Fla. Stat. § 736.1502 - Commentary to Florida Trust Code

Legal Commentary on Fla. Stat. § 736.1502

Fla. Stat. § 736.1502 provides a list of definitions which apply to the entirety of the Community Property Trust Act.

The definition of “community property” establishes a key feature of the community property trust: property owned by a community property trust is deemed to be community property in Florida. This deeming is at the heart of why community property trusts exist at all. If the assets in the trust are deemed to be community property under state law, then the assets should qualify for a full step up in basis (or a step down, in some cases) after the death of one of the spouses who created the trust. 26 U.S. Code § 1014(b)(6). Thus, the community property trust can result in substantial tax savings when utilized correctly.

The definition of “community property trust” includes the following interesting requirement: “created on or after July 1, 2021.” Thus, a trust that complies with every requirement of Fla. Stat. § 736.1503 will still fail to be a community property trust if it was created before July 1, 2021. This timing requirement might mean that a trust created prior to July 1, 2021, cannot be amended now to make it into a community property trust.

The definition of “qualified trustee” limits the possible trustees of a community property trust to individuals who reside in Florida and companies who are “authorized” to act as trustee in Florida. Most trusts have no such requirement. However, a qualified trustee is only required to be used “during the marriage of the settlor spouses.” Fla. Stat. § 736.1502(1). The statute section also requires that a qualified trustee have certain powers. Thus, it may be advisable for the drafter of a community property trust to explicitly state that the qualified trustee has these powers to ensure compliance with the Community Property Trust Act.

Text of Fla. Stat. § 736.1502

Definitions.—Unless the context otherwise requires, as used in this part:

(1) “Community property” means the property and the appreciation of and income from the property owned by a qualified trustee of a community property trust during the marriage of the settlor spouses. The property owned by a community property trust pursuant to this part and the appreciation of and income from such property shall be deemed to be community property for purposes of general law.

(2) “Community property trust” means an express trust that complies with s. 736.1503 and is created on or after July 1, 2021.

(3) “Decree” means a judgment or other order of a court of competent jurisdiction.

(4) “Dissolution” means either:

(a) Termination of a marriage by a decree of dissolution, divorce, annulment, or declaration of invalidity; or

(b) Entry of a decree of legal separation maintenance by a court of competent jurisdiction in another state that recognizes legal separation or maintenance under its laws.

(5) “During marriage” means a period that begins at marriage and ends upon the dissolution of marriage or upon the death of a spouse.

(6) “Qualified trustee” means either:

(a) A natural person who is a resident of the state; or

(b) A company authorized to act as a trustee in the state.

A qualified trustee’s powers include, but are not limited to, maintaining records for the trust on an exclusive or a nonexclusive basis and preparing or arranging for the preparation of, on an exclusive or a nonexclusive basis, any income tax returns that must be filed by the trust.

(7) “Settlor spouses” means a married couple who establishes a community property trust pursuant to this part.

History of Fla. Stat. § 736.1502

Fla. Stat. § 736.1502 became law on July 1, 2021 as part of the Community Property Trust Act. It has not been amended or revised since that date.

Fla. Stat. § 736.1502 appears to be heavily influenced by Tenn. Code Ann. § 35-17-102. Indeed, at the time Florida’s Community Property Act was enacted, Tenn. Code Ann. § 35-17-102 listed the exact same seven terms in its list of definitions. Florida’s definitions have been partially lifted from Tennessee’s code. For example, Florida’s definition for “community property” lifts the phrase “community property trust during the marriage of the settlor spouses” and Florida’s definition of “decree” lifts the phrase “a judgment or other order of a court.”

This article is part of the PTM Legal Commentary to the Florida Trust Code. Click here to navigate through the entire commentary.