The Florida Community Property Trust act (FLCPT) became available to married Florida couples
July 1, 2021. This trust provides many benefits, the most significant being the potential tax
treatment of assets held in this type of trust after the first spouse passes away.
Florida is a common law property state, and asset ownership is dictated by how the asset is
titled. If you own the asset, you may convey it.
Conversely, there are nine states that are community property states and assets in those states
that are acquired during a marriage are considered to be owned 50/50 regardless of how assets
are titled or acquired. You can only convey the ½ that you own.
This new act FLCPT permits the creation of a joint Community Property Trust to permit spouses
to place assets in the trust that will be treated as if the asset is Community Property.
The primary purpose of a Community Property Trust is to take advantage of Federal Income Tax
• Under IRS regulations, property receives a “step up in basis” on the death of the owner. A “step
up in basis” is a tax rule that adjusts the cost basis (price paid) of an inherited asset to its fair
market value at the time of the decedent’s death.
• Jointly held property in a common law state only permits a “step up in basis” of ½ the property.
• Property held in a community property state however/ permits the survivor a 100% “step up in
basis” for all of the property.
Let’s look at an example:
200 Shares of ABC stock at $100 a share cost basis
and a Fair Market Value of $500 owned Jointly with
rights of survivorship
At Husband’s death ½ valued receives a step up in
basis to $50,000
Wife owns ½ shares with a cost basis of $10,000
Wife sells 200 shares $500/share netting $100,000
200 Shares of ABC stock at $100 with a share
cost basis and Fair Market Value of $500 owned
as Community Property
At Husband’s death
All shares valued at $500
Wife sells 200 shares $500/share
netting $100,000
Cost basis is $100,000
Capital gain is $4,000 ($100,000-$50,000 – $10,000
= $40,000)
Capital gains tax is $8,000 ($40,000 X 20%)
No capital gains.
Tax savings $8,000
Are there downsides?
• You may lose creditor protection of Tenants by the Entireties.
• This may affect marital division in the event of a divorce.
• The IRS could challenge. No current case law or IRS regulations. The act is Florida law (not IRS
Code or Regulation). Other states have taken similar actions, but this is not precedent.
As with all important estate and tax planning strategy decisions, you should consult with
your wealth management team, including your wealth advisor, estate planning attorney and
your accountant before engaging in any transactions. It’s also a good time to check with your
insurance agent to ensure that your umbrella liability policy is adequate.
Remember that these trusts are for specific assets and should not be a replacement for your
will or trust.
If a Community Property Trust looks favorable, your attorney will draft the trust and assist with
the transfer of assets into the trust name.
Investment advisory services are offered through Suncoast Equity Management, LLC, a
Securities and Exchange Commission Registered Investment Advisor. This material has been
prepared for informational purposes only and is not intended to be relied on for tax, legal or
accounting advice.