Florida imposes no state estate tax, no inheritance tax, and no gift tax, so Florida residents plan around only the federal estate and gift tax system. That system shares a single lifetime exemption between gifts you make while living and the estate you leave at death, and it taxes the excess at rates up to 40%. For most Florida households the practical work is not paying tax but proving residency, coordinating exemptions between spouses, and handling real estate owned in states that still tax estates.
I have spent years sitting across the table from clients who assumed that retiring to Florida solved their estate tax problem entirely. Sometimes it does. Often it doesn’t, because the condo in Manhattan or the lake house in Connecticut never moved south with them. This article walks through how the federal rules actually apply to Florida residents, where dual-state ownership creates exposure, and which gifting strategies do real work versus which ones just feel productive.
Why Florida Residency Matters for Estate Tax
Florida abolished its estate tax in 2005 when the federal credit it was tied to disappeared. The Florida Constitution, Article VII, Section 5, actually prohibits the state from levying an estate or inheritance tax beyond what federal law would otherwise credit back. There is nothing to revive. That is a genuine, durable advantage, and it is one reason so many high-net-worth families establish domicile here.
But “I have a Florida driver’s license” is not the same as “I am a Florida domiciliary for tax purposes.” States like New York and New Jersey are aggressive about residency audits, and they look at where you actually live, vote, bank, see your doctor, and keep your treasured possessions. If you split time and die with sloppy records, a former home state may argue you never truly left.
To establish and document Florida domicile, most clients should:
- File a Declaration of Domicile with the clerk of court under Florida Statutes Section 222.17.
- Register to vote and actually vote in Florida.
- Obtain Florida driver’s licenses and register vehicles here.
- File the homestead exemption on a Florida residence (this also brings creditor protection under Article X, Section 4 of the Florida Constitution).
- Move banking, primary physicians, estate planning documents, and the “center of gravity” of life to Florida.
- Spend more than half the year in-state and keep a calendar or records that prove it.
Domicile is a factual question decided on the totality of the evidence. The Declaration of Domicile is helpful, but no single document is a magic shield. Build a consistent record.
How the Federal Estate and Gift Tax Actually Works
The federal estate tax and the federal gift tax are unified. You get one lifetime exemption that covers taxable gifts made during life plus the value of your taxable estate at death. For 2024 that exemption is $13.61 million per individual; for 2025 it is $13.99 million, indexed annually for inflation. A married couple can effectively shield roughly double that amount with proper planning. Value above the exemption is taxed at a top federal rate of 40%.
Two features matter enormously for Florida residents:
The Annual Gift Tax Exclusion
Separate from the lifetime exemption, you can give any number of people a set amount each year with no gift tax filing and no use of your lifetime exemption. That annual exclusion is $18,000 per recipient in 2024 and $19,000 in 2025. A married couple can “split gifts” and give double per recipient. Give to four children and four grandchildren, and a couple can move well over $300,000 out of their taxable estate in a single year using 2025 figures, every year, tax-free.
Portability of the Spousal Exemption
When the first spouse dies, the survivor can inherit the deceased spouse’s unused exemption. This is “portability,” and it is claimed by filing a federal estate tax return (Form 706) and making the DSUE election, even when no tax is due. Skipping that filing because “we’re nowhere near the threshold” is one of the most common and most expensive mistakes I see. It forfeits millions in exemption that the surviving spouse may need later, especially if assets appreciate.
The Sunset: Why 2026 Is a Planning Deadline
The historically high exemption is not permanent. Under the 2017 Tax Cuts and Jobs Act, the doubled exemption is scheduled to “sunset” after December 31, 2025, reverting to roughly half its current level (estimated in the $7 million range per person after inflation adjustment) unless Congress acts. The IRS has confirmed in regulations that gifts made under the higher exemption will not be “clawed back” if the exemption later drops. In plain terms: use it or lose it.
That anti-clawback rule rewards large lifetime gifts made now. For families well above the projected post-sunset threshold, gifting in 2025 can lock in exemption that would otherwise evaporate. This is not a reason to give away assets you need for retirement. It is a reason to model the numbers carefully and act while the window is open.
Gifting Strategies That Do Real Work
Gifting is not just writing checks. Used well, it shifts both the asset and its future appreciation out of your taxable estate. Used poorly, it triggers capital gains problems and family friction. The strategies below are the ones I return to most often.
1. Systematic Annual Exclusion Gifting
Quiet, simple, and powerful over time. Annual exclusion gifts compound. A couple giving to multiple descendants every year can move seven figures out of the estate over a decade without filing a single gift tax return or touching the lifetime exemption.
2. Irrevocable Trusts
An irrevocable trust removes assets from your taxable estate while letting you control how and when beneficiaries receive them. Common vehicles include the Irrevocable Life Insurance Trust (ILIT), which keeps life insurance death benefits out of the estate, and the Spousal Lifetime Access Trust (SLAT), which lets one spouse make a large completed gift while the other spouse retains indirect access. Florida’s trust law, codified in Chapter 736 of the Florida Statutes (the Florida Trust Code), governs these instruments.
3. Grantor Retained Annuity Trusts (GRATs) and Family Entities
For appreciating assets, a GRAT can pass future growth to heirs at little or no gift tax cost. Family limited partnerships and LLCs can also support valuation discounts for lack of marketability and control, though the IRS scrutinizes these closely and they must have real business substance.
4. 529 Plans and Direct Payments
You can superfund a 529 education account with up to five years of annual exclusion gifts at once. Separately, payments made directly to a school for tuition or to a provider for medical care are not gifts at all under the unlimited education and medical exclusion. Pay the university or hospital directly, never reimburse the relative.
The Step-Up in Basis Tradeoff
Here is the counterweight that DIY gifters miss. When you gift an appreciated asset during life, the recipient takes your original cost basis (carryover basis) and inherits the built-in capital gains. When an asset passes at death, it generally receives a “step-up” to fair market value under Internal Revenue Code Section 1014, wiping out unrealized gains.
So for families comfortably under the estate tax exemption, gifting low-basis assets can be a mistake: you trade a nonexistent estate tax problem for a real capital gains tax bill. The right answer depends on your total net worth, the asset’s basis, and your time horizon. This is exactly where general rules fail and individualized analysis earns its keep.
The Dual-State Trap: Out-of-State Real Estate
This is the issue I see most often with our South Florida clientele, and it deserves its own warning. Even a perfect Florida domicile does not erase estate tax on real property located in another state. A non-domiciliary who owns real estate in a state with its own estate tax can face that state’s tax on the in-state property, plus an ancillary probate proceeding in that state.
Several states a Florida snowbird is likely to own property in still impose their own estate tax with thresholds far below the federal level, including New York, Connecticut, Massachusetts, Illinois, Maine, and others. New York’s “cliff” is particularly harsh: if a taxable estate exceeds the exemption by more than 5%, the exemption can vanish entirely and the whole estate is taxed.
If you own a home, condo, or investment property up north, you need coordinated planning in both jurisdictions. Strategies include holding the out-of-state real estate through an LLC or trust so it passes as an intangible interest rather than as in-state real property, and using techniques like retained life estates. Our colleagues at Morgan Legal’s New York office handle exactly this kind of cross-border structuring; their overview of is a useful starting point for anyone holding a New York property while domiciled in Florida. Coordinating your Florida documents with proper New York instruments, including a valid , prevents the ancillary-probate headache your heirs would otherwise inherit.
For the Florida side of the plan, our firm and our partners coordinate the trusts, wills, and homestead strategy; you can review the scope of that work on the .
Putting It Together for a Florida Resident
A sound plan for a dual-state Florida family usually layers several of these tools:
- Lock down domicile with the Declaration of Domicile, homestead, and a consistent factual record.
- Coordinate the spousal exemptions so portability is preserved and both exemptions are used efficiently.
- Run systematic annual gifts to shrink the estate quietly over time.
- Evaluate the sunset window for larger lifetime gifts if your net worth is in or above the danger zone.
- Re-title out-of-state real estate through entities or trusts to avoid foreign-state estate tax and ancillary probate.
- Weigh basis step-up against gifting asset by asset, not by reflex.
None of this is one-size-fits-all, and the numbers change every year. If you are sorting out the foundational documents first, start with our guides on wills and Florida probate, then bring your full picture, including every out-of-state deed, to a planning session. You can reach us through our contact page to map the strategy to your actual assets.
This article is general information, not legal or tax advice. Estate and gift tax figures are indexed annually and subject to legislative change; confirm current numbers with a Florida attorney or CPA before acting.
Frequently Asked Questions
Does Florida have an estate tax or inheritance tax?
No. Florida has no estate tax, no inheritance tax, and no gift tax. Article VII, Section 5 of the Florida Constitution prohibits the state from levying an estate tax beyond the now-defunct federal credit. Florida residents plan only around the federal estate and gift tax system.
How much can I gift each year without paying gift tax?
You can give each recipient up to the annual exclusion amount ($18,000 in 2024, $19,000 in 2025) with no gift tax and no use of your lifetime exemption. Married couples can split gifts to double that per recipient. Direct payments of tuition or medical bills are unlimited and not counted as gifts.
Will moving to Florida protect my out-of-state property from estate tax?
Not by itself. Real estate physically located in another state can still be subject to that state’s estate tax and ancillary probate, even if you are a Florida domiciliary. States like New York and Connecticut impose their own estate taxes. Holding the property through an LLC or trust, or using a retained life estate, can help, but it requires coordinated planning in both states.
What happens to the federal estate tax exemption after 2025?
Under the 2017 Tax Cuts and Jobs Act, the doubled exemption is scheduled to sunset after December 31, 2025, dropping to roughly half its current level (estimated around $7 million per person) unless Congress acts. The IRS has confirmed there is no clawback on gifts made under the higher exemption, which makes 2025 an important planning window for large estates.
Should I gift appreciated assets during my lifetime?
Not always. Gifted assets carry your original cost basis, so the recipient inherits the built-in capital gains. Assets passing at death generally get a step-up to fair market value under IRC Section 1014, erasing those gains. For families under the estate tax exemption, gifting low-basis assets can create a capital gains bill while solving an estate tax problem you do not have. The right answer is asset-specific.
For more on our Florida practice, see our overview of Florida estate planning. Morgan Legal Group's affiliated New York office also handles special needs planning in New York.
