Florida recently enacted a new law that is making some exciting changes in estate planning.
This new law, the Community Property Trust Act (CPTA) went into effect on July 1, 2021.
But what’s it all about?
In today’s post we will provide a brief overview of the new law and how it may affect your estate planning.
But First, The Old Law: Florida Law and Capital Gains Taxes
Before we delve into the new law, it is important to understand two things:
- that Florida is not a community property state. And
- what that means when it comes to estate planning.
In community property states (for example, California, Nevada, New Mexico, Arizona, Idaho, Louisiana, Texas, New Mexico, Washington and Wisconsin) all property acquired during the marriage that is not separate property, is considered “community property” or “marital” property. For estate tax purposes, Internal Revenue Code § 1014(b)(6), allows the basis of all community property to be adjusted to the fair market value of the property at the date of the first spouse’s death. This means that at the time of death of the first spouse, both the deceased spouse’s share and the surviving spouse’s half of the community property is adjusted to the fair market value of the property at the date of the decedent spouse’s death.
This step-up in basis allows the surviving spouse to avoid capital gains tax at the time of the first spouse’s death.
In contrast, because Florida is not a community property state, Florida’s law— until the passing of the CPTA—allowed only the deceased spouse’s half of all marital property to receive a step-up in basis. A surviving spouse’s share did not get a step-up in basis. Jointly-owned assets get the step-up in basis for only one-half the value.
Enactment of the CPTA, however, has expanded the estate planning possibilities.
Next, The New Law: Florida’s New Community Property Trust Act
The enactment of the CPTA allows Floridians to participate in the tax advantage historically enjoyed in community property states.
Florida’s new Community Property Trust Act lets Florida residents create and fund a community property trust (CPT). This allows them to take advantage of Internal Revenue Code § 1014(b)(6).
The CPT must meet specific legal requirements (which we will discuss in a separate post). However, once properly established, the assets in the CPT are revalued as of the date of the first spouse’s death; helping couples avoid capital gains tax.
It may not work for everyone of course, but if a CPT makes sense for your estate planning, it can be a great tool to use. Talk to your estate and probate lawyer to find out more about Florida’s new law.
Talk to our Estate Planning Lawyers
Our team here at SJF Law Group works hard to ensure that your wishes will be followed, and your loved ones taken care of when you are gone. Our estate planning lawyers expertly guide individuals and families through the complex probate process and capably handle all aspects of the creation, administration, and settlement of estates and trusts. When you work with our Florida estate planning attorneys at SJF Law Group, you get more than just an estate plan: you get peace of mind.
As trusted probate and estate planning lawyers, we serve individuals and families in the vibrant communities of Plantation, Fort Lauderdale, Boca Raton, West Palm Beach, and Miami, FL. We are also pleased to offer the options of both in-person and virtual appointments throughout Florida to make our services accessible no matter where you are located.
If you want to discuss your specific situations with one of our estate planning lawyers, do not hesitate to reach out to our law firm at 954-580-3690. You can also fill out our contact form.