In addition to weather, beaches, a good state economy and nice people, Florida offers a beneficial legal climate for businesses and individuals looking to preserve their wealth. If moving to the state of Florida, there are a few advantages including estate planning.
Only seven (7) states have zero state-level income tax. One of them is Florida. Paychecks, pensions, and Social Security income go farther. However, Florida does have other taxes (i.e., sales and hospitality taxes). As for estate planning, Florida also does not have an estate or inheritance tax. Although, some large Florida estates may still have to pay at the federal level, they can preserve more wealth in Florida than in states which impose a “death tax,” such as New York, New Jersey, or Pennsylvania.
Only a minority of states charge state-level estate taxes, and the state of Florida stands out since estate taxes are expressly prohibited by the state’s constitution. Consequently, a state constitutional amendment, and not just new legislation, would be required to add an estate tax in the future.
In addition, Florida Homestead laws, which are built into the state’s constitution as well, prohibit creditors from attaching real estate that qualifies as a “homestead” under the Homestead law. Creditors are unable to force a sale of a homestead to satisfy a judgment or to place an involuntary lien on the property. Florida homesteads are even protected from liquidation in bankruptcy.
Many states have homestead exemptions, but Florida’s is unique in that there is no cap or no limit on the value of the protected property. In the alternative, California, and New York limit homestead protection to about $300,000 and $85,400. Further, Florida law does not prohibit or prevent homestead property owners from transferring funds into a homestead (e.g., through improvements or mortgage payments) to maximize the protection of their wealth.
Florida’s homestead exemption laws also benefit homestead properties with regard to real estate tax calculations. Up to $50,000 of a residential home’s value is exempt from assessment, therefore, a home valued at $300,000 is taxed as if its value is $250,000. A recent amendment further limits property taxes on homesteads by capping annual assessed value increases to three percent (3%) or the Consumer Price Index inflation rate, whichever is lower. As a result, homeowners are NOT assessed large property tax increases if property values rise significantly. The aforesaid exemption resulting from the limit on annual increases is also “portable” and can be transferred from one Florida homestead to another.
Florida asset protection laws also offer strong protections for shielding other assets against creditor claims. Under Florida’s exemption statutes, wages earned by a head of household can be exempt from attachment. Life insurance protections can provide that cash value stored in permanent life insurance policies are also protected against an insured person’s creditors. Retired individuals can take advantage of a benefit from Florida’s exemption for funds held in annuities, which is likewise protected from creditor claims and attachment. There are also favorable rules for various types of Trusts, which makes it a beneficial jurisdiction if the goal is to preserve your family’s wealth in this state through multiple generations.
Under Florida law, any assets co-owned by a married couple under certain conditions are assumed to be owned as tenants by the entireties. The laws in this state for co-ownership by spouses offer various favorable wealth management features. First, there is a “right of survivorship,” which means when one owner dies, the other automatically (by operation of law) receives full title or ownership to the asset or property, without any need for a legal proceeding called a Probate. Moreover, when an asset is held as tenants by the entirety, creditors of only one spouse cannot attach it. If both spouses owe the debt, attachment may still be possible unless the asset is protected by another exemption.
Many states offer tenancy by the entirety ownership for real estate, but Florida allows it for just about any type of asset that can be jointly owned such as land, personal property, financial accounts, and even intellectual property can be co-owned as tenants by the entireties. Furthermore, any asset in Florida held or owned as tenancy by the entireties enjoys the same protection against creditor claims.
Together with the advantages for financial planning and asset protection, Florida also provides a business-friendly legal climate that can be enticing for entrepreneurs and companies (large and small) to relocate to Florida. Florida is among the nation’s most pro-business jurisdictions, with “right to work” and at-will employment laws. Obviously, the absence of any state income tax can increase an existing business’s profitability and make it easier to attract capable employees. The Florida legislature, not long ago, improved the state’s Florida LLC or Limited Liability Company laws, which assist new small businesses forming such entities. Various publications have indicated that several of the top relocation areas are in Central and South Florida.
If you are contemplating a move to Florida and want to know how Florida law might affect your personal finances or business and/or estate plan, please consult with the full-service law firm of CASERTA & SPIRITI, which has experienced and specialized attorneys together practicing a wide variety of areas of law with a practical approach to solve problems.