The clause the rest of the Part serves
For purposes of the application of s. 1014(b)(6) of the Internal Revenue Code of 1986, 26 U.S.C. s. 1014(b)(6), as of January 1, 2021, a community property trust is considered a trust established under the community property laws of the state.
Section 736.1511, Florida Statutes, first sentence.
Read the rest of Part XV and it can look like a lot of machinery for no evident purpose, with definitions, a warning in capital letters, a qualified trustee requirement, and rules for death and divorce. This sentence is what it is all for.
The federal provision it names concerns the income tax basis of community property when a spouse dies. Basis is what a later sale is measured against, so it determines the taxable gain. For a couple holding long appreciated assets, how basis is treated at the first death can be the single largest tax consequence of the whole estate plan.
We are going to stop short of explaining the federal rule, and we want to say plainly why. This is a page about a Florida statute. The benefit people are pursuing is federal, it depends on the particular assets, their basis, the couple’s circumstances and the state of federal law when the death occurs, and it is not something to take from a general description. Anyone considering a community property trust should be getting tax advice on their own numbers.
What a Florida statute can and cannot do
This is the honest limit on the section, and it is worth stating because the drafting invites a stronger reading than it can carry.
Florida can decide, as a matter of Florida law, what character property has. Section 736.1505(3) does exactly that. All property owned by a community property trust is community property under the laws of the state during the marriage. That is a proper exercise of state power and it is not in doubt.
Whether a federal statute applies to property so characterised is a federal question. The Internal Revenue Service and the federal courts decide it, applying federal law. A state legislature can declare its intention and shape the state law inputs; it cannot direct the federal outcome.
So the accurate way to describe this section is that it states the objective and puts the state law pieces in place. It does not, and cannot, guarantee the result. Elective community property regimes of this kind exist in several states and the federal treatment has been the subject of long standing professional debate. That debate is beyond a statute annotation, and its existence is the reason to take advice rather than rely on a page.
The frozen reference, which is genuinely unusual
Look again at the words as of January 1, 2021.
Florida has pinned the federal provision to a fixed date. That is the opposite of how the Trust Code usually handles federal references. Section 736.1201(3), in the charitable trusts Part, defines the Internal Revenue Code as the 1986 Code as amended, so that Part moves automatically whenever Congress acts.
Here it does not. The section refers to the federal provision as it stood on January 1, 2021, several months before the Part itself took effect on July 1 of that year.
We are not going to speculate about why. What matters practically is that a reader must not describe this as a rolling reference, and that anyone relying on the section should be looking at the federal provision as of the fixed date as well as at whatever it says now.
Property that was already community property
The rest of the section deals with couples who bring community property with them, which is common in Florida given how many residents arrive from community property states.
Community property classified by another jurisdiction which is transferred to a community property trust retains its character as community property while in the trust. It does not have to be re-characterised, and it does not lose anything by being placed in a Florida trust.
And on revocation, such property retains its character to the extent otherwise provided by ss. 732.216-732.228, which are Florida’s provisions on community property rights at death for property acquired elsewhere. The same cross-reference appears in section 736.1505(5), which is the general rule that property distributed out of the trust stops being community property under this Part.
Put together, Florida-created community property character is a creature of the trust and ends when the property leaves it. Imported community property character is older, and survives.
No court has construed this section
Our review found no citing decision, with a Florida court filter and nationwide, at every precedential status.
Nor would we expect one soon. The questions this section raises are federal tax questions, and they are resolved in the federal system, which does not construe Florida statutes. A Florida court would be involved only if the character of property under state law were disputed, which is the subject of the other sections in this Part rather than this one.