New Florida Community Property Trust Law

Quarles & Brady LLP

Quarles & Brady LLP

Florida has enacted new legislation allowing married couples to create a Community Property Trust (CPT). Currently (except in community property states), when the first spouse dies, his or her own assets receive a step-up in basis to their date-of-death value. Assets owned jointly receive this step-up in basis for one-half of the value. Under the new law, if a couple creates and funds a CPT, all of the assets in the CPT will be revalued as of the date of the first spouse's death. The result? Capital gains disappear. This adds flexibility for the surviving spouse, who can now sell any of the assets without incurring capital gains tax.

The CPT law requires that upon the first death one-half of the assets must pass pursuant to the deceased spouse's wishes and the other half pursuant to the surviving spouse's wishes. For this reason, the CPT may not be a good option for some second marriages.

Additionally, creditors of either spouse can reach one-half of the assets held in a CPT (other than homestead property). Thus, a CPT is not a good choice if either spouse has creditor concerns.

For married couples with the same intended beneficiaries, appreciated assets, and no creditor issues, a CPT can provide significant income tax savings upon the death of the first spouse. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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