Florida is one of the most tax friendly states in the country for passing wealth to the next generation. That reputation has also produced a large volume of outdated advice online about estate planning for wealthy families. High net worth families should beware getting estate planning advice online to handle appreciated real estate, stock portfolios, and closely held business interests. Much of what still circulates was written before the federal tax changes enacted in 2025. A few of these questions also remain unsettled, and those gray areas are identified below rather than glossed over.

Myth 1: Florida Has No Estate Tax, So There Is Nothing to Plan For

The first half is true. Article VII, Section 5 of the Florida Constitution bars the state from imposing an estate or inheritance tax beyond a federal credit Congress eliminated years ago. Chapter 198 of the Florida Statutes still sets out an estate tax framework, but it is dormant and collects nothing. Florida imposes no state income tax and no state capital gains tax.

The error is the conclusion. Heirs still face federal capital gains tax when they sell inherited assets, and that exposure often dwarfs any estate tax the family would owe. The question is not how to avoid a death tax that does not exist. It is how to position assets so that decades of appreciation are never taxed at all.

Myth 2: The Federal Exemption Is About to Be Cut in Half

Many articles still warn that the federal estate and gift tax exclusion is about to drop by roughly half. That was accurate under prior law, which set a sunset at the end of 2025, but federal legislation enacted that year removed it. The exclusion now sits at roughly $15 million per person, or about $30 million for a married couple using portability, with no expiration date.

Two cautions apply. The figure is indexed for inflation, so the exact amount shifts over time, and a future Congress could lower it. It is highly recommended that the current number be confirmed with a qualified Florida estate planning attorney before a plan is built around any specific threshold.

Myth 3: Giving Assets to Children Now Saves the Family Taxes

This instinct frequently backfires. Assets transferred during life generally carry the original owner’s cost basis to the recipient, while assets that pass at death generally receive a new basis equal to fair market value on the date of death.

Consider a couple who bought an investment property for $200,000 now worth $900,000. Deeded to their daughter today, it carries a $200,000 basis and a sale produces $700,000 of taxable gain. Inherited instead, the basis resets to $900,000 and a sale produces almost none.

One narrow federal rule deserves mention. Appreciated property given to someone who dies within a year can lose the basis adjustment if it passes back to the donor or the donor’s spouse. The conditions are specific and the outcome turns on the facts, so counsel should review any substantial gift to an ill or elderly relative.

“Assets transferred during life generally carry the original owner’s cost basis to the recipient, while assets that pass at death generally receive a new basis equal to fair market value on the date of death.”

Myth 4: Jointly Owned Assets Receive a Full Step Up When One Spouse Dies

In Florida, ordinarily they do not. Florida is a common law property state, so when the first spouse dies only that spouse’s half of a jointly owned asset receives a new basis. The survivor keeps the original basis on the other half.

The Community Property Trust Act, at Sections 736.1501 through 736.1512 of the Florida Statutes, changed what is possible. Assets moved into a qualifying trust are classified as community property under Section 736.1505, and Section 736.1511 ties that classification to federal law. A stock position bought for $200,000 and worth $1 million might leave a surviving spouse with roughly $400,000 of gain under ordinary titling, and none inside such a trust.

Two cautions are essential and usually left out elsewhere. The Internal Revenue Service has not issued formal guidance confirming that it will treat a Florida community property trust the same as property held in a true community property state. The favorable result is widely expected among practitioners but not guaranteed. Funding the trust can also forfeit the creditor protection that tenancy by the entireties provides, which matters most for business owners and licensed professionals. It is highly recommended that both risks be weighed with a qualified Florida estate planning attorney before any funding occurs.

Myth 5: A Lady Bird Deed Is a Statutory Fix for the Family Home

Enhanced life estate deeds, commonly called lady bird deeds, are widely used in Florida and accepted by title insurers. They are not authorized anywhere in the Florida Statutes, and their validity rests on common law principles and the deed execution requirements in Section 689.01.

The larger risk is homestead. Section 732.4015 of the Florida Statutes provides that homestead property is not subject to devise when the owner is survived by a spouse or a minor child, with a narrow exception allowing a devise to the spouse if no minor child survives. Section 732.401 then controls where the property goes when a devise fails.

How those restrictions apply to an enhanced life estate deed is not fully settled in Florida practice, and capable attorneys take different positions. What is clear is that a plan leaving the family home to adult children can fail when a spouse or minor child survives. Homestead transfers warrant individual legal review rather than a form document.

Myth 6: Every Asset Receives a Step Up in Basis

The basis reset does not reach everything. Retirement accounts, employer plans, annuities, and life insurance follow separate rules and receive no such adjustment. Income the decedent earned but had not collected is taxed to whoever receives it.

Assets given away in a completed gift to an irrevocable trust and removed from the taxable estate generally receive no adjustment either. Federal guidance issued in 2023 is commonly read to confirm that a grantor who pays the trust’s income taxes does not create one. Because the analysis depends on how a particular trust was drafted, existing irrevocable trusts should be reviewed rather than assumed.

Business equity is more complicated still. Stock in a qualifying small corporation can receive exceptional federal treatment, but the requirements are technical, the holding periods strict, the applicable limits dependent on when the stock was acquired, and a single poorly structured transfer can destroy the benefit permanently. Involving counsel well before a sale or succession is the only reliable protection.

South Florida Law

The strategies described here can preserve hundreds of thousands or even millions of dollars for the next generation. Each strategy depends on precise drafting, correct timing, and facts that vary by family. The families who lose the most are usually those who relied on general information found online rather than advice matched to their own holdings.

South Florida Law assists clients with estate planning, trust drafting and administration, probate, real estate and title services, and business succession matters throughout Florida. The firm can review an existing plan against current federal law, evaluate whether a community property trust fits a couple’s circumstances, and address homestead and deed issues before they become problems for heirs. Call (954) 900-8885 or use our contact form to schedule a consultation.