Estate Tax: What Families Should Know

“Estate tax” is one of the most misunderstood terms in planning. For most Palm Beach families it’s not a worry at all, but a few situations deserve real attention. Here’s a clear, practical look at what applies in Florida and what to actually plan for.

Florida Has No Estate or Inheritance Tax

Start with the good news. Florida imposes no state estate tax and no state inheritance tax. Your heirs in Palm Beach will not pay a Florida tax simply for inheriting your home, accounts, or other assets. This is one reason Florida is such a popular destination for retirees. The only estate tax that can apply is the federal one.

The Federal Estate Tax and Its High Threshold

The federal estate tax applies only to estates that exceed a federal exemption amount, which is set quite high and adjusts over time. The large majority of estates fall well below it and owe nothing. If your total estate — including your Palm Beach real estate, investments, business interests, and life insurance you own — is approaching that threshold, the planning becomes more sophisticated and worth professional attention well in advance. Because the exemption amount changes, it’s important to confirm the current figure rather than rely on an old number.

Portability Between Spouses

Married couples have an extra layer of protection. “Portability” allows a surviving spouse to use any unused portion of the first spouse’s federal exemption, effectively doubling the amount a couple can pass tax-free. There’s a catch: capturing it generally requires filing a federal estate tax return after the first spouse’s death, even when no tax is due. Missing that filing can quietly forfeit a valuable benefit, so it’s a step worth knowing about.

The Step-Up in Basis

One of the most valuable tax features isn’t an estate tax rule at all — it’s income tax. When you pass, many assets receive a “step-up” in cost basis to their value at the date of death. For a Palm Beach home or stock portfolio that has appreciated for decades, this can dramatically reduce the capital gains your heirs would owe if they later sell. How you title and hold assets affects whether they get the full step-up, which is why estate and income tax planning belong together.

Lifetime Gifting

Gifts made during life interact with the federal system through an annual exclusion and the lifetime exemption. Strategic gifting can move future appreciation out of a large estate, but it must be done carefully because of the basis and reporting consequences. For most families it’s optional; for larger estates it can be a meaningful tool.

Talk to a Florida Attorney

Most Palm Beach families owe no estate tax, but larger estates, blended families, and business owners benefit from tailored planning around the federal exemption, portability, and basis. A licensed Florida estate planning attorney, working with your tax advisor, can confirm where you stand and structure your plan accordingly.