The Florida Community Property Trust: A Powerful Tax Planning Tool for Married Couples

​By Richard L. Steinberg, Esq. | Steinberg & Associates, P.A.

A Florida Community Property Trust can be a valuable estate planning tool for married couples who own appreciated assets and want to evaluate potential capital gains tax planning opportunities. If you and your spouse own stock, real estate, a business, or other assets that have grown significantly in value, this relatively new planning option could help your family reduce capital gains taxes when one spouse passes away. Although Florida Community Property Trusts have been available since July 2021, they remain one of the most underutilized estate planning strategies in the state.
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This article explains what a Florida Community Property Trust is, how it works, who stands to benefit from one, and what to watch out for.

Florida Is a Common Law State. What Does That Mean for You?

Most people choose Florida for its weather, its tax climate, or its quality of life. What many do not realize is that Florida is what lawyers call a "common law" property state. In practical terms, this means that the person whose name is on the title of an asset is generally considered its legal owner.

If a husband and wife have a brokerage account that is titled solely in the husband's name, Florida law treats it as his asset. If they own their home jointly, Florida law treats it as jointly owned. The law does not automatically presume that both spouses share equally in everything acquired during the marriage. That presumption is reserved for what are called community property states.

Note: Under Florida’s equitable distribution statute, Section 61.075, Florida Statutes, assets acquired during a marriage may be treated as marital assets subject to division in a divorce proceeding, regardless of how title is held. However, this right arises only upon dissolution of the marriage and is determined by a court based on the circumstances of the case. It is not a vested ownership interest during the marriage in the way that community property rights are.

There are nine community property states in the country, including California, Texas, Arizona, and Nevada. In those states, assets acquired during a marriage are generally presumed to be owned equally by both spouses, regardless of whose name is on the title. This distinction, which might seem like a technical legal detail, can have enormous consequences on taxes.

Understanding Cost Basis and Why It Matters

Before explaining the tax benefit of a Florida Community Property Trust, it helps to understand a basic concept: cost basis.

When you buy an asset, your cost basis is generally what you paid for it. When you later sell that asset, you pay income tax on the gain, which is the difference between what you sold it for and your original cost basis.

When someone passes away and leaves an asset to a surviving spouse or other heir, federal tax law generally resets the cost basis of that inherited asset to its fair market value on the date of death. This reset is called a "step-up in basis," and it can eliminate years or even decades of built-up gain from the calculation. It is one of the most valuable benefits in the entire tax code.

In Florida, however, the step-up at death is only partial for married couples. Because Florida is a common law state, only the deceased spouse's share of a jointly owned asset receives the step-up. The surviving spouse's share retains its original, lower basis. That distinction is where the Florida Community Property Trust makes all the difference.

The following two examples, using the same facts, illustrate exactly what is at stake.

• Example 1 — Florida without a Community Property Trust: Maria and Roberto purchased stock for $50,000 in 2005. By 2025, the stock is worth $350,000. Roberto dies. His half of the stock, worth $175,000, receives a step-up in basis to $175,000. Maria's half retains her original basis of $25,000. When Maria sells the entire position, she owes capital gains tax on $150,000 of gain, the difference between her $25,000 original basis and the $175,000 she receives for her half. The $300,000 of appreciation that built up over twenty years is only half eliminated.
• Example 2 — Same facts, with a Florida Community Property Trust: Maria and Roberto purchased the same stock for $50,000 in 2005 and held it in a Florida Community Property Trust. By 2025, the stock is worth $350,000. Roberto dies. Because the entire position is community property, both halves receive a step-up to the full $350,000 fair market value. Maria's new basis in the entire position is $350,000. She sells shortly after and owes zero capital gains tax. The entire $300,000 of built-up gain is eliminated. The only difference between Example 1 and Example 2 is whether the stock was held in the FLCPT.

That difference, zero tax versus tax on $150,000 of gain, illustrates why the double step-up is so significant. At a combined federal capital gains and net investment income tax rate of approximately 23.8% for higher-income taxpayers, the tax savings in these examples alone would approach $36,000 on a single stock position. For couples with larger portfolios or more appreciated assets, the numbers grow proportionally.

​For a plain-English explanation of how basis works before and after death, see our guide to the step-up in basis in Florida.

​One important limitation: the step-up in basis applies to stocks, real estate, and business interests held in taxable accounts. It does not apply to retirement accounts, IRAs, 401(k)s, annuities, or life insurance, which have their own tax rules. The Florida Community Property Trust is most powerful for non-retirement assets that have appreciated significantly over time.

What Is a Florida Community Property Trust? 

In 2021, the Florida Legislature enacted the Florida Community Property Trust Act, which allows married couples to voluntarily opt into community property treatment for assets they choose to place into a special type of trust. That trust is called a Florida Community Property Trust, sometimes referred to by the abbreviation FLCPT.

In simple terms, a Florida Community Property Trust is a jointly held trust created by both spouses together. When a married couple transfers assets into this trust and the trust meets certain legal requirements, those assets are treated as community property under Florida law. That community property classification is what unlocks the double step-up in basis at the first spouse's death.

A few key points about how the trust works:

• It is voluntary and selective. You choose which assets go into the trust. You are not required to put everything you own into it, and you can keep other assets outside of it entirely.
• It is generally revocable. The Florida Community Property Trust Act sets revocability as the default. During both spouses' lifetimes, the trust can typically be amended or revoked. It is not a permanent, locked-in arrangement.
• Both spouses are settlors. That is the legal term for the people who create and fund the trust. Both spouses must sign it, and both must be on board.
• A Florida-qualified trustee is required. At least one trustee must either be a Florida resident individual or a bank or trust company authorized to act as trustee in Florida. This requirement is what gives the trust its Florida legal footing, and it means couples who live outside of Florida can still use an FLCPT as long as they appoint a qualified Florida trustee.
• An existing trust may be amended or restated to qualify. Florida's Community Property Trust Act applies to a trust that is created, amended, restated, or modified on or after July 1, 2021. Accordingly, an existing trust created before that date may potentially be converted into a Florida Community Property Trust through a properly executed amendment, restatement, or modification. The trust must still satisfy all of the Act's requirements, including the required participation of both spouses, a qualified Florida trustee, and the statutory warning language. Whether amendment or restatement is appropriate depends on the existing trust's terms and amendment provisions; in some situations, creating a new Florida Community Property Trust and transferring selected assets to it may be the cleaner approach.
• The trust must contain specific required language. Florida law requires the trust instrument to include a prominent warning in capital letters at the beginning of the trust agreement, advising both spouses of the significant consequences of creating a community property trust and strongly recommending that each spouse obtain independent legal counsel before signing.

That last point is worth pausing on. The required warning is there for good reason. A Florida Community Property Trust changes your property rights in important ways, and those changes affect what happens not just at death, but also in the event of divorce, creditor claims, and other circumstances. The warning is not merely a formality. It reflects the fact that this is a serious decision that should be made with eyes wide open.

How the Trust Works During Your Lifetime and at Death

During Both Spouses' Lifetimes 

While both spouses are alive, a Florida Community Property Trust generally operates much like any revocable joint trust. The spouses can use the assets in the trust for their benefit, manage them, sell them, or reinvest the proceeds. Income and appreciation generated by assets inside the trust are also treated as community property. Day-to-day life looks much the same as it did before the trust was created.

Because the trust is revocable by default under Florida law, the spouses can generally amend or revoke it during their lifetimes, though the specific rights of each spouse to act individually depend on how the trust is drafted. If they change their minds and want to take an asset back out of the trust, they can do so. This flexibility is one of the features that makes the FLCPT attractive compared to some other planning strategies that require irrevocable commitments.

At the First Spouse's Death

When the first spouse passes away, the trust does not simply end. Instead, it splits. Each spouse's one-half share is identified and accounted for separately. The deceased spouse's half is subject to whatever disposition that spouse directed in the trust, typically passing to the surviving spouse or into a continuing trust for the surviving spouse's benefit. The surviving spouse's half remains fully the surviving spouse's property.

Critically, both halves of the community property held in the trust receive a stepped-up basis to the fair market value on the date of death. This is the double step-up that makes the FLCPT so powerful.

• Example 3: David and Susan have held a rental property in their FLCPT for fifteen years. They originally paid $200,000 for it. At David's death, the property is worth $900,000. At that moment, the trust splits into two equal halves. David's half, worth $450,000, passes to Susan as directed by the terms of the trust. Susan's own half, also worth $450,000, remains hers. Because the property was held as community property in the FLCPT, both halves receive a step-up in basis to fair market value at the date of David's death. Susan's combined basis in the entire property is now $900,000. If she sells the property shortly after, she owes no capital gains tax on any of the $700,000 of appreciation that built up during the marriage. Without the FLCPT, Susan would have received a step-up only on David's half, leaving her with a combined basis of $550,000 and a taxable gain of $350,000 when she sells.

The tax savings in that example, at a 20% long-term capital gains rate plus the 3.8% net investment income tax that applies to higher-income taxpayers, could easily exceed $80,000 on that single property.

​One important administrative note: how the trust assets are divided at the first death matters. To preserve the double step-up, each spouse's one-half share should generally be funded on an asset-by-asset basis rather than by allocating entire assets exclusively to one spouse's share. The trustee and estate planning attorney will need to work together carefully at this stage to ensure the basis step-up is properly preserved and reported.

After the First Spouse's Death

Following the first spouse's death, the surviving spouse has options. The trust may continue in operation, with the surviving spouse retaining control over their own half. The surviving spouse can also amend the portions of the trust that relate to their own share, even if the trust was originally drafted as irrevocable. Florida law specifically preserves this right.

Alternatively, the surviving spouse may choose to terminate the trust and receive their share of the remaining assets outright. The structure gives the surviving spouse meaningful flexibility rather than locking them into a rigid arrangement at a time that is already difficult.

Homestead Property and the Florida Community Property Trust

Florida homeowners benefit from some of the strongest property protections in the country, and those protections do not go away when a home is placed into a Florida Community Property Trust. In fact, the trust is specifically designed to preserve them.

When a couple transfers their primary residence into an FLCPT, the transfer does not trigger a reassessment of the property for tax purposes. It is treated as a transfer between spouses, which under Florida law does not constitute a change of ownership that would cause the property to be reassessed. The homestead exemption, the Save Our Homes cap on annual assessment increases, and the creditor protection that comes with Florida homestead status all remain intact, provided the surviving spouse retains the right to reside in the property rent-free.

There is, however, one area where careful planning is essential: homestead devise restrictions. Florida's constitution restricts who a homeowner can leave their home to at death. If a person dies survived by a spouse or minor children, there are limits on how the home can be devised. A Florida Community Property Trust does not automatically resolve these restrictions. If the trust directs the deceased spouse's share of the home to someone other than the surviving spouse, or into an irrevocable trust that limits the surviving spouse's rights, the attempted transfer could run into problems.

The good news is that these issues are manageable with proper planning. A homestead waiver included in the deed conveying the property to the trust, or a separate nuptial agreement, can often address the devise restriction concerns. But they need to be addressed intentionally and in advance. A Florida Community Property Trust that includes homestead property requires extra care in both the drafting and the administration.

​When minor children are involved the analysis becomes significantly more complex, and couples in that situation should discuss the homestead implications with their attorney before proceeding.

Who Is a Good Candidate for a Florida Community Property Trust?

A Florida Community Property Trust is not the right tool for every married couple. But for the right couple, it can deliver substantial benefits. Here are the characteristics that tend to make someone a strong candidate:

• Long-term, stable marriages. The trust is a joint arrangement that treats all assets inside it as shared equally. Couples who are certain they want to share their wealth equally and who are not concerned about protecting separate property interests from a prior marriage tend to be the best fit. For younger couples with long life expectancies, the benefit may be less urgent in the near term, since appreciated assets are often sold and replaced over many years. The planning is most compelling for couples in their fifties and beyond with significant low-basis holdings they intend to hold until death.
• Highly appreciated assets. The double step-up benefit only matters if the assets have grown significantly in value since they were purchased. Couples with stock portfolios, investment real estate that has appreciated over decades, or business interests that have grown substantially stand to benefit most.
• A portfolio that has not been sold due to capital gains concerns. Many couples hold onto appreciated investments longer than they otherwise would simply because selling would trigger a large tax bill. An FLCPT can make it easier for the surviving spouse to sell those assets after the first death without the same tax burden.
• Rental real estate. Rental properties often carry both significant appreciation and accumulated depreciation deductions, which create a dual tax exposure at sale. A surviving spouse who inherits appreciated, heavily depreciated rental property without a basis step-up faces both capital gains tax and depreciation recapture. The double step-up can eliminate both concerns on assets held in the trust.
• Collectibles, artwork, gold, and other alternative assets. These assets are often subject to a higher long-term capital gains rate of up to 28%, making basis planning particularly valuable.
• Couples who moved to Florida from a community property state. If you lived in California, Texas, Arizona, or another community property state before moving to Florida, you may have brought assets with you that were originally community property. Florida has a separate law, the Uniform Disposition of Community Property Rights at Death Act, that provides some protection for those imported assets. But there is meaningful uncertainty about whether that law alone is sufficient to preserve the double step-up in basis. Placing those assets into an FLCPT provides a cleaner, more certain path to the same tax treatment.
• Non-retirement, taxable assets. The trust works for stocks, real estate, and business interests held in taxable accounts. It does not change the tax treatment of IRAs, 401(k)s, retirement plans, annuities, or life insurance, which have their own rules. Couples whose wealth is concentrated in retirement accounts will find less benefit here.
• No significant current creditor concerns. For reasons discussed in the next section, couples who face potential creditor claims or who work in high-liability professions may want to weigh the FLCPT against other planning options.

Who Should Think Carefully Before Using One?

​The FLCPT is a powerful tool, but it is not without tradeoffs. Several categories of couples should proceed thoughtfully:

​Couples with Asset Protection Concerns

When you place assets into a Florida Community Property Trust, each spouse's half of the trust is exposed to that spouse's individual creditors. This is different from how married couples often hold assets in Florida as tenants by the entirety, a form of joint ownership available only to married couples in which neither spouse's individual creditors can reach the property.

• Example 4: Dr. Patricia and her spouse Mark own their investment portfolio as tenants by the entirety. A malpractice judgment against Patricia individually cannot reach that portfolio. If they transfer it to an FLCPT, one-half of the portfolio becomes reachable by Patricia's individual creditors. The tenants-by-the-entirety protection they had is gone.

This does not mean couples with creditor concerns can never benefit from an FLCPT. It means they need to carefully weigh the tax savings against the potential increase in creditor exposure, ideally with the guidance of an attorney who understands both estate planning and asset protection.

Blended Families and Prior Marriages

If either spouse has children from a prior relationship, or if either spouse has significant separate property they wish to preserve, the community property framework can create complications. The FLCPT treats everything inside it as jointly owned, and upon the first spouse's death, one-half belongs entirely to the surviving spouse. Couples who want to maintain distinct property interests, whether for estate planning purposes or to protect the inheritance rights of children from prior marriages, often find that keeping assets separate is more important to them than the tax benefit.

There is one additional legal wrinkle worth knowing about for couples in second marriages or where either spouse has children from a prior relationship. Florida law gives a surviving spouse the right to claim a portion of a deceased spouse's estate regardless of what the will or trust says. This is called the elective share. Florida's community property trust statute is clear that the surviving spouse's own half of the trust is not counted when calculating that claim, which makes sense since it was already theirs. What the statute does not address is whether the deceased spouse's half of the trust is subject to an elective share claim by the surviving spouse. That unresolved question could matter in situations where the deceased spouse directed their half of the trust to someone other than the surviving spouse, such as children from a prior marriage. Couples navigating that kind of family situation should discuss the elective share implications with their attorney before establishing a Florida Community Property Trust.

Couples Considering Divorce

If a marriage is in difficulty, a Florida Community Property Trust is almost certainly not the right move. If the couple later divorces, assets held in the trust are divided equally, one-half to each spouse. This is different from Florida's general equitable distribution rules, which give courts discretion to divide marital assets based on the circumstances of the marriage. Agreeing in advance to a strict 50/50 split through an FLCPT eliminates that flexibility.

Couples Where One Spouse Is Not a U.S. Citizen

Florida has a large and diverse international population, and many married couples include a spouse who is not a United States citizen. For those couples, the FLCPT requires careful additional analysis before proceeding. The unlimited gift tax marital deduction, which allows one spouse to transfer unlimited assets to the other without gift tax, is not available when the recipient spouse is not a U.S. citizen. Instead, annual limits apply. This means that funding an FLCPT with appreciated separate property when one spouse is a non-citizen could trigger gift tax considerations that would not arise in an all-citizen couple, depending on the assets transferred and how the trust is funded. There are also potential estate tax complications if the non-citizen spouse predeceases the citizen spouse, since the estate tax marital deduction is similarly restricted for non-citizen spouses. Couples in this situation should work with an attorney experienced in both estate planning and international tax planning before establishing a Florida Community Property Trust.

The Tax Uncertainty: What the IRS Has and Has Not Said

​It would be incomplete to discuss the tax benefits of a Florida Community Property Trust without addressing the honest uncertainty that exists around them.
The federal tax law that provides for the double step-up in basis, Internal Revenue Code Section 1014(b)(6), was written for couples living in traditional community property states. Florida, along with Alaska, Kentucky, South Dakota, and Tennessee, allows couples to opt into community property treatment through a trust. The IRS has not issued a formal ruling specifically confirming that the double step-up applies to assets held in these opt-in community property trusts.

Some critics of the opt-in approach point to a 1944 Supreme Court case called Commissioner v. Harmon, in which the Court declined to recognize an Oklahoma law that allowed couples to elect community property treatment, at least for income tax purposes. However, most practitioners believe that Harmon does not control here, for two reasons: it involved income splitting rather than basis adjustment, and it predates modern opt-in statutes that are carefully structured to mirror traditional community property law in all meaningful respects. The IRS has never raised Harmon as a basis to challenge community property trusts in Alaska, Tennessee, or South Dakota, states that have had similar laws since 1998.

In a further development, the ABA Tax Section submitted a formal White Paper to the IRS and Treasury Department specifically requesting guidance confirming the double step-up for opt-in states like Florida. Representatives of the Florida Bar Tax Section participated in meetings with IRS and Treasury officials at the 2025 Annual Meeting in Washington to discuss the submitted White Papers. While the IRS declined to issue formal guidance at that time, the issue is reportedly under active internal consideration. Notably, IRS attorneys identified a number of peripheral issues that could affect the federal treatment of such trusts, but did not address the fundamental question of whether opt-in community property trust statutes satisfy the statutory definition of community property for federal tax purposes. No formal guidance has been issued as of the drafting of this article.

There are also a few additional tax risks worth understanding:

• The step-down risk. A step-up only helps when assets have gained value. If the market has declined significantly at the time of the first spouse's death, the same rule that would have provided a step-up instead delivers a step-down, resetting the basis to a lower value. Couples should monitor whether assets in the trust have appreciated or depreciated and can remove loss assets from the trust if circumstances change.
• Deathbed transfers. If assets are transferred into an FLCPT very close to the time of death, there is a risk the IRS could treat the transfer as a deathbed transaction and limit the step-up on the surviving spouse's half. Timing matters, and the trust should be established well in advance.
• The step-up in basis survived the most sweeping federal tax legislation in decades. The One Big Beautiful Bill Act, signed into law on July 4, 2025, made permanent the step-up in basis rules and raised the federal estate and gift tax exemption to $15 million per individual. Congress had the opportunity to eliminate the step-up entirely and chose not to. For most Florida couples, federal estate tax is now a non-issue, which means capital gains planning, including the FLCPT, has become the central tax concern in estate planning.

None of these risks mean the FLCPT is not a sound planning tool. For the right couple, the potential tax savings are substantial and the strategy is widely used and recommended by experienced Florida estate planners. It is also worth noting that the downside risk of the FLCPT is one-sided: if the IRS were to ultimately deny the double step-up, a couple would not lose anything beyond the cost of creating and administering the trust. The underlying assets would simply be treated the same way they would have been without the FLCPT. But it should be entered into with realistic expectations and proper legal guidance.

Is a Florida Community Property Trust Right for You?

Here is a straightforward way to think about whether an FLCPT deserves a conversation with your estate planning attorney:

If you and your spouse are in a stable marriage, own non-retirement assets that have appreciated meaningfully since you bought them, do not face significant current creditor exposure, and are not in a situation where separate property interests are a priority, a Florida Community Property Trust may offer you a planning opportunity that is difficult to replicate any other way.

The potential to eliminate capital gains tax on decades of appreciation in a stock portfolio, an investment property, or a business interest is not a minor benefit. For many couples, it represents one of the most significant wealth-preservation opportunities available under current law. With the federal estate tax exemption now permanently set at $15 million per individual, capital gains planning has become the primary tax concern for the vast majority of married couples in Florida.

At the same time, the FLCPT involves real tradeoffs. It requires giving up certain creditor protections. It commits both spouses to an equal ownership framework. It requires establishing a qualifying Florida Community Property Trust, whether through a new trust or, when appropriate, by amending or restating an existing trust, and properly titling the selected assets. It involves ongoing administration and the requirement of a Florida-qualified trustee. And it operates in an area of tax law where formal IRS guidance remains incomplete.

These are precisely the kinds of considerations that benefit from the guidance of an estate planning attorney who can look at your specific assets, your family situation, your risk tolerance, and your long-term goals before recommending a course of action. A strategy that is ideal for one couple may be entirely wrong for another.

If you are a Florida resident, or even a resident of another state who owns assets in Florida or who is open to working with a Florida trustee, the Florida Community Property Trust Act opened a door that simply did not exist before July 2021. Whether walking through that door makes sense for you and your spouse is a question worth asking.​

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Legal Disclaimer: This article has been prepared by Steinberg & Associates, P.A. for general informational purposes only and does not constitute legal advice. The information contained herein is based on Florida law as of the date of publication and is subject to change. Every individual's circumstances are different, and nothing in this article should be relied upon as a substitute for advice from a qualified Florida estate planning attorney regarding your specific situation. Reading this article does not create an attorney-client relationship between you and Steinberg & Associates, P.A. or any of its attorneys. For advice specific to your circumstances, please consult a licensed Florida attorney. This article was prepared by Richard L. Steinberg, Esq. of Steinberg & Associates, P.A., with the assistance of artificial intelligence drafting tools.

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