Florida has enacted new legislation allowing married couples to establish a Community Property Trust (CPT). Currently (except in community of property states), when the first spouse dies, his or her own property receives an increase in value on the date of death. Assets held in co-ownership benefit from this increase in base for half of the value. Under the new law, if a couple creates and finances a CPT, all of the CPT’s assets will be reassessed from the date of the death of the first spouse. The result? Capital gains disappear. This adds flexibility for the surviving spouse, who can now sell any of the assets without incurring capital gains tax.
The CPT law requires that at the first death, half of the property be transferred in accordance with the wishes of the deceased spouse and the other half in accordance with the wishes of the surviving spouse. For this reason, CPT may not be a good option for some second marriages.
In addition, the creditors of either spouse can reach half of the assets held in a CPT (other than family properties). Thus, a CPT is not a good choice if either spouse has creditor problems.
For married couples with the same intended beneficiaries, valued assets and no creditor issues, a CPT can offer significant tax savings on the death of the first spouse.