Four requirements, all of them mandatory
Florida is not a community property state. Part XV lets a married couple opt into community property treatment for assets they put into a particular kind of trust, and this section says what that trust has to look like.
The section opens with words worth noticing, one or both settlor spouses transfer property to a trust that. A transfer by one spouse alone can create the trust. What both spouses must do is sign.
There are four requirements.
- An express declaration. The trust must expressly declare that it is a community property trust within the meaning of this Part. Nothing is implied and nothing is inferred from how the trust operates.
- At least one qualified trustee. Defined in section 736.1502(6) as a Florida resident individual or a company authorised to act as trustee in Florida. Either or both spouses may also serve, but in addition to the qualified trustee, not instead of one.
- Both spouses sign, with the execution formalities chapter 736 requires.
- The warning, in capital letters, at the beginning.
The signing requirement carries more than it appears to. Section 736.0403 requires a trust with testamentary aspects to be executed with the formalities of a will, meaning two attesting witnesses, and Florida courts construe that strictly. A community property trust that disposes of property at death and was signed without them is exposed, and reformation will not fix it.
The Legislature wrote the warning itself
This is the striking feature of the section. Rather than requiring a warning and leaving the drafting to lawyers, the statute supplies the text.
THE CONSEQUENCES OF THIS COMMUNITY PROPERTY TRUST MAY BE VERY EXTENSIVE, INCLUDING, BUT NOT LIMITED TO, YOUR RIGHTS WITH RESPECT TO CREDITORS AND OTHER THIRD PARTIES, AND YOUR RIGHTS WITH YOUR SPOUSE DURING THE COURSE OF YOUR MARRIAGE, AT THE TIME OF A DIVORCE, AND UPON THE DEATH OF YOU OR YOUR SPOUSE. ACCORDINGLY, THIS TRUST AGREEMENT SHOULD BE SIGNED ONLY AFTER CAREFUL CONSIDERATION. IF YOU HAVE ANY QUESTIONS ABOUT THIS TRUST AGREEMENT, YOU SHOULD SEEK COMPETENT AND INDEPENDENT LEGAL ADVICE. ALTHOUGH NOT A REQUIREMENT, IT IS STRONGLY ADVISABLE THAT EACH SPOUSE OBTAIN THEIR OWN SEPARATE LEGAL COUNSEL PRIOR TO THE EXECUTION OF THIS TRUST.
Section 736.1503(4), Florida Statutes. The statute requires substantially this language, in capital letters, at the beginning of the agreement.
Read what it names. Creditors and other third parties. During the marriage. At divorce. On death. Those are the four moments at which converting separate property into community property changes somebody’s position, and the Legislature listed them.
Then comes the sentence that does the most work, although not a requirement, it is strongly advisable that each spouse obtain their own separate legal counsel.
That is a statute anticipating a conflict of interest. A community property trust is usually presented as a tax planning tool for a couple, and the couple usually has one lawyer. But the arrangement can advantage one spouse and disadvantage the other, particularly at divorce, and the Legislature evidently thought a warning was needed. It stopped short of requiring separate counsel and said the next strongest thing available.
Substantially, not exactly
The requirement is substantially the following language. So a trust that reproduces the sense in slightly different words is not automatically defective.
That said, there is no reason to test it. The text is supplied, the standard is substantial compliance, and the cheapest way to satisfy a substantial compliance test is exact compliance. A drafter who paraphrases has created an argument for no benefit.
Two formal elements are not qualified by substantially. It must be in capital letters and at the beginning of the agreement. Burying the warning at the back would fail the section on its face.
Why couples do this
The reason is federal tax, and it concerns basis. When one spouse dies, property that is community property can receive a different income tax treatment from property held in other forms, which can matter a great deal to a surviving spouse who later sells appreciated assets.
We are not going to work through the federal analysis on a page about a Florida statute, and anyone considering this should be getting tax advice rather than reading a statute annotation. The point for present purposes is that the benefit is a tax benefit, and the costs the statute warns about are legal ones (creditors, divorce, and the shape of what each spouse owns during the marriage).
Note also what section 736.1502(2) requires. The trust must be created, amended, restated, or modified on or after July 1, 2021. An existing trust can be brought into the Part by amendment; a trust untouched since 2020 cannot qualify.
No court has construed this section
Our review found no citing decision, with a Florida court filter and nationwide, at every precedential status.
That is expected rather than surprising. The Part took effect on July 1, 2021, and the consequences of a community property trust arise principally on the death of a spouse or on dissolution of the marriage. Neither has had long to happen, be litigated, and reach a written opinion.
The questions a case would decide are visible in the text. What departure from the prescribed warning is still substantial compliance. Whether a trust that fails one requirement is simply not a community property trust, or is invalid altogether. And how the requirement of two attesting witnesses under section 736.0403 interacts with a document both spouses have signed.