Estate Planning involves deciding how your assets will be distributed after you pass away. Regardless of your age, financial status or state of residence, it is essential to have a comprehensive estate plan in place to ensure that your wishes are carried out, and your loved ones are protected. Yet the complexities of wills, trusts, and other estate planning tools can be difficult to grasp, and the laws surrounding them can change on a dime.
In recent years, a law was passed in Florida that could potentially impact millions of Americans’ estate plans: The Florida Community Property Trust Act. This new law offers a considerable addition to estate planning options for married couples, and significant potential benefits come with this type of trust. However, many people are unaware of this new law or how to use it in estate planning. Read on to learn about:
- The Florida Community Property Trust Act
- The purpose of a Community Opt-in Trust
- How you can leverage this type of trust for the benefit of your family
What is the Florida Community Property Trust Act?
The Florida Community Property Trust Act is a law that was enacted on June 29, 2021, after Florida Governor Ron DeSantis approved Senate Bill No. 1070, Chapter 2021 – 183, and went into effect on July 1, 2021. This law was introduced to allow the creation of a Community Property Trust (CPT).
“The Florida Community Property Trust Act, which is effective for such trusts created on or after July 1, 2021, provides many benefits to married couples, the most significant of which is the potential income tax treatment of trust assets at the first spouse’s passing.”
This is significant because:
- Florida is a common law state, meaning that until now, the title of an asset generally dictated ownership within a married couple.
- Previously, married couples could not take advantage of community property laws in Florida, except when a couple moved to Florida from a community property jurisdiction.
- Many benefits come with community property ownership, which was not previously available to married couples in Florida.
“Florida Community Property Trust (FLCPT) is a joint trust that holds the assets of a married couple, and, while both spouses are alive, the assets generally may be used for their benefit.”
With the enactment of the Florida Community Property Trust Act, married Floridians now have a valuable Estate Planning tool to consider in their estate planning strategy. Whether you are just starting your estate plan or need to update an existing one, understanding the options now available under this new law can benefit your planning process and the future of your assets.
What is the Purpose of a Community Opt-in Trust?
With the Florida Community Property Trust Act, married couples can now create a Community Opt-in Trust, or Community Property Trust (CPT). This type of revocable trust allows married couples to transfer their property into a joint trust and enjoy the benefits of community property ownership. In other words, assets acquired during the marriage and previously considered separate property can be converted to jointly-owned assets or “community property.” A CPT can offer several benefits to married couples, including:
- Avoiding probate.
When one spouse dies, the trust assets can pass directly to the surviving spouse without the need to assess or prove the will of the deceased.
- Tax benefits.
By structuring the trust in a certain way, couples may take advantage of tax benefits, such as stepped-up basis for assets upon the death of one spouse.
- Asset protection.
The trust can help protect the assets from creditors or lawsuits.
- Estate planning.
The trust can be used as a part of a comprehensive estate plan to ensure that the couple’s assets are distributed according to their wishes.
These advantages can prove highly useful for couples looking to create Community Property Trusts and/or convert their assets into jointly-owned property.
How Can You Leverage a CPT for the Benefit of Your Family?
Using a Community Property Trust in your estate plan, you and your spouse can take advantage of all the benefits outlined in the above section. Your CPT should include all of the assets you wish to be considered community property, which can ensure that your assets are distributed according to your wishes. Giving spouses equal interest in a jointly-owned property can be particularly useful in situations where one spouse has significantly more assets than the other, as it can provide fair and equitable property distribution upon either spouse’s death.
But perhaps the most significant way to leverage a CPT is to take advantage of their tax benefits. With a CPT in place, assets receive a step-up on the basis upon the death of either spouse. This means that the cost basis of any asset included in a CPT is increased to the fair market value at the time of the spouse’s death. This can help minimize capital gains taxes when the assets are later sold. Additionally, community property receives a more favorable tax treatment than separate property, which can result in lower taxes for the surviving spouse or heirs.
Call THE South Florida Estate Planning Attorney – Barry Siegel
The Florida Community Property Trust Act gives married couples a new option to consider in their estate planning strategies. Leveraging a CPT in your estate plan can provide numerous benefits for you and your family, and you can begin setting one up today. Working with an experienced Estate Planning Attorney can ensure that your estate plan meets your needs and goals. Call our office at (561) 576-6206 to schedule a complimentary consultation, or submit our online contact form to schedule a consultation today. If you have any questions, do not hesitate to contact us.