We’re often asked, is Florida a community property state? No, Florida is not a community property state. Instead Florida operates using equitable distribution for marital property.
In a community property state, assets and debts the spouses acquired either together or separately are considered community property or marital property and belong to both spouses. But is Florida a 50/50 divorce state?
Since Florida is not a community property state, debts and assets acquired by the married couple during the marriage are not automatically considered marital property or community property. Courts ensure they are divided fairly but not necessarily equally.
Since our Tampa family law attorney team has answered is Florida a community property state, we’ll cover other community property states, the difference between separate property and marital property, and help with understanding equitable distribution and how the Florida Community Property Trust Act affects property division.
Community Property States
There are two types of property laws for a married couple with respect to divorce finances in Floridas: separate property (or the common law system) and community property status. There are currently nine states that have formally adopted the community property regime. The other states follow a separate property system.
Community property states are states that follow laws requiring marital property to be divided equally between the married couple during the divorce process.
In community property states, most assets and debts acquired during the marriage are considered owned jointly or owned equally by both spouses, regardless of whether only one spouse acquires the asset or if only one spouse earns the income.
Community property states include:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
So, is Florida a community property state since it’s not on the list for states with a community property status?
Alaska, South Dakota, Tennessee, Kentucky, and Florida are non-community property states that allow couples to “opt-in” to a community property regime through the Community Property Trust Act. We’ll cover this below.
What Is Community Property?
Community property states use a specific legal framework for dividing marital property or property owned jointly by both spouses. Under the community property system, assets acquired during a marriage by one spouse or the other, including properties, assets, and debts, are both owned jointly. However, not all states recognize community property.
- Community Property: Property acquired during the marriage is owned equally by both spouses.
- Non-Community Property: Property owned or property held by one spouse before the marriage, personal property, inheritances, and gifts are usually considered separate property unless commingled with property acquired during the marriage.
- Equal Division: During divorce in community property states, community property is generally divided equally.
In a community property system, the distribution of community property and marital funds and marital property is divided equally. However, the distinction between community and non-community property can lead to complexities.
Separate Property vs Marital Property
What is Separate Property in Florida?
Separate property in Florida refers to assets that legally belong to one spouse and are not subject to property division when dividing marital property in divorce.
Examples of a spouse’s separate property include personal property acquired before the marriage, inheritances, gifts, and certain bank accounts or other assets one spouse acquires before marriage that are kept as separate property throughout the marriage.
If the marital estate or non-owner spouse contributed to the total value or upkeep of the other spouse’s separate property, such as improving real estate, disputes may arise over whether it’s considered marital property or separate property during property division.
A prenuptial agreement can help clarify which items of a spouse’s “separate property” are considered separate property (non-community property owned by one spouse individually) and which items are marital property.
Proper documentation is critical to protect separate property during property division under Florida law.
What is Marital Property in Florida?
In Florida, marital property refers to any property acquired during the marriage using marital funds, including income, bank accounts, and assets purchased together or by one spouse. This is why our divorce attorneys in Tampa, FL, advise against removing marital property before divorce in Florida.
While Florida is not a community property state, anything considered marital property is subject to equitable distribution during divorce.
So, what is equitable distribution, and how are marital assets divided in a Florida divorce?
Property owned jointly, such as a bank account or home, is typically divided fairly, but one-half interest is not guaranteed. Understanding equitable distribution and what qualifies as joint property, such as assets acquired or funded by marital funds, is essential to protecting your financial interests in a Tampa divorce.
When Does an Inheritance Become Marital Property in Florida?
Under Florida statutes, inheritances are considered separate property acquired by one spouse. This means that in a typical divorce settlement in Florida, any inheritance one spouse acquires before or during the marriage is property owned by that spouse individually, just as if it were separate property or personal property owned before the marriage.
However, an inheritance can become marital property under Florida law under certain circumstances:
- Commingling Funds: If the inheritance is deposited into a bank account owned jointly or used for joint property, it may be considered marital property. For example, using inherited funds to purchase a home jointly titled with a spouse is commingling separate property with marital funds.
- Titling the Inheritance Jointly: If the inherited asset, such as real estate or investment accounts, is titled in both spouses’ names, it may become marital property.
- Using Inheritance for Marital Purposes: Inheritance used to improve joint property, such as renovating the marital home, can make it subject to property division.
- Transmutation of Assets: When an inheritance is treated in a way that shows intent to share it with the other spouse, it may be converted into marital property.
Our Tampa high-asset divorce attorneys can help you understand home equity in Florida divorces and in cases with complex issues, we’ll work with a Florida real estate divorce specialist to ensure the divorce settlement is fair.
Community Property State vs Equitable Distribution State
The difference between an equitable distribution and a community property regime lies in how joint property is split when dividing marital property or upon a deceased spouse’s death.
In a community property state, all property acquired during the marriage is considered community property, with each spouse typically entitled to a one-half interest, regardless of individual contributions. However, separate property, such as inheritances, gifts, or personal property acquired before the marriage, remains with the original owner unless it becomes joint property.
Florida, as an equitable distribution state, ensures marital assets are divided fairly but not necessarily equally, considering factors like contributions and ownership of a particular asset.
For those moving to Florida, the Community Property Trust Act can convert out-of-state quasi-community property into a trust, offering benefits such as a full step-up in fair market value for tax purposes.
This form of asset protection can significantly reduce capital gains tax and provide income tax benefits for the surviving spouse when selling joint property or assets acquired during the marriage. Proper use of these laws ensures clear property division and protects the interests of the non-owner spouse while securing the value of assets owned jointly.
Disadvantages of Community Property for Asset Protection
One of the major disadvantages of the community property regime is that everything considered community property is subject to creditors. So, debt and assets acquired by the other spouse in a community property state are subject to creditor judgment even for the non-debtor spouse.
- Exposure to Creditors: In some community property states, everything considered community property is subject to creditors. So, assets acquired by one spouse can be collected by a judgment creditor for the other spouse, putting the non-debtor spouse in a difficult position.
- Limited Asset Protection: Community property states don’t offer the same level of asset protection. In community property jurisdictions, the non-debtor spouse may have to use joint property to pay off debts of their partner. This means that there isn’t a non-owner spouse and marital property cannot be shielded from creditor claims or other legal actions.
- No Separate Property Status: Property acquired during the marriage is typically considered community property, regardless of which spouse acquires or owns them in community property states. So, separate property, or personal property owned by one spouse before getting married or through inheritance or gifts, may lose the separate property status and be subject to division during divorce.
Asset protection in community property states varies depending on the state law. Speaking with a legal professional at a family law firm in your state can help offer personalized guidance for asset protection in community property jurisdictions.
The Tampa asset protection attorneys at Quinn & Lynch, P.A., a respected family law firm, have extensive experience handling cases involving community assets in Florida.
Understanding Equitable Distribution
Since you know the answer to, is Florida a community property state, we’ll move on to understanding equitable distribution. Under Florida statutes, equitable distribution means spouses share everthing considered marital property, including assets and debts. Under equitable distribution laws, everything that is considered marital property is divided fairly but not necessarily equally during the divorce process.
Since Florida isn’t a community property system, any property held by one spouse is deemed separate property and isn’t subject to creditor collections on behalf of the non-owner spouse.
Under Florida law, marital property and marital funds are subject to equitable distribution during a divorce. Equitable distribution means that courts ensure marital property is divided fairly but not necessarily equal.
To ensure joint property is divided fairly courts consider the length of the marriage, each spouse’s contributions, and the financial circumstances of each spouse.
Marital Property Division in Florida
When dividing marital property in a divorce, courts will first determine what is considered marital property and what is considered separate property. Assets acquired during that marriage, considered marital property, are then subject to equitable distribution under Florida law.
Community Property With Right of Survivorship
Community property with the right of survivorship is a legal ownership arrangement available in some states, including Florida, that combines aspects of community property status and joint tenancy with the right of survivorship. It applies to married couples and dictates how joint property is owned and transferred upon the deceased spouse’s death.
Key features of community property with the right of survivorship include:
- Equal Ownership: Joint property that’s owned jointly by both spouses during their lifetimes, as it is considered community property.
- Right of Survivorship: Upon the death of one spouse, their share automatically transfers to the surviving spouse without the need for probate.
- Tax Benefits: In community property states, there may be favorable tax treatment, such as a full step-up basis for the property’s value upon the death of one spouse.
Common Uses For Community Property With Right of Survivorship
- Real estate ownership between married couples.
- Simplifying asset transfers upon the deceased spouse’s death.
- Avoiding probate while maintaining shared ownership during life.
For married couples moving to Florida, this can provide a level of asset protection for community assets acquired in other states upon the deceased spouse’s death.
When Does Separate Property Become Marital Property?
Separate property can become marital property if it is commingled with marital property. For instance, if one spouse uses separate property to purchase a particular asset used by both parties, such as a home titled in both names, it may be considered marital property.
Florida Community Property Trusts and Tax Law
While the answer to is Florida a community property state is no, Florida does allow couples to use a community property statues under the Community Property Trust Act.
Florida Community Property Trust Act
The Florida Community Property Trust Act, enacted in 2021, allows married couples to create community property trusts (CPT) to enjoy certain tax benefits associated with community property jurisdictions. This trust enables couples to designate assets as community property, even though Florida is not a community property state.
One significant advantage of a CPT is the Double Step-Up in Basis, which adjusts the taxable value of trust-owned assets to their fair market value upon the death of the first spouse, minimizing the capital gains tax for the surviving spouse. So if the spouses are younger, their appreciated joint property will likely be sold, and new assets or property acquired over time, with a new cost basis.
However, certain joint property acquired do not qualify, such as retirement accounts, IRD items, life insurance, and qualified plans that don’t benefit from the double step-up.
This provides a flexible estate planning tool for couples, particularly those moving to Florida from community property states, allowing them to preserve the tax benefits of a community property regime while providing asset protection under Florida law.
More Asset Protection Before the Deceased Spouse’s Death
Spouses seeking asset protection during a divorce can benefit from owning assets as tenants by the entireties (TBE). This ownership safeguards joint property from being used to pay off debts incurred by the other spouse, ensuring the non-debtor spouse is protected while still allowing the assets to be used to satisfy debts owned jointly.
However, if the non-debtor spouse dies first, the joint property passes to the debtor spouse, making the community property vulnerable to creditor claims. For situations involving a debtor and non-debtor spouse, a community property trust may provide stronger protection by securing the non-debtor spouse’s share of the assets and shielding them from future liabilities.
Multi-Member LLC Option
The Multi-Member LLC Option can be a valuable tool under Florida’s Community Property Trust Act in divorce cases for managing marital property and ensuring equitable distribution. By placing marital assets in a multi-member LLC, couples can benefit from asset protection while clearly defining full ownership rights.
So, how is an LLC treated in a Florida divorce in this situation? Here’s an example:
If one spouse holds one-half interest in the LLC, their stake can be valued based on its fair market value for settlement purposes. This structure also simplifies the division of complex assets while minimizing risks of financial disputes during divorce proceedings.
Trust for Surviving Spouse
A trust for a surviving spouse can be an effective way to protect marital assets while ensuring fair distribution under the Florida Community Property Trust Act. By creating a trust, a married couple can secure one-half interest in their joint property for each spouse, with the surviving spouse maintaining access to their share upon the deceased spouse’s death. This also safeguards joint property from risks associated with remarriage after a spouse dies, ensuring that the original intent for inheritance or distribution is preserved. Such trusts provide flexibility and security in managing marital property, particularly for families with complex financial arrangements.
Homestead Property
Under Florida statutes, homestead property that’s transferred to a community property trust (CPT) does not affect its legal protections or exemptions—it retains the same protections as if it were separate property or marital property.
However, if the homestead exceeds the allowable acreage limits, owning it as tenants by the entireties (TBE) might offer better protection. While Florida’s homestead property is explicitly protected from creditor claims, this same level of asset protection is not automatically extended to other marital assets like life insurance, annuities, or other exempt properties.
What Happens to Community Property if You Move From a Community Property State to Florida?
Since you know the answer to is Florida a community property state, you’re probably wondering what happens to existing community property acquired during the marriage in another community property state. If you move to Florida, an equitable distribution state, from a community property state, your community property doesn’t automatically become tenants by entireties but instead remains community property under Florida law.
Here are special considerations for using a community property trust (CPT) for existing community property, income tax benefits, and potential tax consequences under Federal tax law.
- Tax Implications: A Community Property Trust (CPT) may provide clearer and more predictable tax advantages for a married couple moving to Florida from community property jurisdictions, such as the Double Step-Up Basis, which adjusts the taxable value of assets upon the death of the first spouse. However, not all experts agree on the necessity of a community property trust, as the Federal Uniform Disposition of Community Property Rights at Death Act (FUDCPRDA) allows for the Double Step-Up in certain cases without a CPT.
- Advantages of a Community Property Trust: Placing assets purchased in a community property state ensures they’re treated at community property in Florida, making any particular asset eligible for the double step-up upon the death of the first spouse without complex tracing issues. Additionally, FUDCPRDA only applies to assets directly owned by the deceased spouse. It does not cover assets in revocable trusts or other non-probate ownership forms, whereas a CPT can include these.
Challenges When Moving to Florida From a Community Property State
Couples moving to Florida must account for the laws of the community property state where the community property was originally established.
If a married couple places assets in a CPT and fails to meet the requirements for community property under federal tax law, this could jeopardize eligibility for the Double Step-Up. To reduce this risk, it is advisable to separate marital assets brought from a community property state into a separate CPT.
Florida law requires the surviving spouse to file a timely creditor claim in the estate of the first spouse to protect rights under FUDCPRDA. A CPT avoids this requirement.
How Florida Property Division Attorneys Can Help
Our Tampa property division attorneys play a vital role in helping clients navigate the complexities of dividing marital property during a divorce. While the answer to is Florida a community property state is no, understanding equitable distribution and how marital property is divided in Florida is crucial. Unlike community property states, where all assets acquired during the marriage are split equally, Florida law works to ensure marital property is divided fairly, rather than a 50/50 split.
Our Tampa divorce law firm helps distinguish between community property or marital property (such as assets acquired together) and separate property, or property owned by one spouse before the marriage or inherited separately. We also work with certified divorce financial analysts in Florida to ensure a fair outcome in the division process of assets and debts.
