Strategic Estate Planning in Florida Amid 2025 Tax Law Overhauls

By: Braxton Bowen, Esq.

Significant tax changes are on the horizon that will impact estate planning for Florida residents. Understanding these developments is crucial to safeguard your assets and ensure a seamless transfer to your beneficiaries.

Federal Estate Tax Exemption Changes

The federal estate tax exemption currently stands at $13.99 million per individual, allowing substantial wealth transfers without incurring federal estate taxes. However, this elevated exemption is scheduled to sunset on December 31, 2025. Without Congressional intervention, it will revert to approximately $6-7 million per person in 2026, adjusted for inflation.

Gift Tax Exemption Reduction

Aligned with the estate tax exemption, the lifetime gift tax exemption is also set to decrease at the end of 2025. This means that the amount you can gift over your lifetime without incurring federal gift tax will be significantly reduced, potentially limiting tax-efficient wealth transfer strategies.

Generation-Skipping Transfer (GST) Tax Exemption

The GST tax exemption, currently at $13.99 million per individual, is scheduled to decrease alongside the estate and gift tax exemptions. This exemption allows individuals to transfer assets to grandchildren or unrelated individuals more than one generation below without incurring additional taxes. The impending reduction necessitates a reevaluation of long-term wealth transfer plans.

Florida Property Tax Changes: Amendment 5

In November 2024, Florida voters approved Amendment 5, introducing annual adjustments to the state’s homestead property tax exemption based on inflation rates. Starting January 1, 2025, the second $25,000 of the homestead exemption, applicable to non-school taxes, will be indexed to the Consumer Price Index (CPI). This change aims to provide homeowners with tax relief that aligns with the rising cost of living.

Impact on Estate Plans

These changes could significantly affect estate plans in Florida:

• Estates exceeding the lower exemption amounts post-2025 may face substantial federal estate taxes. Assessing your estate’s value and understanding potential tax implications is essential.
• High-net-worth individuals and families should consider utilizing the current higher exemptions through strategies such as lifetime gifts or trust formations before the end of 2025. Proactive planning can help mitigate future tax liabilities.
• Florida residents should evaluate their current estate plans with an attorney to understand how the potential reduction in exemptions might impact their tax situation. Regular reviews ensure that your estate plan remains aligned with your goals and the changing tax landscape.
• Exploring specific trust agreements can be a powerful tool in Florida estate planning to mitigate potential tax impacts. Trusts can offer flexibility and control over asset distribution while providing tax advantages.
• Consider accelerating gifting plans to take advantage of the current higher exemption levels before they potentially decrease. Utilizing the annual gift tax exclusion, which has increased to $19,000 per recipient in 2025, can also be an effective strategy.

Steps to Prepare for the 2025 Tax Changes

To prepare for the tax changes, consider the following steps:

1. Given the complexity of these changes, it is advisable to seek professional guidance to develop a strategy tailored to your specific circumstances. An experienced attorney can provide insights into the most effective planning techniques.
2. Ensure that your will, trusts, and beneficiary designations are current and reflect your intentions, especially in light of the upcoming tax law changes. Regular updates can prevent unintended consequences and ensure your assets are distributed according to your wishes.
3. After seeking guidance from an experienced estate planning attorney, take advantage of the current high exemption by making substantial gifts before the end of 2025. This strategy can reduce the size of your taxable estate and lock in the higher exemption amount.
4. Consider setting up irrevocable trusts, such as Spousal Lifetime Access Trusts (SLATs), to remove assets from your taxable estate while still providing benefits to your spouse or other beneficiaries. Trusts can offer both tax benefits and asset protection.
5. Monitor legislative developments, as changes in tax laws can occur. Staying informed will help you make timely adjustments to your estate plan.

By taking these proactive steps, you will be better prepared for the tax law changes ensuring that your estate plan remains robust and effective in achieving your financial and legacy goals.

Those needing assistance may contact me at braxton.bowen@henlaw.com to schedule a consultation.