Florida Community Property Trust Act. On July 1, 2021, the Community Property Trust Act became effective in Florida, a separate property state, potentially providing substantial tax benefits to married couples. Under Internal Revenue Code § 1014(b)(6), when a spouse owning community property dies, the basis of both the deceased spouse’s and the surviving spouse’s 50 percent shares of the property is adjusted to the fair market value of the property at the date of the decedent spouse’s death. In contrast, under a separate property regime, only the half owned by the decedent spouse receives the stepped-up basis, meaning that if the asset is transferred during the living spouse’s lifetime, higher taxes will be owed. Some commentators have raised doubts about whether the Internal Revenue Service will allow a full step up in basis at the death of one spouse for assets held in a community property trust for individuals who do not live in a community property state.
A community property trust established under the new law would allow Florida residents and others, regardless of domicile, who establish Florida community property trusts to benefit from these tax advantages, as the property owned by the trust and the appreciation of and income from the property are deemed to be community property. Under the new statute, the community property trust must