Real Estate Inheritance

[Kevin Duke]

Hello. I need your expertise on a matter of real estate inhertitance. Subject A is leaving Subject B his home upon his passing. Subject A's total net worth is roughly 6 million dollars. The property is located in Palm Beach county, Florida with an estimated worth of $850,000. What is the best way to set up the inheritance to minimize income taxes? As I understand it, Florida does not have an inheritance tax on property, and the federal inheritance tax is levied on estates greater than 12 million dollars. 

Any advice would be appreciated. Thank you in advance for your help.

[Tyson Wade]

Quote from @Ashish Acharya:

@Kevin DukeSince Subject A’s $6M net worth is below the federal estate tax exemption ($13.61M in 2024) and Florida has no estate or inheritance tax, Subject B can inherit the property tax-free with a step-up in basis to the fair market value at the time of death, eliminating capital gains tax if sold immediately.

To avoid probate, Subject A can use a Lady Bird Deed (Enhanced Life Estate Deed) or a Transfer on Death (TOD) Deed, which allows automatic transfer to Subject B while retaining full control during their lifetime. A revocable living trust is another option for privacy and asset protection.

Avoid gifting the property before death, as this would pass the original purchase price as the cost basis, creating a large capital gains tax liability upon sale.

If the property is Subject A’s homestead, ensure the correct titling to maintain Florida’s homestead protection for Subject B.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

 Love this recommendation. Only thing I would add is that if Subject A uses a Lady Bird Deed of TOD to transfer the property upon death there is less flexibility for planning. Subject A passes, the properties go to Subject B. In some cases, Subject B may not be ready for such a large asset, in which case the revocable living trust is the better option here. In either case, the step-up in basis remains, but the living trust allows for you to plan around Subject B's strengths and weaknesses to ensure they receive the property when they are ready for it, and in the way that Subject A would like (rather than simply being made outright upon death). 

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.