Why High-Net-Worth Florida Residents Still Need Tax Planning — Even Without a State Estate Tax

Fri Nov 14, 2025 | Asset Protection | Share

Florida is marketed to out-of-state residents as a tax-friendly paradise. The Sunshine State has no state income tax and no state estate or inheritance tax. In fact, Florida’s exclusion from federal estate tax is part of the Uniform Relief from Death Tax Act. But even if a state did not have an estate tax, that does not mean that wealthy residents of the state no longer need estate and tax planning.

The reality is that high-net-worth Floridians are still exposed to significant federal estate tax, income tax traps, capital gains issues, IRS audits, and complicated asset-protection concerns. In fact, the absence of an estate tax in Florida may actually require a more proactive approach to tax planning since many people are lulled into a false sense of security, thinking they are “safe” from tax exposure.

Below are 10 reasons wealthy Floridians should not neglect tax planning and address it ideally long before retirement and well before their wealth passes to the next generation.

1. The Federal Estate Tax Still Applies—And It’s Changing

While Florida is fortunate enough to have no state-level estate tax, the federal estate tax is imposed on all U.S. citizens regardless of their state of residence. For 2025, the federal exemption remains at the historically high level but is set to drop sharply on January 1, 2026, if Congress does not act. That shift alone could subject many Florida families to unexpected taxation.

Currently, the exemption is over $13 million per individual, and assets above the exemption level are taxed at 40%.

However, in 2026, the exemption level is scheduled to drop to about $6–7 million per individual, depending on inflation adjustments. For married couples, this represents an effective drop from roughly $26 million to just $12–14 million. Many Florida residents, especially those with real estate, investment portfolios, and business equity, will suddenly find themselves with taxable estates they did not expect. Without planning, your heirs could unnecessarily lose millions of dollars to taxes.

2. Florida Homestead Property Law Creates Unique Tax, Title, and Planning Issues

Florida’s homestead laws are very generous, but they create estate planning issues that many high-net-worth residents do not consider. Primary residences account for a large share of Florida residents’ wealth and often appreciate significantly.  Sophisticated planning is necessary to ensure the homestead remains protected while still integrating into the broader estate and tax plan.

3. High-Net-Worth Individuals Face Complex Federal Income Tax Issues

Tax planning for high-net-worth Floridians goes far beyond estate taxes. Federal income tax exposure can still be significant for people who:

• Face large capital gains
• Earn passive income from real estate
• Own significant investment portfolios
• Have private equity or hedge fund investments
• Control businesses taxed as pass-through entities

Planning techniques such as timing gains, charitable structures, and opportunity zones can reduce federal income tax exposure. Many wealthy retirees are also subject to high taxable income from required minimum distributions (RMDs), pensions, and investment income. A custom tax plan can help mitigate those tax burdens.

4. The Step-Up in Basis Is Not Guaranteed Forever

Right now, appreciated assets receive a step-up in basis at death, reducing or eliminating capital gains taxes for heirs. However, federal legislators regularly talk about modifying or eliminating the step-up in basis. Ultimately, families with large real estate portfolios or significant stock investments have the most to lose. Planning in advance ensures your plan is flexible enough if the tax rules change. Without it, heirs may face six- or seven-figure capital gains tax bills.

5. Strategic Gifts Now Can Reduce Estate Taxes Later

Because the federal exemption is set to decrease in 2026, wealthy people have a narrow window to use the current exemption for tax-free gifting. That said, consider the following:

• Remove appreciating assets from your estate
• Lock in the historically high exemption before it is lowered
• Use advanced tools like spousal lifetime access trusts (SLATs) or irrevocable gifting trusts
• Preserve wealth for multiple generations

Even if you live in Florida, not taking action before the exemption goes down could cost your family millions of dollars.

6. Wealthy Floridians Must Still Plan for Medicaid and Long-Term Care Costs

Many high-income individuals believe they do not need to plan for Medicaid costs. But long-term care expenses for degenerative or memory-related conditions are very high.

Tax-efficient long-term care planning can help with:

• Asset protection from rapid depletion
• Income structuring to preserve eligibility
• Trusts without triggering federal gift or estate tax

Planning needs to be done years in advance to be effective.

7. Probate Costs and Delays Are Still a Concern in Florida

Probate in Florida is relatively predictable but not cheap, fast, or private. High-net-worth estates can involve:

• Multiple properties in various counties or even states
• Complex business assets or interests
• Foreign or offshore holdings
• Family disputes over large inheritances

Planning, especially through revocable trusts, helps keep assets out of court, minimize taxes, and preserve family harmony.

8. Asset Protection Planning Has Tax Consequences

Florida is known for strong asset-protection laws, but wealthy individuals must still be careful about how they structure assets to avoid tax problems. Common tax issues include:

• Transferring assets into LLCs without the correct tax classification
• Putting property into trusts without understanding gift tax issues
• Family limited partnerships that are not set up properly
• Creditor protection moves that trigger unexpected income tax events

An integrated tax and asset-protection plan is necessary to stay compliant while shielding wealth.

9. Philanthropic Planning Can Dramatically Reduce Taxes

Florida residents are charitable, but many miss opportunities to structure giving in a tax-efficient manner. High-impact strategies include:

• Donor-advised funds
• Charitable remainder trusts
• Charitable lead trusts
• Gifts of highly appreciated assets
• Qualified charitable distributions from retirement accounts

These tools can help eliminate capital gains taxes, reduce estate taxes, and increase the overall impact of your philanthropy.

10. Blended Families Need Special Tax Planning

Florida has one of the highest rates of blended families in the country. Without careful planning, second marriages and stepchildren can experience:

• Unintended disinheritances
• Disputes over homestead rights
• Conflicts between revocable trusts and beneficiary designations
• Taxable transfers that could have been avoided

Proper planning helps ensure that your wishes are carried out while minimizing tax consequences for all parties.

Tax Planning in Florida Is Still Essential–Protect Your Assets Today

Florida’s lack of a state estate tax is an enormous benefit for high-net-worth residents. But that does not mean that they do not need to worry about estate and tax planning. Federal taxes, homestead laws, capital gains issues, and possible changes to federal law make a proactive approach to tax planning absolutely essential.

Having a tailored tax plan does more than reduce your tax bill—it also protects your legacy, preserves your assets, and allows your heirs to receive what you intend for them.

For high-net-worth Florida residents, it is time to evaluate your plan. Do not wait until after the 2026 exemption drops or after a triggering event to start your plan. Proper planning now will save your family time, stress, and likely millions of dollars in the future. Contact our office today to discuss.