Florida Banking September 2022

To combat some of this risk, the FCPTA provides that creditors of one spouse can only reach that spouse’s one half of the assets held in a Florida community property trust. § 736.1506 Fla. Stat. In all other states with opt-in community property trust laws, with the exception of Tennessee, creditors of one spouse can reach all of a married couple’s assets held in the trust. Divorce presents another challenge. When a couple with community property divorces, the property generally must be equally split between them. The FCPTA provides some guidance for navigating the difficult process of distributing assets of differing values, and gives spouses some discretion when drafting the community property trust to contemplate divorce. §§ 736.1508, 736.1504, Fla. Sta. The FCPTA also affords spouses the discretion to agree upon any other matters affecting the trust property that does not violate Florida law, or the law of other relevant jurisdictions. Conclusion Overall, the FCPTA provides flexibility in the creation and use of community property trusts. Along with providing potential tax benefits for those in and migrating to Florida, the Act will benefit Florida attorneys drafting these trusts and the corporate trustees administering them. It is critical that those professionals, and others in the financial sector, continue to educate themselves on the rewards and risks associated with community property trusts as their story in Florida unfolds. Kelly O’Keefe is a shareholder in Stearns Weaver Miller’s Tallahassee office. She represents professional and family member fiduciaries in complex and high-stakes estate, probate and trust disputes and

Trust Banking, Continued from page 21

• Provide explicit written notice. The Trust must include the statutorily mandated language identified in the FCPTA, warning each spouse of the legal consequences of signing the agreement and urging the spouses to seek independent legal advice. § 736.1503(4), Fla. Stat. A community property trust can achieve tremendous tax benefits in situations where the assets in it may or have appreciated significantly or where a couple has delayed in selling them because of exposure to capital gains tax. However, Florida residents, current and new, should weigh the risks and rewards of this potential tax saving tool based on their own unique circumstances. The FCPTA Risks The FCPTA has only been in effect for a short time, so how it will be implemented is unknown. The IRS has not yet indicated whether it will permit spouses to opt in to community property treatment in Florida or other states with similar legislation. Although the IRS is undecided, the Estate and Tax Planning Committee of the Real Property, Probate and Trust Law Section of the Florida Bar, which drafted the Act, is optimistic that the FCPTA will withstand challenges by the IRS. Even if the IRS approves of the FCPTA, there are other risks to consider. Marital property that is in a community property trust cannot be owned as tenants by the entireties and as a result, it will be subject to the creditors of an individual spouse. Placing certain property, such as rental properties, into a community property trust may also reduce creditor protections afforded by other ownership options, such as a corporation.

litigation. O’Keefe is the vice chair of the Tallahassee Regional Estate Planning Council, and a subcommittee chair for the Florida Probate Rules Committee. She is regularly recognized by The Best Lawyers in America, Florida Trend and Super Lawyers magazines and is AV Preeminent Rated by Martindale-Hubbell. You can reach her at kokeefe@ stearnsweaver.com. Christopher Clark is an associate in Stearns Weaver Miller’s Tallahassee office. He is a member of the Florida Real Property, Probate, and Trust Law Section of the Florida Bar and has recently been recognized by Florida Trend as a Legal Elite Up and Comer. You can reach him at crclark@stearnsweaver.com.

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