long-term trust removes the assets from the transfer tax system for generations, not just at the next death. Florida's rule against perpetuities permits trusts of up to 1,000 years for instruments executed on or after July 1, 2022, making Florida a favorable dynasty-trust jurisdiction. Allocation is the trap: automatic allocation rules do not cover every transfer, and a missed or misapplied allocation can subject a trust to a separate 40% tax at each generational level.

Business Succession, § 6166 Deferral, and § 2032A Valuation

26 U.S.C. §§ 6166, 2032A, 303

When a closely held business is more than 35% of the adjusted gross estate, § 6166 allows the tax attributable to it to be paid over as long as 14 years — interest only for the first five — at a below-market rate on the first tranche. Section 2032A permits farm and business real property to be valued at its actual use rather than its highest and best use, and § 303 allows a corporate redemption to fund taxes without dividend treatment. These provisions keep families from being forced to sell the business to pay the tax, but each has strict qualification and recapture rules that have to be planned for before death.

Basis Planning and the § 1014 Step-Up

26 U.S.C. § 1014

With a $15 million exemption, the more common mistake is now over-planning. Assets included in the estate at death receive a new income tax basis equal to date-of-death value, erasing a lifetime of unrealized capital gain. Gifting the same asset during life carries the old basis to the recipient. For families below the exemption — and for the assets a family above the exemption should deliberately leave in the estate — the right move is often to hold, use upstream gifts to older relatives, or build swap powers into existing irrevocable trusts to move low-basis assets back in before death.

These techniques are not alternatives to a Florida estate plan; they sit on top of one. The trust, will, powers of attorney, and health care documents still have to be right, the assets still have to be titled correctly, and the beneficiary designations still have to match. Tax planning built on an unfunded or defective foundation does not survive an audit.

Portability vs. Credit Shelter Trust

Aspect	Florida Estate Tax Planning and Reduction	Credit Shelter (Bypass) Trust
How the first spouse's exemption is preserved	Transferred to the survivor by election on Form 706	Used at the first death to fund an irrevocable trust
Post-death appreciation	Taxable in the survivor's estate	Escapes estate tax at the second death
Filing required at first death	Yes — a complete Form 706, even with no tax due	No election required; funding is governed by the trust
GST exemption preserved	No — GST exemption is not portable	Yes — allocable to the trust
Second basis step-up at survivor's death	Yes — assets are in the survivor's estate	No — trust assets keep their first-death basis
Protection if the survivor remarries	None — the survivor may redirect everything; the last deceased spouse rule can also forfeit the ported exemption	Strong — remainder beneficiaries are fixed at the first death
Creditor protection for the surviving spouse	None — assets are owned outright	Yes — properly drafted trust assets are protected
Ongoing administration	None	Separate trust with its own tax return and trustee duties
Best suited to	Estates comfortably under the exemption where basis matters most	Larger estates, appreciating assets, blended families, GST planning

How We Approach an Estate Tax Reduction Engagement

Estate tax planning is a modeling exercise before it is a drafting exercise. The first question is never which trust to use — it is what the estate is actually worth, how it is expected to grow, and how much tax it would generate if nothing changed. Only then does it make sense to talk about techniques.

Step 1: Build the balance sheet. Every asset at fair market value, with basis, title, and beneficiary designation for each — including life insurance death benefits, retirement accounts, deferred compensation, and business interests that people routinely leave off the list.
Step 2: Run the baseline projection. What is the taxable estate today, what does it look like in 10 and 20 years at a realistic growth rate, and what tax does that produce at 40%? This number is what justifies — or does not justify — everything that follows.
Step 3: Test liquidity. If the tax came due nine months from now, what would the family sell? An estate that is 80% closely held business or real estate has a liquidity problem before it has a tax problem.
Step 4: Confirm remaining exemption. Prior taxable gifts, prior Forms 709, GST exemption already allocated, and any deceased spouse's unused exemption available through portability — including whether a late election under Rev. Proc. 2022-32 is still open.
Step 5: Select and sequence the techniques. Gifting, SLAT, ILIT, GRAT, QPRT, entity discounts, charitable structures — chosen for this asset mix, and staged so that valuations, transfers, and elections happen in a defensible order.
Step 6: Obtain qualified appraisals. Closely held interests, real estate, and discounted entity interests need contemporaneous qualified appraisals to start the gift tax statute of limitations running and to withstand review.
Step 7: Draft and execute. Trust agreements, entity documents, deeds, assignments, promissory notes, and the amendments to the underlying will and revocable trust that keep the plan coherent.
Step 8: Fund and report. Retitle the assets, issue the Crummey notices, file the Forms 709 with adequate disclosure, and make the GST allocations. A technique that is documented but not funded produces no tax benefit.
Step 9: Review annually. Exemptions are indexed, asset values move, family circumstances change, and Congress revisits transfer taxes regularly. Plans built for a different exemption level should be re-examined, not assumed still correct.

Why work with an attorney

Essential, and generally alongside your CPA and financial advisor rather than instead of them. Federal transfer tax planning is a technical, penalty-bearing area where the difference between a valid structure and an includable one is drafting language and administrative follow-through. The recurring failures we see are not exotic: a Form 706 never filed at the first death, forfeiting portability; an existing life insurance policy transferred to an ILIT within three years of death and pulled back under § 2035; a family LLC operated as a personal checkbook and collapsed under § 2036; Crummey notices never sent; GST exemption never allocated; a SLAT drafted so symmetrically to a spouse's SLAT that the reciprocal trust doctrine unwinds both. Every one of those is avoidable at the drafting and administration stage, and effectively unfixable after death. Our firm has practiced Florida estate and trust law in Orlando since 1928, and we coordinate the tax planning with the underlying Florida estate plan and eventual trust administration so the structure holds together when it is finally tested.

Frequently Asked Questions

Does Florida have an estate tax?

No. Florida imposes no state estate tax. The tax in Fla. Stat. Ch. 198 was tied to the federal state death tax credit, which Congress phased out entirely for deaths after December 31, 2004, and Fla. Const. art. VII, § 5 prohibits the Legislature from imposing a larger one. Only the federal estate tax can apply to a Florida decedent.

Does Florida have an inheritance tax?

No. Florida has no inheritance tax, so beneficiaries owe no Florida tax on what they receive. Note the distinction: an estate tax is paid by the estate before distribution, while an inheritance tax is paid by the recipient. Florida imposes neither. Inherited assets are also not taxable income to the beneficiary for federal income tax purposes, although income earned by the assets after death is.

How much can you inherit in Florida without paying tax?

As a beneficiary, any amount — Florida imposes no inheritance tax and the receipt of an inheritance is not federal taxable income. The tax question sits with the estate, not the beneficiary. A Florida estate owes federal estate tax only on the value above the decedent's remaining exemption, which is $15 million per person in 2026, and the rate above that is 40%.

What is the federal estate tax exemption in 2026?

$15 million per person, or $30 million for a married couple that preserves both exemptions through portability or a credit shelter trust. The One Big Beautiful Bill Act of 2025 set that amount permanently beginning in 2026 and indexed it for inflation going forward, eliminating the sunset to roughly $7 million that had been scheduled. The rate on the excess is 40%.

How do I avoid estate tax in Florida?

For the large majority of Florida families there is nothing to avoid — the estate is below the exemption and no federal estate tax is owed. Above that line, the tax is reduced by preserving both spouses' exemptions, making annual exclusion gifts and direct tuition and medical payments, moving future appreciation out of the estate through SLATs, GRATs, QPRTs, or sales to grantor trusts, holding life insurance in an ILIT so the death benefit is not taxed, using valuation discounts on closely held entities, and directing charitable gifts through CRTs or CLTs. Which combination fits depends entirely on your asset mix and how much control you are prepared to release.

Is life insurance subject to estate tax in Florida?

Yes, if you own the policy. Under 26 U.S.C. § 2042 the entire death benefit of a policy you hold incidents of ownership in is included in your gross estate — which surprises many families, because the proceeds are income tax free. A $5 million policy adds $5 million to a taxable estate and, at 40%, $2 million of tax. Placing the policy in an irrevocable life insurance trust keeps it out of the estate. Transferring an existing policy starts a three-year clock under § 2035, so the trust should generally apply for and own the policy from the beginning.

What is portability, and what happens if we missed it?

Portability lets a surviving spouse use the deceased spouse's unused exemption, but only if a complete Form 706 is filed electing it — even when no tax is due. Estates not otherwise required to file can make the election late under Rev. Proc. 2022-32 for up to five years after the date of death, which recovers exemption for many families who filed nothing at the first death. Beyond five years, relief requires a private letter ruling. If your spouse died within the last five years and no Form 706 was filed, this is worth reviewing immediately.

I moved to Florida from New York. Do I still owe estate tax there?

Possibly. Establishing Florida domicile ends your former state's ability to tax your intangible assets, but a state where you still own real estate or tangible personal property can tax that property regardless of where you live. States with their own estate or inheritance tax also examine domicile changes closely. A defensible move includes filing a Florida Declaration of Domicile, changing your driver's license, voter registration, vehicle registrations, homestead exemption, and estate planning documents, and shifting the actual center of your life — not just a mailing address.

My spouse is not a U.S. citizen. Does that change anything?

Significantly. The unlimited marital deduction under § 2056 is unavailable for transfers to a non-citizen surviving spouse, on the theory that the assets could leave the U.S. tax system. Transfers instead need to pass through a Qualified Domestic Trust (QDOT) with a U.S. trustee, which defers the tax until principal distributions or the survivor's death. A larger annual gift exclusion applies to gifts to a non-citizen spouse. Plans drafted without accounting for citizenship regularly produce tax that could have been avoided.

I am not a U.S. resident but I own a home in Orlando. Am I exposed?

Yes, and the exposure is much larger than most owners expect. A non-resident, non-citizen decedent gets an exemption of only $60,000 against U.S.-situs assets under 26 U.S.C. § 2102 — not $15 million — and Florida real estate is U.S.-situs property. A $1 million Central Florida home can generate several hundred thousand dollars of federal estate tax. An applicable estate tax treaty may improve the result, and ownership structures can change the analysis. This should be addressed before purchase where possible.

When is the estate tax return due, and who pays the tax?

Form 706 is due nine months after the date of death, with an automatic six-month filing extension available on Form 4768. The extension postpones filing, not payment — interest runs on tax not paid at nine months. The personal representative is responsible for filing and for paying the tax from estate assets before distribution, and can face personal liability for distributing before the tax is satisfied. Section 6166 allows extended installment payment when a closely held business makes up more than 35% of the adjusted gross estate.

Does a revocable living trust avoid estate tax?

No. A revocable trust avoids probate, not estate tax. Because you keep the power to revoke it, everything in it is included in your gross estate under § 2038. Estate tax reduction requires giving up control — typically through irrevocable structures — or preserving exemptions through the trust's post-death distribution provisions. A revocable trust is still the right foundation; the tax planning is built into and around it. See our revocable trust versus will comparison.

Should I gift assets to my children now to reduce estate tax?

Only if you will actually be subject to estate tax. Gifted assets carry your original basis to the recipient, while assets held until death receive a stepped-up basis under § 1014 that erases unrealized capital gain. A family below the $15 million exemption that gifts appreciated stock or long-held real estate can hand its children a capital gains bill in exchange for an estate tax saving of zero. Annual exclusion gifts of cash, and gifts of assets with little built-in gain, are a different matter. The gift-versus-hold analysis should be run on the specific asset.

What is the generation-skipping transfer tax?

A separate 40% tax under Chapter 13 on transfers that skip a generation — typically gifts or bequests to grandchildren, or trusts that benefit them. It applies on top of the estate and gift tax and has its own $15 million exemption. The exemption is not portable between spouses and is not automatically allocated to every transfer, so multigenerational and dynasty trusts require deliberate allocation on the gift or estate tax return. Florida's 1,000-year perpetuities period under Fla. Stat. § 689.225 makes it an attractive situs for trusts designed to hold GST-exempt assets across generations.

The information on this page is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Florida law changes. Consult a licensed Florida attorney for guidance specific to your matter.

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