Florida is an attractive place for snowbirds and retirees nationwide. The state also attracts entrepreneurs and other professionals who want to enjoy the state low-tax profile and mild weather all year long.
Many people move to Florida coming from community property states. Community property is a type of joint ownership that is not common to all states nationwide.
In this article, you will understand what community property in a trust is and how this type of ownership affects the property of Florida residents.
Community Property – Understanding the Concept
The term “community property” refers to legal distinctions used in certain US states to designate a married individual’s assets.
In this sense, any real property acquired by either spouse during the period the couple is still married is considered community property, meaning the asset belongs to both spouses.
Thus, under community property law, both spouses own (or owe, depending on the situation) everything equally (50/50). In the United States, nine states are community property states:
- New Mexico
Florida is not a community property state. However, as many individuals come from other states to reside in the Sunshine State, it is crucial to present an overview of how to deal with community property when moving to Florida.
Community Property States vs Florida Law – An Overview
Given the tourism-oriented nature of the state, many individuals who reside out of the state acquire rental properties and vacation homes in Florida.
In such cases, what would happen if a couple who is domiciled outside of the state of Florida in a community property state (e.g., Texas) acquires real property in Florida?
Florida is a common law state, which means the couple could enjoy other forms of ownership they find suitable in their case (e.g., ownership by the entirety) but not community property.
A similar situation occurs when a couple that resides in Florida acquires real property in a community property state.
In such a case, would the property automatically become community property? The answer is no, since for a property to be considered community property, its owners would need to be residents in the state where the newly-acquired property is located.
For instance, states like California have completely distinct rules. Under the California Probate Code, a property located within the state by a couple that resides out of the state is only considered community property if they intend to remain there permanently.
What Happens to Community Property Rights in Florida in Situations Involving Judgments and Lawsuits?
Poring over the question, it is possible to conclude that while Florida law does not create community property rights, it may import community property rights from other states depending on the situation.
Let us say there is a fictional couple named Bob and Teena. Both spouses are born and raised in Texas, a community property state, where they also married and acquired real property.
While living in Texas, Bob acquired an interest in the ownership of an LLC. Under community property law, each spouse has a separate 50% interest in the other spouse’s assets acquired during the marriage, meaning Teena owns part of Bob’s interest in the LLC ownership.
Then, the couple decided to move to Florida. One year later, while they were already established out of their state, a Texas court entered a judgment against Teena, who had unsettled debts before moving to Florida.
Thus, the creditor managed to move the judgment to Florida. However, the creditor still wanted to levy upon Teena’s share on the interest owned by Bob in a Texan LLC, given that the state is under community property law.
Under Florida law, a wife has no interest in her husband’s individual ownership of assets and property, which includes ownership of an interest in a company.
However, in such a case, the creditor could use community property principles to levy upon the wife’s 50% community property interest, although she is no longer residing in a community property state.
Community Property vs Trusts in Florida
Florida is not a community property state, which means trusts established in Florida do not include community property.
In any case, if you are moving to Florida and still own real property under community property law, it is crucial to seek guidance from an expert real estate attorney to assess your situation and provide a definite answer.
Community Property in a Trust vs Florida Law – We Can Help You
If you own real property under community property laws but are currently residing in Florida, get in touch with Attorney Romy B. Jurado Esq., to have a professional assessment of your situation.