Tax planning has become an increasingly important part of estate planning, particularly for married couples who have accumulated significant wealth through investments, real estate, or business ownership. One of the most powerful tax advantages available today is the step-up in basis rule, which can significantly reduce or eliminate capital gains taxes on inherited assets.

In 2021, Florida introduced a major estate planning tool through the Florida Community Property Trust Act. This law allows married couples in Florida to create a community property trust that may provide a powerful tax advantage known as the double step-up in basis.

For many couples in 2026, this strategy is becoming a critical component of long-term tax planning. By converting certain assets into community property through a properly structured trust, married couples may be able to eliminate large capital gains tax liabilities that would otherwise apply when assets are sold after a spouse’s death.

Understanding how the Florida Community Property Trust Act works can help families preserve more of their wealth for future generations.

What Is the Florida Community Property Trust Act

Florida has traditionally been a common law property state rather than a community property state. In community property states, assets acquired during marriage are generally considered jointly owned by both spouses. This classification carries significant tax advantages when one spouse passes away. The Florida Community Property Trust Act allows married couples in Florida to voluntarily opt into a community property system for certain assets by placing those assets into a community property trust.

When assets are transferred into a properly structured community property trust, they may receive the same tax treatment as community property in traditional community property states.

This is particularly important for capital gains tax purposes. The classification of property directly affects how tax basis adjustments occur when one spouse dies. The ability to access these tax benefits without moving to a community property state has made community property trusts an increasingly popular estate planning tool for high-net-worth families and couples with significant appreciated assets.

Understanding the Step-Up in Basis Rule

To understand why the Florida Community Property Trust Act is so powerful, it is important to understand the concept of tax basis. The basis of an asset generally refers to the original purchase price of that asset. When an asset is sold, capital gains tax is calculated based on the difference between the sale price and the asset’s basis.

For example, imagine a married couple purchases a home or investment property for $200,000. Over time, the value of the property increases to $900,000. If the property is sold, the taxable capital gain may be calculated on the $700,000 increase in value.

However, when a person dies, federal tax law allows many assets to receive a step-up in basis. This means the tax basis of the asset is adjusted to its fair market value at the time of death.

If the property in this example is worth $900,000 at the time of death, the new basis becomes $900,000. If the heirs later sell the property for that amount, there may be little or no capital gains tax owed. This rule provides significant tax savings for families passing assets to the next generation.

The Difference Between a Single Step-Up and a Double Step-Up

In most common law property states, only the deceased spouse’s share of a jointly owned asset receives a step-up in basis. This means that only half of the asset’s value is adjusted to the fair market value at the time of death. The surviving spouse retains the original basis for their share.

Using the earlier example, if the property was worth $900,000 when one spouse died, only half of the property would receive the step-up in basis. The surviving spouse’s half would retain the original cost basis.

This can create significant capital gains tax exposure if the property is later sold. Community property states operate differently. When an asset qualifies as community property, the entire property receives a step-up in basis when one spouse dies. This is known as the double step-up in basis.

Under this rule, both the deceased spouse’s portion and the surviving spouse’s portion receive the adjusted basis. As a result, the full asset value is reset to its fair market value at the time of death.

The difference between a partial step-up and a full step-up can represent hundreds of thousands of dollars in tax savings.

How the Florida Community Property Trust Creates the Double Step-Up

The Florida Community Property Trust Act allows married couples to potentially receive the double step-up in basis without living in a community property state. By transferring assets into a properly structured community property trust, those assets may be treated as community property for federal tax purposes. When one spouse passes away, the entire trust property may receive a full basis adjustment rather than only half. This can significantly reduce or eliminate capital gains taxes when the surviving spouse later sells the asset.

For example, consider a married couple that owns investment property purchased decades ago for $300,000. By 2026, the property may be worth $1.2 million. Without a community property trust, only half the asset might receive a step-up in basis when one spouse dies. If the surviving spouse sells the property, they could face a substantial capital gains tax bill.

However, if the property is held in a Florida community property trust, the entire property may receive a new basis of $1.2 million. If sold shortly after the spouse’s death, the capital gain could be dramatically reduced or even eliminated. This strategy can be especially valuable for couples who own highly appreciated assets such as real estate, stock portfolios, or family businesses.

Why This Strategy Is Especially Important in 2026

Capital gains tax planning has become increasingly important as asset values continue to rise across the country. Real estate values in Florida have increased dramatically over the past decade. Many couples now hold properties that have appreciated far beyond their original purchase prices. Similarly, long-term investments in stock portfolios may have accumulated significant unrealized gains.

Without proper planning, these gains may create substantial tax liabilities when assets are eventually sold. The Florida Community Property Trust Act offers a powerful strategy to address this issue. By allowing couples to obtain the double step-up in basis, the law provides a way to minimize capital gains exposure while preserving flexibility in estate planning.

For couples planning to transfer wealth to children or grandchildren, this tax advantage can make a significant difference in the long-term value of their estate.

Important Requirements for Community Property Trusts

Although the potential tax benefits are significant, community property trusts must meet specific legal requirements to be valid. Both spouses must voluntarily agree to create the trust, and the trust agreement must clearly designate the property as community property. The trust must also meet the statutory requirements outlined in the Florida Community Property Trust Act.

Additionally, not all assets are ideal candidates for community property trusts. Couples should carefully evaluate which assets would benefit most from a potential double step-up in basis.

Because the tax consequences can be complex, it is essential to work with an experienced estate planning attorney when establishing this type of trust.

How an Estate Planning Lawyer Can Help

A community property trust can be an extremely valuable tool, but it must be designed properly to achieve its intended tax benefits. An experienced estate planning attorney can help determine whether a community property trust is appropriate based on a couple’s financial situation, asset structure, and long-term goals. Legal counsel can also help identify which assets should be transferred into the trust and ensure the trust complies with Florida law.

For many married couples, the potential tax savings associated with a double step-up in basis can be substantial. Proper planning can help ensure those benefits are fully realized.

The Florida Community Property Trust Act has introduced a powerful new planning opportunity for married couples seeking to reduce capital gains taxes. By allowing certain assets to be treated as community property, the law creates the potential for a double step-up in basis when one spouse dies. This strategy can significantly reduce or eliminate capital gains taxes on highly appreciated assets.

For families with valuable real estate, investment portfolios, or other long-term assets, this tax advantage can represent a major financial benefit in 2026 and beyond. If you want to explore whether a community property trust could benefit your estate plan, contact Klein Law Group today to schedule a consultation. An experienced estate planning attorney can help you evaluate your options and design a strategy that protects your wealth.