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Estate Planning for Foreign-Owned Florida Real Estate

Foreign nationals who own Florida real estate face two major estate planning problems that US buyers don’t: US estate tax on US-situs assets at rates up to 40% with only a $60,000 exemption (vs $13.61M for US citizens), and Florida ancillary probate — a separate Florida court proceeding to transfer ...

US Estate Tax Exposure by Ownership Type

US estate tax calculation for a non-resident alien owning a $3M Florida property personally (no treaty): taxable US estate = $3,000,000 – $60,000 exemption = $2,940,000. Tentative tax on first $1M = $345,800. Tax on remaining $1,940,000 at 40% = $776,000. Total US estate tax = approximately $1,121,800. The heirs must pay this within 9 months of the date of death before the property can be transferred. If the heirs cannot raise the cash, the property must be sold to pay the tax. For treaty-country buyers (UK, Germany, France, Canada): the proportional exemption may reduce or eliminate this liability. For non-treaty buyers (most Latin American, Netherlands, Scandinavia, Italy, Spain): the foreign corporation + US LLC structure is the standard solution.

The Foreign Corporation Solution

The estate tax mitigation structure for non-treaty buyers: (1) a foreign corporation (BVI, Cayman, Panama) is incorporated in the buyer’s chosen jurisdiction. (2) The foreign corporation is designated as the sole member of a Florida LLC. (3) The Florida LLC takes title to the property at closing. (4) The non-resident alien owner holds shares in the foreign corporation — which are not US-situs assets. The US estate tax does not apply to non-US-situs assets. (5) At the owner’s death: the foreign corporation shares transfer according to the home-country estate plan, and the Florida property passes with them — without triggering US estate tax or Florida ancillary probate on the property itself. The structure is well-established, widely used, and recognised by the IRS. Caveats: it must be implemented before the purchase closes (retrofitting after closing creates potential gift tax issues); annual compliance costs $3,000–$8,000/year; FIRPTA still applies at sale.

Florida Ancillary Probate

Florida real estate owned personally by a foreign national who dies must pass through Florida ancillary probate before title can transfer to heirs. Ancillary probate requirements: (1) petition filed in the Florida probate court in the county where the property is located, (2) appointment of a Florida-licensed personal representative (executor), (3) notice published in a local Florida newspaper, (4) court approval of the property transfer. Timeline: 6–18 months for an uncontested ancillary probate. Cost: 3–5% of the Florida property value in attorney and court fees. On a $2M property: $60,000–$100,000. The solutions: (1) a Florida revocable living trust (property deeded to the trust avoids probate entirely; the trust’s successor trustee transfers the property to beneficiaries without court involvement in 2–4 weeks); (2) the foreign corporation + US LLC structure (transfer of the corporation’s shares is governed by home-country law, not Florida probate). Either solution eliminates the 6–18 month delay and the 3–5% cost.

Coordinating US and Home-Country Estate Plans

Foreign nationals with Florida real estate must ensure their US plan and home-country plan are consistent: (1) the Florida revocable trust or entity structure must align with the home-country estate plan’s beneficiary designations — the same heirs should be named in both plans for the same asset. (2) Some home-country legal systems (French, Spanish, and many Latin American civil law systems) impose “forced heirship” rules that may conflict with the trust’s desired distribution. The US attorney and home-country attorney must review each other’s documents. (3) The US plan should specify Florida law as governing law. (4) The home-country will should specifically address the Florida property: either expressly including it in the residual estate (which passes through the home-country plan) or expressly excluding it (because it passes through the US trust or entity structure).

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Frequently Asked Questions

What is ancillary probate and how does it affect foreign owners?

Ancillary probate is a Florida court proceeding required to transfer Florida real estate owned personally when the owner dies. It adds 6–18 months and 3–5% of property value in costs. A Florida revocable trust or foreign corporation + US LLC structure avoids ancillary probate entirely.

How do I avoid US estate tax on my Florida property?

Primary strategies: (1) entity structuring (Florida LLC owned by a foreign corporation) removes the property from the US estate tax base for non-treaty buyers; (2) US estate tax treaty (UK, Germany, France, Canada) reduces or eliminates US estate tax exposure; (3) gifting to a US citizen spouse transfers the property out of the estate with the unlimited marital deduction.

Should I put my Florida property in a trust?

A Florida revocable living trust avoids ancillary probate and simplifies transfer to heirs but does not reduce US estate tax. For estate tax mitigation (non-treaty buyers), the foreign corporation structure is the right tool. For probate avoidance alone, the revocable trust is the simpler and less costly option.

Does my home-country will cover my Florida property?

A home-country will can be used to transfer Florida real estate but must go through Florida ancillary probate to transfer title, adding 6–18 months and significant cost. A Florida revocable trust or entity structure eliminates this requirement entirely.