Because we are not a law firm, we cannot give legal advice about a specific situation. But this quotation (from our discussion of Texas Lady Bird Deeds, which work the same way as Florida Lady Bird Deeds) should be helpful:
Because a Lady Bird Deed does not create a completed gift for federal tax purposes, the owner/life tenant is treated as retaining the property until his or her death. As a result, the remainder beneficiary will receive a “stepped-up basis” for income tax purposes. A stepped-up basis erases any appreciation in the property that occurred prior to the deceased owner’s death. This can create a substantial income tax savings when the remainder beneficiary sells the property.
The consideration that is stated on the face of the deed is irrelevant for capital gains tax purposes, but it can matter for Florida documentary stamp tax purposes. If you use a gift deed, that can help make it clear to the clerk that no money is changing hands and thus that no documentary stamp taxes are due. It isn’t determinative of the issue, but it can be helpful.
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