A POSSIBLE BENEFIT FROM COMMUNITY PROPERTY OWNERSHIP AND FLORIDA LAW

By James W. Mallonee

James W. MalloneeAs you may know there are States within the United States union that have community property statues that may seem odd to Floridians. The majority of those States are in the Western portion of the United States (e.g. California, Arizona, Oregon, Washington, Idaho including Texas). Community property is generally viewed to be a husband and wife (or possibly unmarried partners) with assets purchased by them during marriage to be owned 50/50 by each, regardless of who provided the funds. However, this does not hold true for property that is inherited provided the inherited property is not comingled with the partner and cannot be traced to the inherited funds.

Florida will recognize community property from another State upon the death of one of the couples. This is not a well-recognized or understood fact in Florida; however, as more and more individuals begin moving to Florida from a community property State, the reality of Florida’s recognizing community property becomes more prolific. What that could mean to you will become apparent using the following example.

Suppose you marry in Georgia and the person you are marrying has a child from a previous relationship. Because of changes in career you elect to move to California (a community property State). While living in California you purchase property using the husband’s non-inherited funds to do so. You continue to live in California for five years, and then move to Florida after selling the California residence. The sold residence had a profit of $100,000.00. It is estimated that other property purchased in California is equal to $20,000.00 for a total of $120,000.00.

The couple purchases a vacation home in Florida for $120,000.00. After fifteen years of living in Florida, the husband dies. You would think that the California community property rule would not be in effect, but it is. Under the community property rules of California, the property proceeds are split 50/50. Assume the husband had no Will which makes his estate intestate. In Florida when there is a child from a previous relationship, the spouse would receive 50% of the estate and the surviving child from the husband’s previous marriage would receive the other 50%.

But wait, because $120,000.00 came from California, the value of the funds is split 50/50, making the Wife eligible for her 50% (or $60,000.00) to keep as her own. The other 50% ($60K) goes into the probate estate and is split according Florida law. The Wife in effect will receive an additional $30,000.00 (1/2 of $60K) and the child from a previous relationship will receive the other $30,000.00. In essence the Wife gets her community property share of 50% up front before the other portion goes into probate. The Wife shall receive $90,000.00 ($60K + $30K from the probate estate). If Florida’s community property statute did not exist, the Wife would have only received $60K and the child from a previous relationship would receive the other $60K. This amounts to a huge benefit to the Wife.

What is interesting in this scenario is that it does not matter that the couple lived in Florida for 15 years or 15 days. If money is brought into Florida from a community property State, it is subject to Florida’s community property statute. However, be aware that there are some gotcha’s which include: you may have to trace what money from a community property State was used and for what. Failure to trace the funds to being community property can eliminate the ability to invoke the rule. The other gotcha is that the person claiming the community property rule is viewed as a creditor to the estate. As a result, the spouse claiming community property would have to file a timely claim against the estate. Failure to do so will eliminate the ability to collect.

Other gotcha’s include marital agreements, homestead or property held as tenants by the entirety. If any of the aforementioned situations arise in Florida, then the community property assets in question will not be considered.

If you and your spouse resided in a State where community property was the law and you move to Florida, you should speak to the attorney of your choice about this unique statute and what it means to your situation. This is especially true if you have children from a previous relationship. Know what could possibly happen at the death of either you or your spouse should someone take a stand on community property.

This article is intended for informational use only and is not for purposes of providing legal advice or association of a lawyer – client relationship.

James W. Mallonee (Jim Mallonee) is a graduate with a B.A. degree from the University of South Florida and a Master of Science degree from Rollins College in Winter Park, Florida. He obtained his Juris Doctorate from the University of the Pacific, McGeorge School of Law in Sacramento, California. Prior to returning to Florida to practice law, Mr. Mallonee was employed by Intel Corporation for 22 years in such locations as New Jersey, Florida and California.

In addition to being a member of the Florida Bar since 2003, Mr. Mallonee serves on the Charlotte Community Foundation Committee for asset allocation and teaches Business Law at State College of Florida. Mr. Mallonee is also on the Board of Directors for the Military Heritage Museum located in Charlotte County, Florida.

His firm practices law in the following areas: Probate, Wills & Trusts, Guardianships, and Litigation in the areas of Real Estate, Guardianships and Estates. The firm has two locations in Venice and Port Charlotte, Florida.

James W. Mallonee, P.A.
946 Tamiami Trail, #206
Port Charlotte, FL 33953
(941) 206-2223
Facsimile (941) 206-2224

871 Venetia Bay Blvd., #225
Venice, FL 34285
(941) 207-2223

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