Consider the Reyes family in Palm Beach. Maria and her late husband built a comfortable life: a homestead off Flagler Drive, a brokerage account, and a modest condo they rent in West Palm Beach. When Maria’s children ask whether the family will owe “death taxes,” the answer surprises them: it depends almost entirely on federal law, not Florida law.
Florida Has No State Estate or Inheritance Tax
This is the single most important fact for Palm Beach families. Florida does not impose a state estate tax or an inheritance tax. The old Florida “pick-up” estate tax was tied to a federal credit that no longer exists, so no separate Florida filing is required. That is part of why so many retirees relocate from high-tax states to Palm Beach County in the first place. When the Reyes children worry about a Florida tax bill, there simply isn’t one.
The Federal Estate Tax Still Applies to Larger Estates
The federal estate tax is a different story. It applies only to estates that exceed the federal exemption amount, which is indexed for inflation and has historically been quite high. Most families never come close. But Palm Beach is home to high-value real estate, business interests, and investment portfolios, so some local estates do cross the threshold. For Maria’s estate, the planning question is whether her combined assets, including the homestead and the rental condo, approach the federal exemption.
Two features soften the impact. First, the unlimited marital deduction lets one spouse pass assets to a surviving U.S.-citizen spouse free of federal estate tax. Second, “portability” allows a surviving spouse to use the deceased spouse’s unused exemption, but only if an estate tax return is timely filed to elect it. Maria’s late husband’s unused exemption could effectively double what she can pass tax-free, but only if that election was properly made.
Why “Stepped-Up Basis” Often Matters More Locally
For many Palm Beach families, capital gains, not estate tax, drive the planning. When Maria dies, assets passing through her estate generally receive a “step-up” in cost basis to their date-of-death value. If the children inherit the West Palm Beach condo and later sell it, their taxable gain is measured from the stepped-up value, not what their parents originally paid. This can save far more than people expect, especially on long-held Florida real estate that has appreciated over decades.
Florida Tools That Shape the Outcome
How assets pass affects taxes and probate alike. Maria’s homestead enjoys special protection under Article X, Section 4 of the Florida Constitution and passes under specific homestead rules. A revocable trust under Florida law (Chapter 736) can help her estate avoid probate and coordinate with any federal planning. A Lady Bird (enhanced life estate) deed could let her keep control of the condo during life while passing it automatically at death. None of these eliminate federal estate tax by themselves, but they organize the estate so any exemption planning works smoothly.
What the Reyes Family Should Do Next
Maria’s takeaways apply to most Palm Beach families: confirm whether the estate is anywhere near the federal exemption, preserve a deceased spouse’s unused exemption through portability when relevant, and structure assets to capture the step-up in basis. The goal is not to chase a Florida tax that doesn’t exist, but to manage the federal rules and capital gains that actually matter.
Talk With a Florida Attorney
Estate tax planning turns on your specific numbers, marital status, and asset mix. Because federal exemptions change and homestead rules are nuanced, a Palm Beach family should review their situation with a licensed Florida estate planning attorney before relying on any general guidance.
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