Estate Tax 2026: 7 Steps Before Year-End for Florida

**Your estate could face a 40% tax hit in just two years—unless you act now.** On December 31, 2026, the federal estate tax exemption drops from $13.61 million to approximately $7 million per person. For Florida residents with estates between $5 million and $13 million, this sunset provision could expose significant wealth to devastating taxation. In this episode, we break down seven actionable steps you can take before year-end to protect your financial legacy. From strategic wealth management techniques to fiduciary considerations, we cover the essential moves that could save your family hundreds of thousands of dollars. Whether you're building your retirement strategy or refining your financial planning approach, understanding these changes is critical. The time to act is now—not after the deadline passes. Ready to talk? Schedule a complimentary discovery call at TDWealth.net. For educational purposes only. Not investment advice. 📖 Full show notes: https://tdwealth.net/estate-tax-2026-7-steps-before-year-end-for-florida/

✅ BOOK AN APPOINTMENT TODAY: https://davieswealth.tdwealth.net/appointment-page

===========================================================

🔴 SEE ALL OUR LATEST BLOG POSTS: https://tdwealth.net/articles

Website: 

https://tdwealth.net

Social Media:

https://www.facebook.com/DaviesWealthManagement

https://twitter.com/TDWealthNet

https://www.linkedin.com/in/daviesrthomas

https://www.youtube.com/c/TdwealthNetWealthManagement

Davies Wealth Management

684 SE Monterey Road

Stuart, FL 34994

772-210-4031

DISCLAIMER

Davies Wealth Management makes content available as a service to its clients and other visitors, to be used for informational purposes only. Davies Wealth Management provides accurate and timely information, however you should always consult with a retirement, tax, or legal professionals prior to taking any action.

Transcript

SPEAKER_00 0:00

Welcome back to the deep dive. We've got a well, a literal ticking clock to talk about today because at exactly midnight on December 31st, 2026, there is a massive tax shelter that has protected American wealth for nearly a decade, and it's scheduled to just collapse.

SPEAKER_01 0:16

Yeah, it's a legislative cliff. And it is quietly keeping a very specific subset of estate planners and financial advisors completely awake at night.

SPEAKER_00 0:26

Right. And you, as the listener, need to know if you're standing on the edge of that cliff.

SPEAKER_01 0:30

Because for a certain demographic, the flip of that calendar, it represents the sudden just overnight creation of a seven-figure tax liability. Yeah. Which is terrifying.

SPEAKER_00 0:40

Terrifying is the right word. So our mission today is to dig into an urgent framework designed to prevent that exact scenario. Our source material comes from a guide by Thomas Davies.

SPEAKER_01 0:49

Yeah, of Davies Wealth Management.

SPEAKER_00 0:51

Right. They're a fee-based fiduciary advisor down in Stewart, Florida. And they originally put this strategy together for their 1715 Treasure Coast Financial Wellness Podcast. It details seven critical steps that Floridians, specifically those with a net worth between five and thirteen million dollars, need to take before this year-end deadline.

SPEAKER_01 1:09

And that specific dollar range is key. It's the danger zone right now.

SPEAKER_00 1:13

Okay, let's unpack this because the origin of this panic, it actually goes back to the Tax Cuts and Jobs Act of 2017.

SPEAKER_01 1:19

Right, right. The TCJA.

SPEAKER_00 1:21

Yeah, that law temporarily doubled the amount of money you could give away or leave to your heirs tax-free. So right now, as of 2026, that lifetime exemption is sitting at an all-time historical high. We are talking $13.61 million per individual.

SPEAKER_01 1:37

Or roughly $27.2 million for a married couple, which is just massive.

SPEAKER_00 1:41

It's a huge number, but and this is the big but the operative word there is temporary.

SPEAKER_01 1:46

Exactly. The legislation was specifically written with a sunset provision. So on January 1st, 2027, that historically high exemption is projected to get cut nearly in half.

SPEAKER_00 1:56

Which means it drops to what, roughly seven million per person?

SPEAKER_01 1:59

Yeah, about seven million.

SPEAKER_00 2:00

I think the best way to visualize this is imagine you built your financial house behind this massive twenty-seven-foot-tall levee.

SPEAKER_01 2:08

Okay. I like that.

SPEAKER_00 2:09

Right. You feel entirely protected from the flood waters of federal taxation.

SPEAKER_01 2:13

Yeah.

SPEAKER_00 2:14

But the government has just announced that on January 1st, they are dismantling the top half of that levy. They're bringing it down to 14 feet.

SPEAKER_01 2:21

So if your net worth is sitting at 20 feet.

SPEAKER_00 2:24

You are suddenly exposed. You're going to take on water. So the question is, who is actually going to be left standing without a seat when the music stops?

SPEAKER_01 2:31

Well, taking on water in this context means facing a flat 40% federal estate tax on everything above that new lower threshold. It's really vital to define who actually lives in what the Davies team calls the exposure zone.

SPEAKER_00 2:46

Aaron Powell The people who are going to get wet.

SPEAKER_01 2:47

Exactly. We are looking at individuals worth $5 to $13 million or couples worth 10 to 27 million. Because think about it, the ultra-wealthy, the billionaires, the families with $50 million, they've known they were exposed all along. Aaron Powell All right.

SPEAKER_00 3:02

They have armies of lawyers, entire family offices managing their trusts.

SPEAKER_01 3:05

Aaron Powell Exactly. And on the other side of the spectrum, everyday families with, you know, a house and a standard 401k, they are safely below the upcoming 7 million line anyway. So the danger falls squarely on that affluent middle tier.

SPEAKER_00 3:19

Aaron Powell We're talking about uh retired executives, successful small business owners, doctors.

SPEAKER_01 3:24

Or even just dual-income professionals who simply invested aggressively over a 30-year career.

SPEAKER_00 3:29

Aaron Powell Right. The millionaires next door. They're the ones who could swing from having a completely sheltered estate to being heavily taxed. Let's look at the sheer math of this.

SPEAKER_01 3:38

Let's do it.

SPEAKER_00 3:39

Imagine a married couple sitting on a $20 million estate. Under the current 2026 law, their 27-foot levy fully protects them.

SPEAKER_01 3:48

Right. They owe zero dollars in federal state tax.

SPEAKER_00 3:50

Zero. But post sunset, their exemption drops to $14 million combined. That leaves $6 million of their life's work completely exposed.

SPEAKER_01 3:59

To a 40% tax rate.

SPEAKER_00 4:00

Yes. That is a $2.4 million tax bill created out of thin air just because the year changed.

SPEAKER_01 4:06

It's brutal. And if we connect this to the bigger picture, there is a deeply ingrained psychological trap at play here. Especially for the audience, this advisory firm serves down in Florida. It's a regional vulnerability that we can essentially call the Florida blind spot.

SPEAKER_00 4:21

Aaron Powell, which I find fascinating, honestly. Because the blind spot is essentially a byproduct of Florida being a tax haven in the first place.

SPEAKER_01 4:29

Right. You have this massive influx of wealthy transplants moving down from high-tax states, New York, New Jersey, Connecticut.

SPEAKER_00 4:37

And when they lived up north, they were super paranoid about state-level estate taxes, so they were highly proactive. But then they establish Florida residency where there is no state income tax, no state is state tax, and they just they let their guard down.

SPEAKER_01 4:51

They feel like they've already won the game. They associate Florida with being quote unquote tax-free, and that causes them to drastically underestimate their exposure at the federal level. Aaron Powell Ah, that makes sense. Yeah. And when you combine that complacency with the massive boom in Florida real estate and business valuations over the last few years, I mean you have families whose assets were perfectly safe three years ago, but they've appreciated so rapidly that they are now pushing right up against that impending sunset.

SPEAKER_00 5:19

Aaron Powell But I have to push back on the urgency here a little bit. Yeah. Considering the reality of Washington, I mean, Congress is incredibly unpredictable.

SPEAKER_01 5:27

Aaron Powell That's an understatement.

SPEAKER_00 5:29

Right. So it is entirely possible they just pass a last-minute bill to extend this higher exemption. They've done it with tax class in the past. If the law might not even change, why on earth would a family rush into paying attorneys and appraisers to set up these highly complex legal structures right now? Isn't the most logical move to just wait and see what happens?

SPEAKER_01 5:51

It sounds logical, it really does. But from a strategic wealth management perspective, waiting is a massive miscalculation of risk. You have to view this through the lens of asymmetric risk.

SPEAKER_00 6:01

Okay, break that down for me.

SPEAKER_01 6:02

Let's say you act now, you lock in these protective structures, and then a gridlocked Congress miraculously agrees to extend the exemption at the 11th hour. What have you lost?

SPEAKER_00 6:13

Well, just the legal fees, I guess.

SPEAKER_01 6:15

Virtually nothing in the grand scheme. Your assets are now organized in tax-efficient, highly protective vehicles that offer significant asset protection benefits from creditors anyway. But if you wait and Congress simply lets the law expire, which is the default legally scheduled track right now, inaction will literally cost you millions of dollars.

SPEAKER_00 6:35

And what gives you the confidence to act early is a very specific regulatory safety net, because the IRS actually saw this hesitation coming.

SPEAKER_01 6:43

They did.

SPEAKER_00 6:44

A few years ago, they issue final regulations, created this strict anti-clawback guarantee. They basically stated that if you utilize the massive 13.61 million limit before the sunset, they are legally prohibited from retroactively punishing you if the limit drops later.

SPEAKER_01 6:59

It's a use it or lose it scenario, but with a safety pet.

SPEAKER_00 7:02

Exactly. The rule forces the IRS to calculate your eventual estate tax using the greater of the exemption amount at the time you made the transfer or at your death.

SPEAKER_01 7:12

The logic behind the IRS issuing that guarantee was to prevent a total freeze of the American economy. Because if wealthy families were too terrified to transfer assets out of fear of future retroactive taxes, capital would just stop moving.

SPEAKER_00 7:26

Right. People would just hoard everything. Exactly.

SPEAKER_01 7:29

So the IRS essentially provided a written runway. They said use the high exemption now and you get to keep it. But that runway is incredibly short.

SPEAKER_00 7:37

Which is a crucial point in the Davies Wealth Management Guide. December 31st is a phantom deadline.

SPEAKER_01 7:42

A total phantom deadline.

SPEAKER_00 7:44

You cannot call on a state attorney on December 10th and ask to shield $10 million. You are dealing with complex legal drafting, independent business appraisals, asset retitling. That is a three to six month logistical process. So what does this all mean?

SPEAKER_01 7:59

It means the operational deadline is not New Year's Eve.

SPEAKER_00 8:02

The actual deadline is essentially midsummer. If you wait until the fourth quarter, the legal and financial systems will be entirely bottlenecked, and your paperwork simply will not get processed in time.

SPEAKER_01 8:14

You'll just be stuck in line while the clock runs out.

SPEAKER_00 8:16

Right. So assuming you understand the timeline, let's look at the actual mechanics of solving this. Because the overarching strategy is to move wealth out of your taxable estate now to lock in that high exemption. But the way you do it depends heavily on how much control you're willing to give up.

SPEAKER_01 8:33

All right. Because the most direct method is outright gifting. You just transfer $13 million to your kids today. Done.

SPEAKER_00 8:39

It is the most efficient way to use the exemption, but it presents a severe control dilemma. Most successful people in their 60s or 70s are not comfortable entirely parting with the bulk of their net worth just yet.

SPEAKER_01 8:51

Of course not.

SPEAKER_00 8:52

Because it's like handing the keys to a brand new Ferrari over to your kids. Simple. But you lose total control. You have no steering wheel.

SPEAKER_01 8:59

And you've given up all legal leverage. If your child gets sued, or heaven forbid gets divorced, that money you simply handed over is now completely vulnerable to their creditors or their ex-spouse.

SPEAKER_00 9:10

Exactly. So to solve that control dilemma, families use spousal lifetime access trusts or slats.

SPEAKER_01 9:18

What's fascinating here is how the slat threads the needle between tax avoidance and practical reality. With a slat, one spouse places assets into an irrevocable trust for the benefit of the other spouse. By doing this, you legally remove those assets from both of your taxable estates. However, because your spouse is the beneficiary, your household retains an indirect pipeline back to those funds if you ever actually need them to maintain your lifestyle.

SPEAKER_00 9:44

You essentially build an impenetrable vault to keep the IRS out, but you hand the key to your spouse.

SPEAKER_01 9:49

Exactly.

SPEAKER_00 9:50

So you still have a way in. But there's a massive caveat with slats called the reciprocal trust doctrine. If a husband puts $10 million in a trust for his wife, and then the wife puts $10 million in an identical trust for her husband, the IRS will completely invalidate the maneuver.

SPEAKER_01 10:05

Oh yeah. The IRS views that as an economic sham. They call it uncrossing the trusts because if the terms, the amounts, and the timing are identical, you haven't actually altered your economic position or you just traded money.

SPEAKER_00 10:16

You're just playing a shell game.

SPEAKER_01 10:17

Exactly. So to survive IRS scrutiny, those trusts must be materially different. They need different trustees, different distribution rules, and ideally they should be funded with different types of assets at completely different times.

SPEAKER_00 10:30

Aaron Powell Okay, so that covers general liquid wealth. Yeah. But the strategy changes completely when you are dealing with a rapid growth problem. Let's say you own a highly successful Florida construction firm or prime commercial real estate that is just appreciating wildly. You don't just want to protect the current value, you want to make sure all the explosive future growth happens outside of your taxable estate.

SPEAKER_01 10:54

Right. You want to shift that growth.

SPEAKER_00 10:55

And this is where you leverage a Grantor-Retained annuity trust, or a GRIAT.

SPEAKER_01 11:00

Aaron Powell A GR is a highly specific mechanism designed for assets you expect to spike in value. Often you do this right before a liquidity event, like selling the company. So you transfer the asset into the trust, and the trust is required to pay you back an annuity, a fixed income stream, over a set number of years.

SPEAKER_00 11:19

Okay, so you're getting paid back.

SPEAKER_01 11:21

Yes. But here's the magic. The IRS dictates a baseline expected growth rate for that trust. If your business grows faster than the government's baseline rate, every single dollar of that excess growth passes to your beneficiaries completely free of gift and estate taxes.

SPEAKER_00 11:38

Wow. So you are essentially capping the size of your estate at today's value and letting the ensuing avalanche of wealth just fall directly into your children's laps without touching your exemption.

SPEAKER_01 11:49

That's exactly it.

SPEAKER_00 11:49

And before you even put that business into the trust, you can utilize valuation discounts, which I think is one of the most intellectually interesting loopholes in the entire tax code.

SPEAKER_01 11:57

It really is, because it's based on pure economic reality. Let's say your business is appraised at $20 million. You decide to transfer a 30% share of that business into a trust for your daughter. Now, from a pure mathematical standpoint, 30% of 20 million is six million.

SPEAKER_00 12:13

Simple math.

SPEAKER_01 12:14

Right. But the IRS doesn't value that gift at $6 million.

SPEAKER_00 12:18

Aaron Powell Because if your daughter tried to sell her 30% share on the open market, no outside investor would pay $6 million for it. A 30% owner has no voting control. They can't force the company to issue a dividend, they can't fire the CEO, and they can't force a sale.

SPEAKER_01 12:34

They are essentially a trapped minority partner.

SPEAKER_00 12:36

Exactly. And because of that lack of control and lack of marketability, a certified appraiser applies a steep discount to the value of those shares.

SPEAKER_01 12:44

And the IRS recognizes this reality. So that 30% stake might be discounted by 30 or even 40%. Suddenly you are transferring $6 million worth of actual underlying corporate value, but the IRS only counts it as a $3.5 million gift against your lifetime exemption limit.

SPEAKER_00 13:02

You are squeezing massive wealth through a much smaller tax keyhole.

SPEAKER_01 13:06

Perfectly said. You'll lose a huge percentage of it right off the top.

SPEAKER_00 13:24

Right. So the alternative is a charitable remainder trust, or CRT.

SPEAKER_01 13:29

A CRT brilliantly reframes the tax burden by leveraging the tax-exempt status of a charity, you irrevocably transfer your highly appreciated stock into the trust. And because the trust ultimately benefits a recognized charity, the trust itself pays zero capital gains tax when it sells that stock.

SPEAKER_00 13:48

Meaning the full gross value of the asset is preserved and reinvested? Yes. And then from that reinvested pool, the trust pays you an income stream for a set number of years or even for the rest of your life. When you pass away, the remainder goes to the charity of your choice. It's just an incredible efficiency play.

SPEAKER_01 14:04

It really is.

SPEAKER_00 14:04

I mean, I have to ask you, the listener, would you rather write a $400,000 check to the IRS or use those same funds to secure an income stream for yourself and fund a charity you actually care about? You bypass the capital gains tax, you generate reliable cash flow for retirement, you get an immediate charitable income tax deduction, and you fund a philanthropic cause.

SPEAKER_01 14:27

You're effectively redirecting money that would have gone to Washington toward your own cash flow and a cause you believe in. It transforms a liability into a legacy.

SPEAKER_00 14:37

Beautifully put.

SPEAKER_01 14:38

Which brings us to the ultimate long game. Everything we've discussed so far focuses on your spouse, your immediate business, or your children. But the Davies framework also focuses heavily on generational planning. Specifically, leveraging Florida's unique trust laws to protect wealth for descendants who won't even be born for another two centuries.

SPEAKER_00 14:57

Here's where it gets really interesting. Florida law allows for the creation of dynasty trust that can operate for up to 360 years.

SPEAKER_01 15:05

It's mind-boggling.

SPEAKER_00 15:06

To put that in perspective, that is older than the United States of America.

SPEAKER_01 15:09

It is. The intent behind a dynasty trust is to permanently sever wealth from the transfer tax system. If you take $13 million today and lock it into one of these 360-year trusts, yes, you use up your exemption once. But after that, the money cascades down from your children to your grandchildren to your great-grandchildren, never again triggering that 40% estate tax at any generational transfer.

SPEAKER_00 15:32

And the math of compounding interest over centuries is almost difficult to comprehend. If that 13 million grows at a highly conservative 6% annually, within a single decade, it's worth over $23 million. In 30 years, it is sitting at $75 million. Wow. And every single dollar of that growth is occurring completely outside of the taxable estate.

SPEAKER_01 15:54

It becomes a self-sustaining financial ecosystem for your bloodline.

SPEAKER_00 15:58

That's a great way to describe it.

SPEAKER_01 15:59

But while the focus is often on these massive multimillion dollar trust structures, the strategy also requires meticulous attention to the micro-level maneuvers, the things that don't even require the use of your lifetime exemption.

SPEAKER_00 16:12

Right, like the annual gift exclusions. Separate from that big 13.61 million lifetime bucket, the IRS allows you to give $19,000 away to as many different individuals as you want every single year. Completely tax-free.

SPEAKER_01 16:27

It's a very powerful tool.

SPEAKER_00 16:29

Oh, absolutely. If you have three kids and four grandchildren, you and your spouse could distribute over a quarter of a million dollars a year, year after year, slowly draining your taxable estate without ever touching your lifetime exemption limit.

SPEAKER_01 16:42

And the IRS provides a unique mechanism to accelerate that drainage through 529 college savings plans. Normally, if you give someone more than the annual 19,000 limit, you have to file a gift tax return. But 529 plans allow for something called superfunding.

SPEAKER_00 16:56

Oh, I've heard of this.

SPEAKER_01 16:57

Yeah, you can legally frontload five years' worth of annual gifts into a single year.

SPEAKER_00 17:01

So a married couple can drop $190,000 into a newborn grandchild's $529 plan in a single afternoon.

SPEAKER_01 17:08

Exactly. The IRS allows this specific exception to encourage education savings, and it allows wealthy grandparents to rapidly offload cash while they're still alive to actually watch it grow.

SPEAKER_00 17:18

We've covered a massive amount of ground here. Slats to protect the spouse, gyats and discounts for the family business, CRTs to bypass capital gains, and dynasty trusts to build a 300-year legacy.

SPEAKER_01 17:30

This raises an important question, though. How do you actually orchestrate all of these distinct mechanisms without creating a cascading disaster somewhere else in your financial life?

SPEAKER_00 17:40

Yeah, because it's not just a vacuum.

SPEAKER_01 17:41

Exactly. The tax code is deeply interconnected. Pulling one lever in your estate plan inevitably moves a gear in your income tax bracket.

SPEAKER_00 17:50

Which is why the source material stresses the absolute necessity of an integrated fiduciary team. You cannot execute this in a silo. If your estate attorney drafts a complex, irrevocable trust, but doesn't consult your CPA, that trust might inadvertently kick out phantom income under your personal tax return.

SPEAKER_01 18:08

And suddenly you're adjusted gross income spikes on paper.

SPEAKER_00 18:11

Right. And when the Social Security Administration sees that spike, they hit you with what's called an IRMA surcharge, an income-related monthly adjustment amount, which can essentially double your Medicare Part B and Part D premiums.

SPEAKER_01 18:22

So a brilliant estate tax maneuver can accidentally create an income tax nightmare.

SPEAKER_00 18:28

Precisely. The wealth advisor, the estate attorney, and the CPA must be looking at the exact same blueprint. A misstep in drafting an irrevocable trust is not just a clerical error, it is a permanent, extraordinarily expensive mistake.

SPEAKER_01 18:43

It really is.

SPEAKER_00 18:44

So to synthesize everything we've extracted from this framework today, the 2026 sunset is not a theoretical debate happening in some congressional committee. It is a scheduled legislative event. For those sitting in that highly vulnerable $5 million to $13 million exposure zone, relying on the Florida blind spot or hoping for political gridlock to save you is a massive gamble.

SPEAKER_01 19:06

A gamble you don't need to take. The IRS has provided a very clear anti-clawback runway to protect families who act now.

SPEAKER_00 19:13

But the logistical reality of independent valuations and complex legal drafting means the true deadline to begin this process is today.

SPEAKER_01 19:21

You really have to view this historically high exemption window as a fleeting anomaly. It's a rare, time-sensitive opportunity to fundamentally alter the financial trajectory of your family.

SPEAKER_00 19:31

It truly is a paradigm shift. And it leaves me with one final thought, something that wasn't explicitly laid out in the Davies Guide, but it feels like the philosophical core of everything we just discussed.

SPEAKER_01 19:42

What's that?

SPEAKER_00 19:43

Well, if Florida law allows you to build a tax-free dynasty trust that lasts for 360 years, you aren't just engaging in basic financial planning anymore. You are constructing a modern-day financial monarchy. You're guaranteeing that descendants you will never even meet are permanently insulated from economic hardship.

SPEAKER_01 20:02

It's incredible to think about.

SPEAKER_00 20:03

But how does that reality shape a family? If your great great grandchildren know from birth that their lives are permanently subsidized by a three century old trust fund, how does that knowledge alter their ambition, their career choices, and their fundamental understanding of the value of work? Something for all of us to think about. Thanks for joining us on this deep dive.