The Benefits of Florida Residency

With its sandy beaches, pleasant weather, thriving economy, and vast recreational opportunities, Florida has much to offer its residents. High-net-worth individuals who make Florida their permanent home also enjoy the advantages of favorable tax, property, and trust laws. Here are some of the benefits the state of Florida offers its residents.

No State Personal Income Tax.

One of the better-known benefits Florida provides its residents is no state personal income tax. Florida’s constitution prohibits the state, its municipalities, and counties from levying any income tax on an individual resident.

No Estate and Inheritance Tax.

Florida does not have state estate, gift, or inheritance taxes. Changing these provisions would require an amendment to the state’s constitution. Florida residents are still subject to federal taxation on these types of wealth transfers if over the exemption amount.

Homestead Exemption and Creditor Protection.

The Florida homestead exemption offers a property tax break based on a home’s assessed value within a certain value limit. There are several requirements to claim this benefit, such as the exemption must be for a permanent residence and the property must be lived in on January 1 of the tax year in question.

Florida’s constitution also provides homestead protections against general creditor claims. Under this provision, a homestead property typically cannot be forced into sale by a creditor to satisfy a debt judgment from lawsuits or unsecured loans, except in certain circumstances.

Tenacy by the Entirety.

Another asset protection available to married Florida residents is tenancy by the entirety, a form of joint ownership that allows both spouses to be 100% undivided owners of all property. The property is not divisible on behalf of one spouse alone, and therefore assets owned by the spouses are inaccessible by creditors seeking to satisfy the obligations of only one spouse. Based on Florida common law, tenancy by the entirety is allowed for all property types in Florida, including personal property. In the event of the death of one spouse, the surviving spouse inherits all assets under this protection.

Spousal Lifetime Access Trust.

A Spousal Lifetime Access Trust, or SLAT, is an irrevocable trust created by a grantor spouse that names the other spouse – and typically their dependents – as the trust’s beneficiary. Like other types of irrevocable trusts, a SLAT protects all assets placed into trust from creditors in most circumstances.

In an expansion of the state’s existing asset protection laws, Florida enacted a new statute in 2022 that allows the SLAT grantor spouse to be added as a beneficiary of the SLAT upon the death of the beneficiary spouse. This allows the grantor spouse the ability to access the SLAT assets, while keeping those assets outside of his or her estate.

Community Property Trust.

Florida is a separate property state, which deems that property acquired during a marriage is generally owned separately by the spouse who acquired it. However, the Florida Community Property Trust Act – signed into law in 2021 – allows married residents to transfer their assets to a community property trust. Assets in the trust are considered property of both spouses. When one spouse dies, all assets in the trust are revalued as of that date. This means that the surviving spouse can sell any assets within the trust at the current market value without incurring potential capital gains tax, which can lead to significant income tax savings when liquidating appreciated assets.

Florida Uniform Directed Trust.

The adoption of the Florida Uniform Directed Trust Act (FUDTA) in July 2021 grants authority to a trust director – an individual other than the trustee – to make decisions and act on behalf of the trust in certain circumstances. Ultimately, the FUDTA gives the trust grantor the ability to divide responsibilities and liabilities related to managing the trust.

If you are considering or planning to establish permanent residency in a new state, as a client of Commerce Trust, you can expect us to engage our team of experienced estate and tax planners, investment managers, private bankers, and trust administrators to guide you along the journey and ensure the coordinated execution of your plan.

If you are considering making Florida your new home state, contact Mark Benskin, Florida Market Executive for Commerce Trust, to learn how we can help you with wealth planning needs.

The opinions and other information in the commentary are provided as of February 28, 2024. This summary is intended to provide general information only, and may be of value to the reader and audience.

This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such.

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Commerce Trust is a division of Commerce Bank. Investment Products: Not FDIC Insured / May Lose Value / No Bank Guarantee