A Florida Community Property Trust (CPT) is a modern estate planning tool that allows married couples to elect community property treatment for their assets — despite Florida being a non-community property state. Created under the Florida Community Property Trust Act, a CPT is designed primarily to provide significant income tax advantages while maintaining the flexibility of a revocable trust.
The primary benefit of a CPT is the full step-up in basis at the death of the first spouse. In traditional Florida planning, only the deceased spouse’s share of jointly owned assets typically receives a step-up in basis. However, when assets are properly transferred into a CPT, 100 percent of the trust assets may receive a step-up, potentially eliminating large capital gains taxes if the surviving spouse later sells those assets. This can be especially valuable for couples who own appreciated real estate, long-held investments, or business interests.
To create a CPT, both spouses must sign the trust agreement and transfer assets into the trust. The trust must clearly state the intent to be treated as community property under Florida law. Importantly, the law generally requires joint action by both spouses to amend or revoke the trust, which is a key distinction from standard revocable trusts.
While CPTs offer powerful tax benefits, they are not appropriate for every client. Careful consideration must be given to issues such as creditor exposure, blended families, and the treatment of separate property. Transferring assets into a CPT may change how those assets are characterized, which can have unintended consequences if not properly addressed.
For the right client, typically a married couple with appreciated assets and a desire for tax efficiency a Florida CPT can be a highly effective planning strategy.
Questions about your estate plan? Call our office at 561-694-7827 and schedule a consultation. Elder & Estate Planning Attorneys PA, 480 Maplewood Drive, Suite 3, Jupiter.
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