Estate and Gift Tax Planning in Miami, Florida

Estate and gift tax planning is the process of structuring your wealth transfers to minimize the tax burden on your estate and your beneficiaries. At the Law Offices of Albert Goodwin, PA, we help individuals and families throughout South Florida develop tax-efficient estate plans that preserve wealth across generations. Whether your estate is approaching the federal exemption threshold or you simply want to take advantage of available strategies, proper tax planning can save your family millions of dollars in unnecessary taxes.

Florida offers one of the most favorable tax environments in the nation for estate planning. Unlike many states that impose their own estate or inheritance taxes, Florida imposes neither. When combined with strategic use of the federal estate and gift tax rules, Florida residents are uniquely positioned to transfer wealth to their loved ones with minimal tax consequences.

Florida Has No State Estate Tax or Inheritance Tax

One of the most significant advantages of being a Florida resident is that the state does not impose an estate tax or an inheritance tax. Prior to 2005, Florida collected a state estate tax equal to the federal credit for state death taxes, commonly called a "pick-up" or "sponge" tax. When the federal government phased out that credit, Florida's estate tax effectively disappeared. The Florida Legislature chose not to enact a stand-alone state estate tax, and Article VII, Section 5 of the Florida Constitution prohibits the imposition of a personal income tax, further reinforcing the state's tax-friendly posture.

This stands in sharp contrast to states like New York, Massachusetts, Connecticut, Illinois, Maryland, and others that impose their own estate taxes, often with exemption thresholds far below the federal level. In New York, for example, estates exceeding roughly $6.94 million face state estate tax, and a "cliff" provision can cause the entire estate to become taxable if it exceeds the exemption by more than 5%. Florida residents face no such concern. This is one reason why high-net-worth individuals relocate to Florida as part of their estate planning strategy.

The Federal Estate Tax

While Florida does not impose its own estate tax, the federal estate tax still applies to Florida residents whose estates exceed the applicable exemption amount. Under the Internal Revenue Code § 2001, the federal government imposes an estate tax on the transfer of a decedent's taxable estate. The taxable estate is calculated by taking the gross estate (all assets the decedent owned or had an interest in at death), subtracting allowable deductions (debts, funeral expenses, charitable bequests, and the marital deduction), and applying the applicable tax rate.

The Tax Cuts and Jobs Act of 2017 (TCJA) roughly doubled the federal estate tax exemption. For 2025, the exemption is approximately $13.99 million per individual, or approximately $27.98 million for a married couple. Estates that exceed this exemption are taxed at a top marginal rate of 40%. However, the TCJA's increased exemption is scheduled to sunset on December 31, 2025, which would reduce the exemption to approximately half of the current amount, adjusted for inflation. This sunset provision makes advance planning critically important for families with estates in the $7 million to $14 million range.

The Federal Gift Tax

The federal gift tax, governed by IRC § 2501, works in tandem with the estate tax to prevent individuals from avoiding estate taxes simply by giving away their assets before death. The gift tax and estate tax share a unified exemption, meaning that taxable gifts made during your lifetime reduce the amount of exemption available at death.

Annual Exclusion

Under IRC § 2503(b), every individual can make gifts up to the annual exclusion amount to any number of recipients each year without incurring gift tax or reducing their lifetime exemption. For 2025, the annual exclusion is $19,000 per recipient. A married couple can combine their exclusions through gift splitting under § 2513, allowing them to give up to $38,000 per recipient per year. Over time, consistent annual gifting can transfer substantial wealth outside of the taxable estate without using any of the lifetime exemption.

Lifetime Exemption

Gifts exceeding the annual exclusion count against the donor's lifetime gift and estate tax exemption. If a donor makes a gift of $119,000 to one person in a single year, $100,000 of that gift ($119,000 minus the $19,000 annual exclusion) reduces the donor's remaining lifetime exemption. No actual gift tax is owed until the entire lifetime exemption has been exhausted, at which point additional gifts are taxed at rates up to 40%.

Portability of the Estate Tax Exemption Between Spouses

One of the most valuable provisions in modern estate tax law is portability, codified in IRC § 2010(c)(4). Portability allows a surviving spouse to use any unused portion of the deceased spouse's estate tax exemption, known as the deceased spousal unused exclusion amount (DSUE). For example, if the first spouse to die used only $4 million of the $13.99 million exemption, the surviving spouse can add the remaining $9.99 million to their own exemption, resulting in a combined exemption of approximately $23.98 million.

However, portability is not automatic. The executor of the first spouse's estate must file a federal estate tax return (IRS Form 706) and elect portability, even if no estate tax is owed. Failing to file this return means the unused exemption is lost forever. We strongly advise every surviving spouse to consult an attorney about filing Form 706, regardless of the size of the estate.

Step-Up in Basis

Under IRC § 1014, assets included in a decedent's estate receive a "step-up" in basis to their fair market value at the date of death. This means that if you purchased stock for $100,000 and it is worth $1 million at the time of your death, your beneficiaries inherit the stock with a basis of $1 million. If they sell it immediately, they owe no capital gains tax. This step-up in basis is an enormously valuable benefit that must be weighed against any tax planning strategy that removes assets from the taxable estate. Gifting assets during your lifetime, for instance, does not provide a step-up in basis; instead, the recipient takes the donor's carryover basis under IRC § 1015.

Effective estate tax planning balances the potential estate tax savings of removing assets from the estate against the loss of the step-up in basis. For many families, especially those whose estates fall below the federal exemption, retaining assets in the estate to obtain the step-up may be the better strategy.

Estate and Gift Tax Planning Strategies

There are numerous strategies available to reduce estate and gift taxes. The right approach depends on the size of your estate, your family circumstances, your charitable goals, and the types of assets you own. Below are several of the most effective techniques.

Irrevocable Life Insurance Trusts (ILITs)

Life insurance proceeds are included in your gross estate if you own the policy or retain any incidents of ownership at the time of your death under IRC § 2042. For individuals with large estates, this can push the estate above the exemption threshold. An irrevocable life insurance trust (ILIT) solves this problem by owning the policy on your behalf. Because the trust, not you, owns the policy, the death benefit is excluded from your taxable estate.

The trustee of the ILIT applies the insurance proceeds for the benefit of your family according to the terms you established when creating the trust. An ILIT can provide liquidity to pay estate taxes, fund ongoing family needs, and keep millions of dollars out of the taxable estate. It is important to note that if you transfer an existing policy to an ILIT, you must survive at least three years after the transfer for the proceeds to be excluded from your estate under the three-year rule of IRC § 2035. For this reason, many planners recommend that the ILIT purchase a new policy directly.

Grantor Retained Annuity Trusts (GRATs)

A GRAT is an irrevocable trust in which the grantor transfers assets and retains the right to receive an annuity payment for a fixed term of years. At the end of the term, whatever remains in the trust passes to the beneficiaries, often with little or no gift tax. The key to a successful GRAT is that if the assets inside the trust appreciate at a rate exceeding the IRS Section 7520 interest rate, the excess growth passes to beneficiaries transfer-tax-free. GRATs are particularly effective for transferring rapidly appreciating assets such as closely held business interests or concentrated stock positions.

Charitable Trusts

Charitable trusts allow you to support causes you care about while reducing your estate and income tax burden. A charitable remainder trust (CRT) provides you or your beneficiaries with an income stream for a period of years or for life, with the remainder passing to charity. This generates an income tax deduction and removes the assets from your taxable estate. Conversely, a charitable lead trust (CLT) provides income to charity for a term, with the remainder passing to your family, often at a significantly reduced transfer tax cost. Both vehicles can be powerful components of a comprehensive estate tax plan.

Family Limited Partnerships and LLCs

A family limited partnership (FLP) or family limited liability company (LLC) allows you to transfer business interests or investment assets to the next generation at a discounted value. Because limited partnership interests lack control and marketability, they are often valued at a discount for gift and estate tax purposes. A parent might transfer a 30% limited partnership interest valued at $3 million but, after applying appropriate discounts for lack of control and lack of marketability, report the gift at $2.1 million for tax purposes. The IRS scrutinizes these arrangements, so they must be established and operated with legitimate business purposes and proper formalities.

Annual Gifting Programs

One of the simplest and most effective estate tax reduction strategies is a systematic annual gifting program. By making annual exclusion gifts of $19,000 per recipient (or $38,000 for married couples using gift splitting), a family can transfer significant wealth over time. For a couple with three children and six grandchildren, annual exclusion gifts alone can move $342,000 per year out of the taxable estate. Over a decade, that amounts to $3.42 million in tax-free transfers, not counting any growth on the gifted assets.

Gifts can be made outright or in trust. Gifts made to irrevocable trusts, such as Crummey trusts, can qualify for the annual exclusion while keeping the assets protected from creditors and controlled by a trustee. Contributions to 529 education savings plans also qualify for the annual exclusion and can be front-loaded with up to five years of gifts in a single year.

Generation-Skipping Transfer Tax

The generation-skipping transfer (GST) tax, codified in IRC § 2601, is a separate tax imposed on transfers to individuals who are two or more generations below the transferor, such as grandchildren or great-grandchildren. The GST tax is designed to prevent families from avoiding a layer of estate tax by skipping a generation. The GST tax rate is a flat 40%, imposed in addition to any applicable gift or estate tax.

The GST tax applies to three types of transfers: direct skips (outright transfers to skip persons), taxable distributions (distributions from a trust to a skip person), and taxable terminations (when a trust interest terminates and only skip persons remain as beneficiaries). Understanding which type of transfer triggers the tax is essential for proper planning.

Each individual has a GST exemption equal to the estate tax exemption (approximately $13.99 million for 2025). Proper allocation of the GST exemption is critical. When the exemption is allocated to a trust, the trust's inclusion ratio becomes zero, meaning distributions from the trust to grandchildren and subsequent generations are free of GST tax. Dynasty trusts, which are designed to last for multiple generations, are a powerful vehicle for deploying the GST exemption. Florida law permits trusts to last up to 360 years under Florida Statutes § 689.225, making the state an attractive jurisdiction for dynasty trusts.

Florida's Favorable Tax Environment for Estate Planning

Florida's combination of no state income tax, no state estate tax, no inheritance tax, strong homestead protections, and favorable trust laws makes it one of the premier jurisdictions for estate planning in the United States. Individuals who establish Florida domicile and take advantage of these benefits can achieve results that would be impossible in higher-tax states. Specific advantages include:

• No state-level tax on trust income. Trusts administered in Florida are not subject to state income tax, unlike trusts in states like California, New Jersey, or Connecticut. This makes Florida an ideal situs for irrevocable trusts that accumulate income.
• Long trust duration. Florida's 360-year rule against perpetuities allows dynasty trusts to shelter wealth from estate and GST taxes across many generations.
• Asset protection. Florida's generous homestead exemption, tenancy by the entireties protections, and unlimited exemption for certain retirement accounts provide additional tools for wealth preservation.
• No intangible personal property tax. Florida repealed its intangible personal property tax in 2007, eliminating a former tax on stocks, bonds, and other financial assets.

For individuals considering a move to Florida, proper domicile planning is essential. Simply purchasing a home in Florida is not sufficient. You must demonstrate an intent to make Florida your permanent home by taking steps such as registering to vote, obtaining a Florida driver's license, filing a declaration of domicile with the county clerk under Florida Statutes § 222.17, and updating your estate planning documents to reflect Florida law.

Individuals who split time between Florida and a high-tax state should be especially careful. States like New York aggressively audit former residents who claim to have changed domicile. A comprehensive domicile plan, supported by proper documentation, is essential to avoid being taxed by two states on the same estate.

Planning for Special Needs Beneficiaries

Tax planning becomes more complex when one of your beneficiaries has special needs and receives government benefits. A special needs trust can be structured to hold assets for a disabled beneficiary without disqualifying them from Medicaid or Supplemental Security Income. When integrated into your estate tax plan, a special needs trust can receive assets through your will, your revocable trust, or directly through lifetime gifts, all while preserving the beneficiary's eligibility for public benefits.

The Role of Trust Administration

After a grantor's death, proper trust administration is essential to ensure that tax planning strategies are executed correctly. The successor trustee must understand how to make appropriate tax elections, file estate tax returns, allocate the GST exemption, fund marital and bypass trusts, and distribute assets in accordance with the trust terms. Mistakes during administration can undo years of careful planning and result in unnecessary tax liability.

Why You Need an Estate Tax Planning Attorney

Estate and gift tax law is among the most complex areas of the tax code. The rules change frequently, the stakes are enormous, and a single mistake can cost your family millions. Whether you need to establish an ILIT, create a GRAT, structure a family limited partnership, plan for the TCJA sunset, elect portability, or integrate your estate tax plan with your probate and trust planning, you need an attorney who understands both the federal tax code and Florida law.

At the Law Offices of Albert Goodwin, PA, we work closely with individuals, families, and their financial advisors to develop estate tax plans that achieve our clients' goals. We monitor changes in federal tax law and advise our clients when adjustments are needed to protect their wealth.

Contact an Estate Tax Planning Attorney

If you have questions about estate and gift tax planning, or if you want to explore strategies for reducing the tax burden on your estate, contact the Law Offices of Albert Goodwin, PA. You can reach us by phone at 786-522-1411 or by email at [email protected]. Our office is located at 121 Alhambra Plz #1000, Coral Gables, FL 33134. We serve clients throughout Miami-Dade County and South Florida.