Bill Text: FL H0823 | 2012 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Florida Uniform Principal and Income Act

Spectrum:

Status: (Introduced - Dead) 2012-03-06 - Laid on Table, companion bill(s) passed, see CS/SB 1050 (Ch. [H0823 Detail]

Download: Florida-2012-H0823-Introduced.html

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HB 823

1	A bill to be entitled
2	An act relating to the Florida Uniform Principal and
3	Income Act; amending s. 738.102, F.S.; defining the
4	term "carrying value"; repealing s. 738.104(11), F.S.,
5	relating to the administration of a trust and its
6	applicability, which is being transferred to another
7	section; amending s. 738.1041, F.S.; defining the term
8	"average fair market value" and revising the term
9	"unitrust amount"; deleting a duplicative provision
10	relating to conclusive determinations of the terms of
11	a unitrust; revising provisions relating to an express
12	total return unitrust; amending s. 738.105, F.S.;
13	substituting the term "trustee" for "fiduciary" with
14	respect to judicial control of discretionary powers;
15	amending s. 738.201, F.S.; revising provisions
16	relating to the determination and distribution of net
17	income; amending s. 738.202, F.S.; revising provisions
18	relating to distributions to residuary and remainder
19	beneficiaries; amending ss. 738.301, 738.302, and
20	738.303, F.S.; substituting the term "fiduciary" for
21	"trustee" to clarify that provisions apply to all
22	fiduciaries; amending s. 738.401, F.S.; substituting
23	the term "fiduciary" for "trustee" to clarify that
24	provisions apply to all fiduciaries; revising how
25	distributions from entities are allocated between
26	income and principal; amending ss. 738.402, 738.403,
27	738.501, 738.502, 738.503, 738.504, and 738.601, F.S.;
28	substituting the term "fiduciary" for "trustee" to
29	clarify that provisions apply to all fiduciaries;
30	amending s. 738.602, F.S.; substituting the term
31	"fiduciary" for "trustee" to clarify that provisions
32	apply to all fiduciaries; revising provisions relating
33	to allocations to trusts; amending s. 738.603, F.S.;
34	substituting the term "fiduciary" for "trustee" to
35	clarify that provisions apply to all fiduciaries;
36	revising provisions relating to the allocation between
37	income and principal when liquidating assets; amending
38	ss. 738.604, 738.605, 738.606, 738.607, 738.608,
39	738.701, 738.702, 738.703, and 738.704, F.S.;
40	substituting the term "fiduciary" for "trustee" to
41	clarify that provisions apply to all fiduciaries;
42	amending s. 738.705, F.S.; substituting the term
43	"fiduciary" for "trustee" to clarify that provisions
44	apply to all fiduciaries; revising the method for
45	allocating income taxes between income and principal;
46	amending s. 738.801, F.S.; clarifying the
47	apportionment of expenses between tenants and
48	remaindermen; amending s. 738.804, F.S.; transferring
49	a provision relating to applicability; providing an
50	effective date.
51
52	Be It Enacted by the Legislature of the State of Florida:
53
54	Section 1.  Present subsections (3) through (13) of section
55	738.102, Florida Statutes, are renumbered as subsections (4)
56	through (14), respectively, and a new subsection (3) is added to
57	that section, to read:
58	738.102  Definitions.-As used in this chapter, the term:
59	(3)  "Carrying value" means the fair market value at the
60	time the assets are received by the fiduciary. For the estates
61	of decedents and trusts described in s. 733.707(3), after the
62	grantor's death, the assets are considered received as of the
63	date of death. If there is a change in fiduciaries, a majority
64	of the continuing fiduciaries may elect to adjust the carrying
65	values to reflect the fair market value of the assets at the
66	beginning of their administration. If such election is made, it
67	must be reflected on the first accounting filed after the
68	election. For assets acquired during the administration of the
69	estate or trust, the carrying value is equal to the acquisition
70	costs of the asset.
71	Section 2.  Subsection (11) of section 738.104, Florida
72	Statutes, is repealed.
73	Section 3.  Section 738.1041, Florida Statutes, is amended
74	to read:
75	738.1041  Total return unitrust.-
76	(1)  For purposes of this section, the term:
77	(a)  "Average fair market value" means the average of the
78	fair market values of assets held by the trust at the beginning
79	of the current and each of the 2 preceding years, or for the
80	entire term of the trust if there are less than 2 preceding
81	years, and adjusted as follows:
82	1.  If assets have been added to the trust during the years
83	used to determine the average, the amount of each addition is
84	added to all years in which such addition was not included.
85	2.  If assets have been distributed from the trust during
86	the years used to determine the average, other than in
87	satisfaction of the unitrust amount, the amount of each
88	distribution is subtracted from all years in which such
89	distribution was not included.
90	(b)(a)  "Disinterested person" means a person who is not a
91	"related or subordinate party" as defined in s. 672(c) of the
92	United States Internal Revenue Code, 26 U.S.C. ss. 1 et seq., or
93	any successor provision thereof, with respect to the person then
94	acting as trustee of the trust and excludes the grantor and any
95	interested trustee.
96	(c)(b)  "Fair market value" means the fair market value of
97	the assets held by the trust as otherwise determined under this
98	chapter, reduced by all known noncontingent liabilities.
99	(d)(c)  "Income trust" means a trust, created by either an
100	inter vivos or a testamentary instrument, which directs or
101	permits the trustee to distribute the net income of the trust to
102	one or more persons, either in fixed proportions or in amounts
103	or proportions determined by the trustee and regardless of
104	whether the trust directs or permits the trustee to distribute
105	the principal of the trust to one or more such persons.
106	(e)(d)  "Interested distributee" means a person to whom
107	distributions of income or principal can currently be made and
108	who has the power to remove the existing trustee and designate
109	as successor a person who may be a "related or subordinate
110	party," as defined in the Internal Revenue Code, 26 U.S.C. s.
111	672(c), with respect to such distributee.
112	(f)(e)  "Interested trustee" means an individual trustee to
113	whom the net income or principal of the trust can currently be
114	distributed or would be distributed if the trust were then to
115	terminate and be distributed, any trustee whom an interested
116	distributee has the power to remove and replace with a related
117	or subordinate party as defined in paragraph (d), or an
118	individual trustee whose legal obligation to support a
119	beneficiary may be satisfied by distributions of income and
120	principal of the trust.
121	(g)  "Related or subordinate party" has the same meaning as
122	provided in 26 U.S.C. s. 672(c) of the Internal Revenue Code, or
123	any successor provision thereof.
124	(h)(f)  "Unitrust amount" means the amount determined by
125	multiplying the average fair market value of the assets as
126	calculated in subparagraph (a)1. defined in paragraph (b) by the
127	percentage calculated under paragraph (2)(b).
128	(2)  A trustee may, without court approval, convert an
129	income trust to a total return unitrust, reconvert a total
130	return unitrust to an income trust, or change the percentage
131	used to calculate the unitrust amount or the method used to
132	determine the fair market value of the trust if:
133	(a)  The trustee adopts a written statement regarding trust
134	distributions which that provides:
135	1.  In the case of a trust being administered as an income
136	trust, that future distributions from the trust will be unitrust
137	amounts rather than net income, and indicates the manner in
138	which the unitrust amount will be calculated and the method in
139	which the fair market value of the trust will be determined.
140	2.  In the case of a trust being administered as a total
141	return unitrust, that:
142	a.  Future distributions from the trust will be net income
143	rather than unitrust amounts; or
144	b.  The percentage used to calculate the unitrust amount or
145	the method used to determine the fair market value of the trust
146	will be changed, and indicates the manner in which the new
147	unitrust amount will be calculated and the method in which the
148	new fair market value of the trust will be determined;
149	(b)  The trustee determines the terms of the unitrust under
150	one of the following methods:
151	1.  A disinterested trustee determines, or if there is no
152	trustee other than an interested trustee, the interested trustee
153	appoints a disinterested person who, in its sole discretion but
154	acting in a fiduciary capacity, determines for the interested
155	trustee:
156	a.  The percentage to be used to calculate the unitrust
157	amount if, provided the percentage used is not greater than 5
158	percent or nor less than 3 percent;
159	b.  The method to be used in determining the fair market
160	value of the trust; and
161	c.  Which assets, if any, are to be excluded in determining
162	the unitrust amount; or
163	2.  The interested trustee or disinterested trustee
164	administers the trust such that:
165	a.  The percentage used to calculate the unitrust amount is
166	50 percent of the applicable federal rate as defined in the
167	Internal Revenue Code, 26 U.S.C. s. 7520, in effect for the
168	month the conversion under this section becomes effective and
169	for each January thereafter; however, if the percentage
170	calculated exceeds 5 percent, the unitrust percentage is shall
171	be 5 percent and if the percentage calculated is less than 3
172	percent, the unitrust percentage is shall be 3 percent; and
173	b.  The fair market value of the trust shall be determined
174	at least annually on an asset-by-asset basis, reasonably and in
175	good faith, in accordance with the provisions of s. 738.202(5),
176	except the following property may shall not be included in
177	determining the value of the trust:
178	(I)  Any residential property or any tangible personal
179	property that, as of the first business day of the current
180	valuation year, one or more current beneficiaries of the trust
181	have or have had the right to occupy, or have or have had the
182	right to possess or control, (other than in his or her capacity
183	as trustee of the trust), and instead the right of occupancy or
184	the right to possession and control is shall be deemed to be the
185	unitrust amount with respect to such property; however, the
186	unitrust amount must shall be adjusted to take into account
187	partial distributions from or receipt into the trust of such
188	property during the valuation year;.
189	(II)  Any asset specifically given to a beneficiary and the
190	return on investment on such property, which return on
191	investment shall be distributable to the such beneficiary; or.
192	(III)  Any asset while held in a decedent's testator's
193	estate;
194	(c)  The trustee sends written notice of its intention to
195	take such action, along with copies of the such written
196	statement regarding trust distributions and this section, and,
197	if applicable, the determinations of either the trustee or the
198	disinterested person to:
199	1.  The grantor of the trust, if living.
200	2.  All living persons who are currently receiving or
201	eligible to receive distributions of income from of the trust.
202	3.  All living persons who would receive distributions of
203	principal of the trust if the trust were to terminate at the
204	time of the giving of such notice (without regard to the
205	exercise of any power of appointment,) or, if the trust does not
206	provide for its termination, all living persons who would
207	receive or be eligible to receive distributions of income or
208	principal of the trust if the persons identified in subparagraph
209	2. were deceased.
210	4.  All persons acting as advisers or protectors of the
211	trust.
212
213	Notice under this paragraph shall be served informally, in the
214	manner provided in the Florida Rules of Civil Procedure relating
215	to service of pleadings subsequent to the initial pleading.
216	Notice may be served on a legal representative or natural
217	guardian of a person without the filing of any proceeding or
218	approval of any court;
219	(d)  At least one person receiving notice under each of
220	subparagraphs (c)2. and 3. is legally competent; and
221	(e)  Persons No person receiving such notice under each of
222	subparagraphs (c)2. and 3. do not object objects, by written
223	instrument delivered to the trustee, to the proposed action of
224	the trustee or the determinations of the disinterested person
225	within 60 days after service of such notice. An objection under
226	this section may be executed by a legal representative or
227	natural guardian of a person without the filing of any
228	proceeding or approval of any court.
229	(3)  If a trustee desires to convert an income trust to a
230	total return unitrust, reconvert a total return unitrust to an
231	income trust, or change the percentage used to calculate the
232	unitrust amount or the method used to determine a fair market
233	value of the trust but does not have the ability to or elects
234	not to do it under subsection (2), the trustee may petition the
235	circuit court for such order as the trustee deems appropriate.
236	In that event, the court, in its own discretion or on the
237	petition of such trustee or any person having an income or
238	remainder interest in the trust, may appoint a disinterested
239	person who, acting in a fiduciary capacity, shall present such
240	information to the court as is shall be necessary for the court
241	to make a determination hereunder.
242	(4)  All determinations made pursuant to sub-subparagraph
243	(2)(b)2.b. shall be conclusive if reasonable and made in good
244	faith. Such determination shall be conclusively presumed to have
245	been made reasonably and in good faith unless proven otherwise
246	in a proceeding commenced by or on behalf of a person interested
247	in the trust within the time provided in s. 736.1008. The burden
248	will be on the objecting interested party to prove that the
249	determinations were not made reasonably and in good faith.
250	(4)(5)  Following the conversion of an income trust to a
251	total return unitrust, the trustee:
252	(a)  Shall treat the unitrust amount as if it were net
253	income of the trust for purposes of determining the amount
254	available, from time to time, for distribution from the trust.
255	(b)  May allocate to trust income for each taxable year of
256	the trust, or portion thereof:
257	1.  Net short-term capital gain described in the Internal
258	Revenue Code, 26 U.S.C. s. 1222(5), for such year, or portion
259	thereof, but only to the extent that the amount so allocated
260	together with all other amounts allocated to trust income, as
261	determined under the provisions of this chapter without regard
262	to this section and s. 738.104, for such year, or portion
263	thereof, does not exceed the unitrust amount for such year, or
264	portion thereof.
265	2.  Net long-term capital gain described in the Internal
266	Revenue Code, 26 U.S.C. s. 1222(7), for such year, or portion
267	thereof, but only to the extent that the amount so allocated
268	together with all other amounts, including amounts described in
269	subparagraph 1., allocated to trust income for such year, or
270	portion thereof, does not exceed the unitrust amount for such
271	year, or portion thereof.
272	(5)(6)  In administering a total return unitrust, the
273	trustee may, in its sole discretion but subject to the
274	provisions of the governing instrument, determine:
275	(a)  The effective date of the conversion.
276	(b)  The timing of distributions, including provisions for
277	prorating a distribution for a short year in which a
278	beneficiary's right to payments commences or ceases.
279	(c)  Whether distributions are to be made in cash or in
280	kind or partly in cash and partly in kind.
281	(d)  If the trust is reconverted to an income trust, the
282	effective date of such reconversion.
283	(e)  Such other administrative issues as may be necessary
284	or appropriate to carry out the purposes of this section.
285	(6)(7)  Conversion to a total return unitrust under the
286	provisions of this section does shall not affect any other
287	provision of the governing instrument, if any, regarding
288	distributions of principal.
289	(7)(8)  Any trustee or disinterested person who in good
290	faith takes or fails to take any action under this section is
291	shall not be liable to any person affected by such action or
292	inaction, regardless of whether such person received written
293	notice as provided in this section or and regardless of whether
294	such person was under a legal disability at the time of the
295	delivery of such notice. Such person's exclusive remedy is shall
296	be to obtain, under subsection (8) (9), an order of the court
297	directing the trustee to convert an income trust to a total
298	return unitrust, to reconvert from a total return unitrust to an
299	income trust, or to change the percentage used to calculate the
300	unitrust amount. If a court determines that the trustee or
301	disinterested person has not acted in good faith in taking or
302	failing to take any action under this section, the provisions of
303	s. 738.105(3) applies apply.
304	(8)(9)  If a majority in interest of either the income or
305	remainder beneficiaries of an income trust has delivered to the
306	trustee a written objection to the amount of the income
307	distributions of the trust, and, if the trustee has failed to
308	resolve the objection to the satisfaction of the objecting
309	beneficiaries within 6 months after from the receipt of such
310	written objection, then the objecting beneficiaries may petition
311	the court in accordance with subsection (3).
312	(9)(10)  This section pertains shall be construed as
313	pertaining to the administration of a trust and is applicable to
314	any trust that is administered either in this state or under
315	Florida law unless:
316	(a)  The governing instrument reflects an intention that
317	the current beneficiary or beneficiaries are to receive an
318	amount other than a reasonable current return from the trust;
319	(b)  The trust is a trust described in the Internal Revenue
320	Code, 26 U.S.C. s. 170(f)(2)(B), s. 642(c)(5), s. 664(d), s.
321	2702(a)(3), or s. 2702(b);
322	(c)  One or more persons to whom the trustee could
323	distribute income have a power of withdrawal over the trust:
324	1.  That is not subject to an ascertainable standard under
325	the Internal Revenue Code, 26 U.S.C. s. 2041 or s. 2514, and
326	exceeds in any calendar year the amount set forth in the
327	Internal Revenue Code, 26 U.S.C. s. 2041(b)(2) or s. 2514(e); or
328	2.  A power of withdrawal over the trust that can be
329	exercised to discharge a duty of support he or she possesses; or
330	(d)  The governing instrument expressly prohibits use of
331	this section by specific reference to the section. A provision
332	in the governing instrument that, "The provisions of section
333	738.1041, Florida Statutes, as amended, or any corresponding
334	provision of future law, may shall not be used in the
335	administration of this trust," or similar words reflecting such
336	intent are shall be sufficient to preclude the use of this
337	section; or
338	(e)  The trust is a trust with respect to which a trustee
339	currently possesses the power to adjust under s. 738.104.
340	(10)(11)  The grantor of a trust may create an express
341	total return unitrust that becomes which will become effective
342	as provided in the trust instrument document without requiring a
343	conversion under this section.
344	(a)  An express total return unitrust created by the
345	grantor of the trust is shall be treated as a unitrust under
346	this section only if the terms of the trust instrument document
347	contain all of the following provisions:
348	1.(a)  That distributions from the trust will be unitrust
349	amounts and the manner in which the unitrust amount will be
350	calculated; and the method in which the fair market value of the
351	trust will be determined.
352	2.(b)  The percentage to be used to calculate the unitrust
353	amount if, provided the percentage used is not greater than 5
354	percent nor less than 3 percent.
355	(b)  The trust instrument may also contain provisions
356	specifying:
357	1.(c)  The method to be used in determining the fair market
358	value of the trust, including whether to use an average fair
359	market value or the fair market value of the assets held by the
360	trust at the beginning of the current year; or.
361	2.(d)  Which assets, if any, are to be excluded in
362	determining the unitrust amount.
363	(c)  The remaining provisions of this section establish the
364	method of determining the fair market value of the trust if the
365	trust instrument is silent as to subparagraph (b)1., and to
366	specify those assets, if any, which are to be excluded in
367	determining the unitrust amount if the trust instrument is
368	silent as to subparagraph (b)2.
369	Section 4.  Subsections (1), (3), and (4) of section
370	738.105, Florida Statutes, are amended to read:
371	738.105  Judicial control of discretionary powers.-
372	(1)  A court may shall not change a trustee's fiduciary's
373	decision to exercise or not to exercise a discretionary power
374	conferred by this chapter unless the court determines that the
375	decision was an abuse of the trustee's fiduciary's discretion. A
376	court may shall not determine that a trustee fiduciary abused
377	its discretion merely because the court would have exercised the
378	discretion in a different manner or would not have exercised the
379	discretion.
380	(3)  If a court determines that a trustee fiduciary has
381	abused its discretion, the remedy is shall be to restore the
382	income and remainder beneficiaries to the positions they would
383	have occupied if the fiduciary had not abused its discretion, in
384	accordance with according to the following rules:
385	(a)  To the extent the abuse of discretion has resulted in
386	no distribution to a beneficiary or a distribution that is too
387	small, the court shall require the trustee fiduciary to
388	distribute from the trust to the beneficiary an amount the court
389	determines will restore the beneficiary, in whole or in part, to
390	his or her appropriate position.
391	(b)  To the extent the abuse of discretion has resulted in
392	a distribution to a beneficiary that is too large, the court
393	shall restore the beneficiaries, the trust, or both, in whole or
394	in part, to their appropriate positions by requiring the trustee
395	fiduciary to withhold an amount from one or more future
396	distributions to the beneficiary who received the distribution
397	that was too large or requiring that beneficiary to return some
398	or all of the distribution to the trust.
399	(c)  To the extent the court is unable, after applying
400	paragraphs (a) and (b), to restore the beneficiaries or, the
401	trust, or both, to the positions they would have occupied if the
402	trustee fiduciary had not abused its discretion, the court may
403	require the trustee fiduciary to pay an appropriate amount from
404	its own funds to one or more of the beneficiaries or the trust
405	or both.
406	(4)  Upon the filing of a petition by the trustee
407	fiduciary, the court having jurisdiction over the trust or
408	estate shall determine whether a proposed exercise or
409	nonexercise by the trustee fiduciary of a discretionary power
410	conferred by this chapter will result in an abuse of the
411	trustee's fiduciary's discretion. If the petition describes the
412	proposed exercise or nonexercise of the power and contains
413	sufficient information to inform the beneficiaries of the
414	reasons for the proposal, the facts upon which the trustee
415	fiduciary relies, and an explanation of how the income and
416	remainder beneficiaries will be affected by the proposed
417	exercise or nonexercise of the power, a beneficiary who
418	challenges the proposed exercise or nonexercise has the burden
419	of establishing that such exercise or nonexercise will result in
420	an abuse of discretion.
421	Section 5.  Subsections (1) through (4) of section 738.201,
422	Florida Statutes, are amended to read:
423	738.201  Determination and distribution of net income.-
424	After a decedent dies, in the case of an estate, or after an
425	income interest in a trust ends, the following rules apply:
426	(1)  A fiduciary of an estate or of a terminating income
427	interest shall determine the amount of net income and net
428	principal receipts received from property specifically given to
429	a beneficiary under the rules in ss. 738.301-738.706 which apply
430	to trustees and the rules in subsection (5). The fiduciary shall
431	distribute the net income and net principal receipts to the
432	beneficiary who is to receive the specific property.
433	(2)  A fiduciary shall determine the remaining net income
434	of a decedent's estate or a terminating income interest under
435	the rules in ss. 738.301-738.706 which apply to trustees and by:
436	(a)  Including in net income all income from property used
437	to discharge liabilities.
438	(b)  Paying from income or principal, in the fiduciary's
439	discretion, fees of attorneys, accountants, and fiduciaries and;
440	court costs and other expenses of administration. However; and
441	interest on death taxes, but the fiduciary may pay interest on
442	death taxes those expenses from income of property passing to a
443	trust for which the fiduciary claims an estate tax marital or
444	charitable deduction under the Internal Revenue Code or
445	comparable law of any state only to the extent the payment of
446	those expenses from income will not cause the reduction or loss
447	of the deduction.
448	(c)  Paying from principal all other disbursements made or
449	incurred in connection with the settlement of a decedent's
450	estate or the winding up of a terminating income interest,
451	including debts, funeral expenses, disposition of remains,
452	family allowances, and death taxes and related penalties that
453	are apportioned to the estate or terminating income interest by
454	the will, the terms of the trust, or applicable law.
455	(3)  If A fiduciary shall distribute to a beneficiary who
456	receives a pecuniary amount outright is also entitled to receive
457	the interest on the amount or any other amount provided by the
458	will or, the terms of the trust, a fiduciary shall distribute
459	the interest or applicable law from net income determined under
460	subsection (2) or from principal to the extent net income is
461	insufficient. If a beneficiary is to receive a pecuniary amount
462	outright from a trust after an income interest ends and no
463	interest or other amount is provided for by the terms of the
464	trust or applicable law, the fiduciary shall distribute the
465	interest or other amount to which the beneficiary would be
466	entitled under applicable law if the pecuniary amount were
467	required to be paid under a will.
468	(4)  A fiduciary shall distribute the net income remaining
469	after distributions required under subsections (1)-(3) by
470	subsection (3) in the manner described in s. 738.202 to all
471	other beneficiaries, including a beneficiary who receives a
472	pecuniary amount in trust, even if the beneficiary holds an
473	unqualified power to withdraw assets from the trust or other
474	presently exercisable general power of appointment over the
475	trust.
476	Section 6.  Section 738.202, Florida Statutes, is amended
477	to read:
478	738.202  Distribution to residuary and remainder
479	beneficiaries.-
480	(1)  Each beneficiary described in s. 738.201(4) is
481	entitled to receive a portion of the net income remaining after
482	the application of s. 738.201(1)-(3), which is equal to the
483	beneficiary's fractional interest in undistributed principal
484	assets, using carrying values as of the distribution date. If a
485	fiduciary makes more than one distribution of assets to
486	beneficiaries to whom this section applies, each beneficiary,
487	including one who does not receive part of the distribution, is
488	entitled, as of each distribution date, to the net income the
489	fiduciary has received after the date of death or terminating
490	event or earlier distribution date but has not distributed as of
491	the current distribution date.
492	(2)  In determining a beneficiary's share of net income,
493	the following applies rules apply:
494	(a)  The beneficiary is entitled to receive a portion of
495	the net income equal to the beneficiary's fractional interest in
496	the carrying value of the undistributed principal assets
497	immediately before the distribution date, excluding the amount
498	of unpaid liabilities including assets that later may be sold to
499	meet principal obligations.
500	(b)  The beneficiary's fractional interest in the
501	undistributed principal assets shall be calculated: without
502	regard to
503	1.  At the time the interest began and adjusted for any
504	disproportionate distributions since the interest began;
505	2.  By excluding any liabilities of the estate or trust
506	from the calculation;
507	3.  By also excluding property specifically given to a
508	beneficiary and property required to pay pecuniary amounts not
509	in trust; and.
510	4.(c)  The beneficiary's fractional interest in the
511	undistributed principal assets shall be calculated On the basis
512	of the aggregate carrying value of those assets determined under
513	subsection (1) as of the distribution date without reducing the
514	value by any unpaid principal obligation.
515	(c)  If a disproportionate distribution of principal is
516	made to a beneficiary, the respective fractional interests of
517	all beneficiaries in the remaining underlying assets shall be
518	recomputed by:
519	1.  Adjusting the carrying value of the principal assets to
520	their fair market value before the distribution;
521	2.  Reducing the fractional interest of the recipient of
522	the disproportionate distribution in the remaining principal
523	assets by the fair market value of the principal distribution;
524	and
525	3.  Recomputing the fractional interests of all
526	beneficiaries in the remaining principal assets based upon the
527	now restated carrying values.
528	(d)  The distribution date for purposes of this section may
529	be the date as of which the fiduciary calculates the value of
530	the assets if that date is reasonably near the date on which
531	assets are actually distributed.
532	(3)  If a fiduciary does not distribute all of the
533	collected but undistributed net income to each person as of a
534	distribution date, the fiduciary shall maintain appropriate
535	records showing the interest of each beneficiary in that net
536	income.
537	(4)  A fiduciary may apply the provisions of rules in this
538	section, to the extent the fiduciary considers appropriate, to
539	net gain or loss realized after the date of death or terminating
540	event or earlier distribution date from the disposition of a
541	principal asset if this section applies to the income from the
542	asset.
543	(5)  The carrying value or fair market value of trust
544	assets shall be determined on an asset-by-asset basis and are
545	shall be conclusive if reasonable and determined in good faith.
546	Determinations of fair market value based on appraisals
547	performed within 2 years before or after the valuation date are
548	shall be presumed reasonable. The values value of trust assets
549	are shall be conclusively presumed to be reasonable and
550	determined in good faith unless proven otherwise in a proceeding
551	commenced by or on behalf of a person interested in the trust
552	within the time provided in s. 736.1008.
553	(6)  All distributions to a beneficiary shall be valued
554	based on their fair market value on the date of distribution.
555	Section 7.  Subsection (4) of section 738.301, Florida
556	Statutes, is amended to read:
557	738.301  When right to income begins and ends.-An income
558	beneficiary is entitled to net income from the date on which the
559	income interest begins.
560	(4)  An income interest ends on the day before an income
561	beneficiary dies or another terminating event occurs, or on the
562	last day of a period during which there is no beneficiary to
563	whom a fiduciary trustee may distribute income.
564	Section 8.  Subsections (1) and (2) of section 738.302,
565	Florida Statutes, are amended to read:
566	738.302  Apportionment of receipts and disbursements when
567	decedent dies or income interest begins.-
568	(1)  A fiduciary trustee shall allocate an income receipt
569	or disbursement other than one to which s. 738.201(1) applies to
570	principal if the due date of the receipt or disbursement occurs
571	before a decedent dies in the case of an estate or before an
572	income interest begins in the case of a trust or successive
573	income interest.
574	(2)  A fiduciary trustee shall allocate an income receipt
575	or disbursement to income if the due date of the receipt or
576	disbursement occurs on or after the date on which a decedent
577	dies or an income interest begins and the due date is a periodic
578	due date. An income receipt or disbursement shall be treated as
579	accruing from day to day if the due date of the receipt or
580	disbursement is not periodic or the receipt or disbursement has
581	no due date. The portion of the receipt or disbursement accruing
582	before the date on which a decedent dies or an income interest
583	begins shall be allocated to principal and the balance shall be
584	allocated to income.
585	Section 9.  Subsections (2) and (3) of section 738.303,
586	Florida Statutes, are amended to read:
587	738.303  Apportionment when income interest ends.-
588	(2)  When a mandatory income interest ends, the fiduciary
589	trustee shall pay to a mandatory income beneficiary who survives
590	that date, or the estate of a deceased mandatory income
591	beneficiary whose death causes the interest to end, the
592	beneficiary's share of the undistributed income that is not
593	disposed of under the terms of the trust unless the beneficiary
594	has an unqualified power to revoke more than 5 percent of the
595	trust immediately before the income interest ends. In the latter
596	case, the undistributed income from the portion of the trust
597	that may be revoked shall be added to principal.
598	(3)  When a fiduciary's trustee's obligation to pay a fixed
599	annuity or a fixed fraction of the value of the trust's assets
600	ends, the fiduciary trustee shall prorate the final payment if
601	and to the extent required by applicable law to accomplish a
602	purpose of the trust or its grantor relating to income, gift,
603	estate, or other tax requirements.
604	Section 10.  Section 738.401, Florida Statutes, is amended
605	to read:
606	738.401  Character of receipts.-
607	(1)  For purposes of this section, the term "entity" means
608	a corporation, partnership, limited liability company, regulated
609	investment company, real estate investment trust, common trust
610	fund, or any other organization in which a fiduciary trustee has
611	an interest other than a trust or estate to which s. 738.402
612	applies, a business or activity to which s. 738.403 applies, or
613	an asset-backed security to which s. 738.608 applies.
614	(2)  Except as otherwise provided in this section, a
615	fiduciary trustee shall allocate to income money received from
616	an entity.
617	(3)  Except as otherwise provided in this section, a
618	fiduciary trustee shall allocate the following receipts from an
619	entity to principal:
620	(a)  Property other than money.
621	(b)  Money received in one distribution or a series of
622	related distributions in exchange for part or all of a trust's
623	or estate's interest in the entity.
624	(c)  Money received in total or partial liquidation of the
625	entity.
626	(d)  Money received from an entity that is a regulated
627	investment company or a real estate investment trust if the
628	money distributed represents short-term or long-term capital
629	gain realized within the entity.
630	(e)  Money received from an entity listed on a public stock
631	exchange during any year of the trust or estate which exceeds 10
632	percent of the fair market value of the trust's or estate's
633	interest in the entity on the first day of that year. The amount
634	to be allocated to principal must be reduced to the extent that
635	the cumulative distributions from the entity to the trust or
636	estate allocated to income does not exceed a cumulative annual
637	return of 3 percent of the fair market value of the interest in
638	the entity at the beginning of each year or portion of a year
639	for the number of years or portion of years in the period that
640	the interest in the entity was held by the trust or estate. If a
641	trustee has exercised a power to adjust under s. 738.104 during
642	any period the interest in the entity was held by the trust, the
643	trustee, in determining the total income distributions from that
644	entity, must take into account the extent to which the exercise
645	of that power resulted in income to the trust from that entity
646	for that period. If the income of the trust for any period was
647	computed under s. 738.1041, the trustee, in determining the
648	total income distributions from that entity for that period,
649	must take into account the portion of the unitrust amount paid
650	as a result of the ownership of the trust's interest in the
651	entity for that period.
652	(4)  If a fiduciary trustee elects, or continues an
653	election made by its predecessor, to reinvest dividends in
654	shares of stock of a distributing corporation or fund, whether
655	evidenced by new certificates or entries on the books of the
656	distributing entity, the new shares shall retain their character
657	as income.
658	(5)  Money is received in partial liquidation:
659	(a)  To the extent the entity, at or near the time of a
660	distribution, indicates that such money is a distribution in
661	partial liquidation; or
662	(b)  If the total amount of money and property received in
663	a distribution or series of related distributions from an entity
664	that is not listed on a public stock exchange is greater than 20
665	percent of the trust or estate's pro rata share of the entity's
666	gross assets, as shown by the entity's year-end financial
667	statements immediately preceding the initial receipt.
668
669	This subsection does not apply to an entity to which subsection
670	(7) applies.
671	(6)  Money may not is not received in partial liquidation,
672	nor may money be taken into account in determining any excess
673	under paragraph (5)(b), to the extent that the cumulative
674	distributions from the entity to the trust or the estate
675	allocated to income do not exceed the greater of: such money
676	does not exceed the amount of income tax a trustee or
677	beneficiary must pay on taxable income of the entity that
678	distributes the money.
679	(a)  A cumulative annual return of 3 percent of the
680	entity's carrying value computed at the beginning of each period
681	for the number of years or portion of years that the entity was
682	held by the fiduciary. If a trustee has exercised a power to
683	adjust under s. 738.104 during any period the interest in the
684	entity was held by the trust, the trustee, in determining the
685	total income distributions from that entity, must take into
686	account the extent to which exercise of the power resulted in
687	income to the trust from that entity for that period. If the
688	income of a trust for any period was computed pursuant to s.
689	738.1041, the trustee, in determining the total income
690	distributions from the entity for that period, must take into
691	account the portion of the unitrust amount paid as a result of
692	the ownership of the trust's interest in the entity for that
693	period; or
694	(b)  If the entity is treated as a partnership, subchapter
695	S corporation, or a disregarded entity pursuant to the Internal
696	Revenue Code of 1986, as amended, the amount of income tax
697	attributable to the trust's or estate's ownership share of the
698	entity, based on its pro rata share of the taxable income of the
699	entity that distributes the money, for the number of years or
700	portion of years that the interest in the entity was held by the
701	fiduciary, calculated as if all of that tax was incurred by the
702	fiduciary.
703	(7)  The following applies special rules shall apply to
704	moneys or property received by a private trustee as a
705	distribution from an entity entities described in this
706	subsection:
707	(a)  If treated as a partnership, subchapter S corporation,
708	or disregarded entity pursuant to the Internal Revenue Code of
709	1986, as amended, the trustee shall first treat as income of the
710	trust all of the money or property received from the investment
711	entity in the current year which would be considered income
712	under this chapter if the trustee had directly held the trust's
713	pro rata share of the assets of the investment entity. For this
714	purpose, all distributions received in the current year must be
715	aggregated.
716	(b)  The trustee shall next treat as income of the trust
717	any additional money or property received in the current year
718	which would have been considered income in the prior 2 years
719	under paragraph (a) if additional money or property had been
720	received from the investment entity in any of those prior 2
721	years. The amount to be treated as income shall be reduced by
722	any distributions of money or property made by the investment
723	entity to the trust during the current and prior 2 years which
724	were treated as income under this paragraph.
725	(c)  The remainder of the distribution, if any, is treated
726	as principal.
727	(d)  As used in this subsection, the term:
728	1.  "Investment entity" means an entity, other than a
729	business activity conducted by the trustee described in s.
730	738.403 or an entity that is listed on a public stock exchange,
731	which is treated as a partnership, subchapter S corporation, or
732	disregarded entity pursuant to the Internal Revenue Code of
733	1986, as amended, and which normally derives 50 percent or more
734	of its annual cumulative net income from interest, dividends,
735	annuities, royalties, rental activity, or other passive
736	investments, including income from the sale or exchange of such
737	passive investments.
738	2.  "Private trustee" means a trustee who is a natural
739	person, but only if the trustee is unable to use the power to
740	adjust between income and principal with respect to receipts
741	from entities described in this subsection pursuant to s.
742	738.104. A bank, trust company, or other commercial trustee is
743	not considered a private trustee.
744	(8)  This section shall be applied before ss. 738.705 and
745	738.706 and does not modify or change any of the provisions of
746	those sections.
747	(a)  Moneys or property received from a targeted entity
748	that is not an investment entity which do not exceed the trust's
749	pro rata share of the undistributed cumulative net income of the
750	targeted entity during the time an ownership interest in the
751	targeted entity was held by the trust shall be allocated to
752	income. The balance of moneys or property received from a
753	targeted entity shall be allocated to principal.
754	(b)  If trust assets include any interest in an investment
755	entity, the designated amount of moneys or property received
756	from the investment entity shall be treated by the trustee in
757	the same manner as if the trustee had directly held the trust's
758	pro rata share of the assets of the investment entity
759	attributable to the distribution of such designated amount.
760	Thereafter, distributions shall be treated as principal.
761	(c)  For purposes of this subsection, the following
762	definitions shall apply:
763	1.  "Cumulative net income" means the targeted entity's net
764	income as determined using the method of accounting regularly
765	used by the targeted entity in preparing its financial
766	statements, or if no financial statements are prepared, the net
767	book income computed for federal income tax purposes, for every
768	year an ownership interest in the entity is held by the trust.
769	The trust's pro rata share shall be the cumulative net income
770	multiplied by the percentage ownership of the trust.
771	2.  "Designated amount" means moneys or property received
772	from an investment entity during any year that is equal to the
773	amount of the distribution that does not exceed the greater of:
774	a.  The amount of income of the investment entity for the
775	current year, as reported to the trustee by the investment
776	entity for federal income tax purposes; or
777	b.  The amount of income of the investment entity for the
778	current year and the prior 2 years, as reported to the trustee
779	by the investment entity for federal income tax purposes, less
780	any distributions of moneys or property made by the investment
781	entity to the trustee during the prior 2 years.
782	3.  "Investment entity" means a targeted entity that
783	normally derives 50 percent or more of its annual cumulative net
784	income from interest, dividends, annuities, royalties, rental
785	activity, or other passive investments, including income from
786	the sale or exchange of such passive investments.
787	4.  "Private trustee" means a trustee who is an individual,
788	but only if the trustee is unable to utilize the power to adjust
789	between income and principal with respect to receipts from
790	entities described in this subsection pursuant to s. 738.104. A
791	bank, trust company, or other commercial trustee shall not be
792	considered to be a private trustee.
793	5.  "Targeted entity" means any entity that is treated as a
794	partnership, subchapter S corporation, or disregarded entity
795	pursuant to the Internal Revenue Code of 1986, as amended, other
796	than an entity described in s. 738.403.
797	6.  "Undistributed cumulative net income" means the trust's
798	pro rata share of cumulative net income, less all prior
799	distributions from the targeted entity to the trust that have
800	been allocated to income.
801	(d)  This subsection shall not be construed to modify or
802	change any of the provisions of ss. 738.705 and 738.706 relating
803	to income taxes.
804	(8)  A trustee may rely upon a statement made by an entity
805	about the source or character of a distribution, about the
806	amount of profits of a targeted entity, or about the nature and
807	value of assets of an investment entity if the statement is made
808	at or near the time of distribution by the entity's board of
809	directors or other person or group of persons authorized to
810	exercise powers to pay money or transfer property comparable to
811	those of a corporation's board of directors.
812	Section 11.  Section 738.402, Florida Statutes, is amended
813	to read:
814	738.402  Distribution from trust or estate.-A fiduciary
815	trustee shall allocate to income an amount received as a
816	distribution of income from a trust or an estate in which the
817	trust has an interest other than a purchased interest and shall
818	allocate to principal an amount received as a distribution of
819	principal from such a trust or estate. If a fiduciary trustee
820	purchases an interest in a trust that is an investment entity,
821	or a decedent or donor transfers an interest in such a trust to
822	a fiduciary trustee, s. 738.401 or s. 738.608 applies to a
823	receipt from the trust.
824	Section 12.  Section 738.403, Florida Statutes, is amended
825	to read:
826	738.403  Business and other activities conducted by
827	fiduciary trustee.-
828	(1)  If a fiduciary trustee who conducts a business or
829	other activity determines that it is in the best interest of all
830	the beneficiaries to account separately for the business or
831	activity instead of accounting for the business or activity as
832	part of the trust's general accounting records, the fiduciary
833	trustee may maintain separate accounting records for the
834	transactions of the such business or other activity, whether or
835	not the assets of such business or activity are segregated from
836	other trust assets.
837	(2)  A fiduciary trustee who accounts separately for a
838	business or other activity may determine the extent to which the
839	net cash receipts of the such business or activity must be
840	retained for working capital, the acquisition or replacement of
841	fixed assets, and other reasonably foreseeable needs of the
842	business or activity, and the extent to which the remaining net
843	cash receipts are accounted for as principal or income in the
844	trust's general accounting records. If a fiduciary trustee sells
845	assets of the business or other activity, other than in the
846	ordinary course of the business or activity, the fiduciary must
847	trustee shall account for the net amount received as principal
848	in the trust's general accounting records to the extent the
849	fiduciary trustee determines that the amount received is no
850	longer required in the conduct of the business.
851	(3)  Activities for which a fiduciary trustee may maintain
852	separate accounting records include:
853	(a)  Retail, manufacturing, service, and other traditional
854	business activities.
855	(b)  Farming.
856	(c)  Raising and selling livestock and other animals.
857	(d)  Management of rental properties.
858	(e)  Extraction of minerals and other natural resources.
859	(f)  Timber operations.
860	(g)  Activities to which s. 738.607 738.608 applies.
861	Section 13.  Section 738.501, Florida Statutes, is amended
862	to read:
863	738.501  Principal receipts.-A fiduciary trustee shall
864	allocate to principal:
865	(1)  To the extent not allocated to income under this
866	chapter, assets received from a transferor during the
867	transferor's lifetime, a decedent's estate, a trust with a
868	terminating income interest, or a payor under a contract naming
869	the trust or its fiduciary trustee as beneficiary.
870	(2)  Money or other property received from the sale,
871	exchange, liquidation, or change in form of a principal asset,
872	including realized profit, subject to this section.
873	(3)  Amounts recovered from third parties to reimburse the
874	trust because of disbursements described in s. 738.702(1)(g) or
875	for other reasons to the extent not based on the loss of income.
876	(4)  Proceeds of property taken by eminent domain; however
877	but a separate award made for the loss of income with respect to
878	an accounting period during which a current income beneficiary
879	had a mandatory income interest is income.
880	(5)  Net income received in an accounting period during
881	which there is no beneficiary to whom a fiduciary trustee may or
882	shall distribute income.
883	(6)  Other receipts as provided in ss. 738.601-738.608.
884	Section 14.  Section 738.502, Florida Statutes, is amended
885	to read:
886	738.502  Rental property.-If To the extent a fiduciary
887	trustee accounts for receipts from rental property pursuant to
888	this section, the fiduciary trustee shall allocate to income an
889	amount received as rent of real or personal property, including
890	an amount received for cancellation or renewal of a lease. An
891	amount received as a refundable deposit, including a security
892	deposit or a deposit that is to be applied as rent for future
893	periods, must shall be added to principal and held subject to
894	the terms of the lease and is not available for distribution to
895	a beneficiary until the trustee's contractual obligations have
896	been satisfied with respect to that amount.
897	Section 15.  Subsections (1), (2), and (3) of section
898	738.503, Florida Statutes, are amended to read:
899	738.503  Obligation to pay money.-
900	(1)  An amount received as interest, whether determined at
901	a fixed, variable, or floating rate, on an obligation to pay
902	money to the fiduciary trustee, including an amount received as
903	consideration for prepaying principal, shall be allocated to
904	income without any provision for amortization of premium.
905	(2)  Except as otherwise provided herein, a fiduciary
906	trustee shall allocate to principal an amount received from the
907	sale, redemption, or other disposition of an obligation to pay
908	money to the fiduciary trustee.
909	(3)  The increment in value of a bond or other obligation
910	for the payment of money bearing no stated interest but payable
911	at a future time in excess of the price at which it was issued
912	or purchased, if purchased after issuance, is distributable as
913	income. If the increment in value accrues and becomes payable
914	pursuant to a fixed schedule of appreciation, it may be
915	distributed to the beneficiary who was the income beneficiary at
916	the this time of increment from the first principal cash
917	available or, if none is available, when the increment is
918	realized by sale, redemption, or other disposition. If When
919	unrealized increment is distributed as income but out of
920	principal, the principal must shall be reimbursed for the
921	increment when realized. If, in the reasonable judgment of the
922	fiduciary trustee, exercised in good faith, the ultimate payment
923	of the bond principal is in doubt, the fiduciary trustee may
924	withhold the payment of incremental interest to the income
925	beneficiary.
926	Section 16.  Subsections (1) and (2) of section 738.504,
927	Florida Statutes, are amended to read:
928	738.504  Insurance policies and similar contracts.-
929	(1)  Except as otherwise provided in subsection (2), a
930	fiduciary trustee shall allocate to principal the proceeds of a
931	life insurance policy or other contract in which the trust or
932	its fiduciary trustee is named as beneficiary, including a
933	contract that insures the trust or its fiduciary trustee against
934	loss for damage to, destruction of, or loss of title to a trust
935	asset. The fiduciary trustee shall allocate dividends on an
936	insurance policy to income if the premiums on the policy are
937	paid from income and to principal if the premiums are paid from
938	principal.
939	(2)  A fiduciary trustee shall allocate to income the
940	proceeds of a contract that insures the fiduciary trustee
941	against loss of occupancy or other use by an income beneficiary,
942	loss of income, or, subject to s. 738.403, loss of profits from
943	a business.
944	Section 17.  Section 738.601, Florida Statutes, is amended
945	to read:
946	738.601  Insubstantial allocations not required.-If a
947	fiduciary trustee determines that an allocation between
948	principal and income required by s. 738.602, s. 738.603, s.
949	738.604, s. 738.605, or s. 738.608 is insubstantial, the
950	fiduciary trustee may allocate the entire amount to principal
951	unless one of the circumstances described in s. 738.104(3)
952	applies to the allocation. This power may be exercised by a
953	cofiduciary under cotrustee in the circumstances described in s.
954	738.104(4) and may be released for the reasons and in the manner
955	described in s. 738.104(5). An allocation is presumed to be
956	insubstantial if:
957	(1)  The amount of the allocation would increase or
958	decrease net income in an accounting period, as determined
959	before the allocation, by less than 10 percent; or
960	(2)  The value of the asset producing the receipt for which
961	the allocation would be made is less than 10 percent of the
962	total value of the trust's assets at the beginning of the
963	accounting period.
964	Section 18.  Section 738.602, Florida Statutes, is amended
965	to read:
966	738.602  Payments from deferred compensation plans,
967	annuities, and retirement plans or accounts.-
968	(1)  As used in For purposes of this section, the term:
969	(a)  "Fund" means a private or commercial annuity, an
970	individual retirement account, an individual retirement annuity,
971	a deferred compensation plan, a pension plan, a profit-sharing
972	plan, a stock-bonus plan, an employee stock-ownership plan, or
973	another similar arrangement in which federal income tax is
974	deferred.
975	(b)  "Income of the fund" means income that is determined
976	according to subsection (2) or subsection (3).
977	(c)  "Nonseparate account" means a fund for which the value
978	of the participant's or account owner's right to receive
979	benefits can be determined only by the occurrence of a date or
980	event as defined in the instrument governing the fund.
981	(d)  "Payment" means a distribution from a fund that a
982	fiduciary trustee may receive over a fixed number of years or
983	during the life of one or more individuals because of services
984	rendered or property transferred to the payor in exchange for
985	future payments. The term includes a distribution made in money
986	or property from the payor's general assets or from a fund
987	created by the payor or payee.
988	(e)  "Separate account" means a fund holding assets
989	exclusively for the benefit of a participant or account owner
990	and:
991	1.  The value of such assets or the value of the separate
992	account is ascertainable at any time; or
993	2.  The administrator of the fund maintains records that
994	show receipts and disbursements associated with such assets.
995	(2)(a)  For a fund that is a separate account, income of
996	the fund shall be determined:
997	1.  As if the fund were a trust subject to the provisions
998	of ss. 738.401-738.706; or
999	2.  As a unitrust amount calculated by multiplying the fair
1000	market value of the fund as of the first day of the first
1001	accounting period and, thereafter, as of the last day of the
1002	accounting period that immediately precedes the accounting
1003	period during which a payment is received by the percentage
1004	determined in accordance with s. 738.1041(2)(b)2.a. The
1005	fiduciary trustee shall determine such percentage as of the
1006	first month that the fiduciary's trustee's election to treat the
1007	income of the fund as a unitrust amount becomes effective. For
1008	purposes of this subparagraph, "fair market value" means the
1009	fair market value of the assets held in the fund as of the
1010	applicable valuation date determined as provided in this
1011	subparagraph. The fiduciary trustee is not liable for good faith
1012	reliance upon any valuation supplied by the person or persons in
1013	possession of the fund. If the fiduciary trustee makes or
1014	terminates an election under this subparagraph, the fiduciary
1015	trustee shall make such disclosure in a trust disclosure
1016	document that satisfies the requirements of s. 736.1008(4)(a).
1017	(b)  The fiduciary may trustee shall have discretion to
1018	elect the method of determining the income of the fund pursuant
1019	to this subsection and may change the method of determining
1020	income of the fund for any future accounting period.
1021	(3)  For a fund that is a nonseparate account, income of
1022	the fund is a unitrust amount determined by calculating the
1023	present value of the right to receive the remaining payments
1024	under 26 U.S.C. s. 7520 of the Internal Revenue Code as of the
1025	first day of the accounting period and multiplying it by the
1026	percentage determined in accordance with s. 738.1041(2)(b)2.a.
1027	The fiduciary trustee shall determine the unitrust amount as of
1028	the first month that the fiduciary's trustee's election to treat
1029	the income of the fund as a unitrust amount becomes effective.
1030	(4)  Except for those trusts described in subsection (5),
1031	the fiduciary trustee shall allocate to income the lesser of the
1032	payment received from a fund or the income determined under
1033	subsection (2) or subsection (3). Any remaining amount shall be
1034	allocated to principal a payment from a fund as follows:
1035	(a)  That portion of the payment the payor characterizes as
1036	income shall be allocated to income, and any remaining portion
1037	of the payment shall be allocated to principal.
1038	(b)  To the extent that the payor does not characterize any
1039	portion of a payment as income or principal and the trustee can
1040	ascertain the income of the fund by the fund's account
1041	statements or any other reasonable source, the trustee shall
1042	allocate to income the lesser of the income of the fund or the
1043	entire payment and shall allocate to principal any remaining
1044	portion of the payment.
1045	(c)  If the trustee, acting reasonably and in good faith,
1046	determines that neither paragraph (a) nor paragraph (b) applies
1047	and all or part of the payment is required to be made, the
1048	trustee shall allocate to income 10 percent of the portion of
1049	the payment that is required to be made during the accounting
1050	period and shall allocate the balance to principal. If no part
1051	of a payment is required to be made or the payment received is
1052	the entire amount to which the trustee is entitled, the trustee
1053	shall allocate the entire payment to principal. For purposes of
1054	this paragraph, a payment is not "required to be made" to the
1055	extent the payment is made because the trustee exercises a right
1056	of withdrawal.
1057	(5)  For a trust that which, in order to qualify for the
1058	estate or gift tax marital deduction under the Internal Revenue
1059	Code or comparable law of any state, entitles the spouse to all
1060	of the income of the trust, and the terms of the trust are
1061	silent as to the time and frequency for distribution of the
1062	income of the fund, then:
1063	(a)  For a fund that is a separate account, unless the
1064	spouse directs the fiduciary trustee to leave the income of the
1065	fund in the fund, the fiduciary trustee shall withdraw and pay
1066	to the spouse, at least no less frequently than annually:
1067	1.  All of the income of the fund determined in accordance
1068	with subparagraph (2)(a)1.; or
1069	2.  The income of the fund as a unitrust amount determined
1070	in accordance with subparagraph (2)(a)2.
1071	(b)  For a fund that is a nonseparate account, the
1072	fiduciary trustee shall withdraw and pay to the spouse, at least
1073	no less frequently than annually, the income of the fund as a
1074	unitrust amount determined in accordance with subsection (3).
1075	(6)  This section does not apply to payments to which s.
1076	738.603 applies.
1077	Section 19.  Section 738.603, Florida Statutes, is amended
1078	to read:
1079	738.603  Liquidating asset.-
1080	(1)  For purposes of this section, the term "liquidating
1081	asset" means an asset the value of which will diminish or
1082	terminate because the asset is expected to produce receipts for
1083	a period of limited duration. The term includes a leasehold,
1084	patent, copyright, royalty right, and right to receive payments
1085	for during a period of more than 1 year under an arrangement
1086	that does not provide for the payment of interest on the unpaid
1087	balance. The term does not include a payment subject to s.
1088	738.602, resources subject to s. 738.604, timber subject to s.
1089	738.605, an activity subject to s. 738.607, an asset subject to
1090	s. 738.608, or any asset for which the fiduciary trustee
1091	establishes a reserve for depreciation under s. 738.703.
1092	(2)  A fiduciary trustee shall allocate to income 5 10
1093	percent of the receipts from the carrying value of a liquidating
1094	asset and the balance to principal. Amounts allocated to
1095	principal may not reduce the carrying value of the liquidating
1096	asset below zero. Amounts received in excess of the remaining
1097	carrying value must be allocated to principal.
1098	Section 20.  Subsections (1) and (4) of section 738.604,
1099	Florida Statutes, are amended to read:
1100	738.604  Minerals, water, and other natural resources.-
1101	(1)  If To the extent a fiduciary trustee accounts for
1102	receipts from an interest in minerals or other natural resources
1103	pursuant to this section, the fiduciary trustee shall allocate
1104	such receipts as follows:
1105	(a)  If received as nominal delay rental or nominal annual
1106	rent on a lease, a receipt shall be allocated to income.
1107	(b)  If received from a production payment, a receipt shall
1108	be allocated to income if and to the extent the agreement
1109	creating the production payment provides a factor for interest
1110	or its equivalent. The balance shall be allocated to principal.
1111	(c)  If an amount received as a royalty, shut-in-well
1112	payment, take-or-pay payment, bonus, or delay rental is more
1113	than nominal, 90 percent shall be allocated to principal and the
1114	balance to income.
1115	(d)  If an amount is received from a working interest or
1116	any other interest not provided for in paragraph (a), paragraph
1117	(b), or paragraph (c), 90 percent of the net amount received
1118	shall be allocated to principal and the balance to income.
1119	(4)  If a trust owns an interest in minerals, water, or
1120	other natural resources on January 1, 2003, the fiduciary
1121	trustee may allocate receipts from the interest as provided in
1122	this chapter or in the manner used by the fiduciary trustee
1123	before January 1, 2003. If the trust acquires an interest in
1124	minerals, water, or other natural resources after January 1,
1125	2003, the trustee shall allocate receipts from the interest as
1126	provided in this chapter.
1127	Section 21.  Subsections (1), (2), and (4) of section
1128	738.605, Florida Statutes, are amended to read:
1129	738.605  Timber.-
1130	(1)  If To the extent a fiduciary trustee accounts for
1131	receipts from the sale of timber and related products pursuant
1132	to this section, the fiduciary trustee shall allocate such the
1133	net receipts as follows:
1134	(a)  To income to the extent the amount of timber removed
1135	from the land does not exceed the rate of growth of the timber
1136	during the accounting periods in which a beneficiary has a
1137	mandatory income interest;
1138	(b)  To principal to the extent the amount of timber
1139	removed from the land exceeds the rate of growth of the timber
1140	or the net receipts are from the sale of standing timber;
1141	(c)  To or between income and principal if the net receipts
1142	are from the lease of timberland or from a contract to cut
1143	timber from land owned by a trust by determining the amount of
1144	timber removed from the land under the lease or contract and
1145	applying the rules in paragraphs (a) and (b); or
1146	(d)  To principal to the extent advance payments, bonuses,
1147	and other payments are not allocated pursuant to paragraph (a),
1148	paragraph (b), or paragraph (c).
1149	(2)  In determining net receipts to be allocated pursuant
1150	to subsection (1), a fiduciary trustee shall deduct and transfer
1151	to principal a reasonable amount for depletion.
1152	(4)  If a trust owns an interest in timberland on January
1153	1, 2003, the fiduciary trustee may allocate net receipts from
1154	the sale of timber and related products as provided in this
1155	chapter or in the manner used by the fiduciary trustee before
1156	January 1, 2003. If the trust acquires an interest in timberland
1157	after January 1, 2003, the fiduciary trustee shall allocate net
1158	receipts from the sale of timber and related products as
1159	provided in this chapter.
1160	Section 22.  Subsection (1) of section 738.606, Florida
1161	Statutes, is amended to read:
1162	738.606  Property not productive of income.-
1163	(1)  If a marital deduction under the Internal Revenue Code
1164	or comparable law of any state is allowed for all or part of a
1165	trust the income of which must is required to be distributed to
1166	the grantor's spouse and the assets of which consist
1167	substantially of property that does not provide the spouse with
1168	sufficient income from or use of the trust assets, and if the
1169	amounts the fiduciary trustee transfers from principal to income
1170	under s. 738.104 and distributes to the spouse from principal
1171	pursuant to the terms of the trust are insufficient to provide
1172	the spouse with the beneficial enjoyment required to obtain the
1173	marital deduction, the spouse may require the fiduciary trustee
1174	to make property productive of income, convert property within a
1175	reasonable time, or exercise the power conferred by ss. 738.104
1176	and 738.1041. The fiduciary trustee may decide which action or
1177	combination of actions to take.
1178	Section 23.  Subsections (2) and (3) of section 738.607,
1179	Florida Statutes, are amended to read:
1180	738.607  Derivatives and options.-
1181	(2)  To the extent a fiduciary trustee does not account
1182	under s. 738.403 for transactions in derivatives, the fiduciary
1183	trustee shall allocate to principal receipts from and
1184	disbursements made in connection with those transactions.
1185	(3)  If a fiduciary trustee grants an option to buy
1186	property from the trust whether or not the trust owns the
1187	property when the option is granted, grants an option that
1188	permits another person to sell property to the trust, or
1189	acquires an option to buy property for the trust or an option to
1190	sell an asset owned by the trust, and the fiduciary trustee or
1191	other owner of the asset is required to deliver the asset if the
1192	option is exercised, an amount received for granting the option
1193	shall be allocated to principal. An amount paid to acquire the
1194	option shall be paid from principal. A gain or loss realized
1195	upon the exercise of an option, including an option granted to a
1196	grantor of the trust for services rendered, shall be allocated
1197	to principal.
1198	Section 24.  Subsections (2) and (3) of section 738.608,
1199	Florida Statutes, are amended to read:
1200	738.608  Asset-backed securities.-
1201	(2)  If a trust receives a payment from interest or other
1202	current return and from other proceeds of the collateral
1203	financial assets, the fiduciary trustee shall allocate to income
1204	the portion of the payment which the payor identifies as being
1205	from interest or other current return and shall allocate the
1206	balance of the payment to principal.
1207	(3)  If a trust receives one or more payments in exchange
1208	for the trust's entire interest in an asset-backed security
1209	during a single accounting period, the fiduciary trustee shall
1210	allocate the payments to principal. If a payment is one of a
1211	series of payments that will result in the liquidation of the
1212	trust's interest in the security over more than a single
1213	accounting period, the fiduciary trustee shall allocate 10
1214	percent of the payment to income and the balance to principal.
1215	Section 25.  Section 738.701, Florida Statutes, is amended
1216	to read:
1217	738.701  Disbursements from income.-A fiduciary trustee
1218	shall make the following disbursements from income to the extent
1219	they are not disbursements to which s. 738.201(2)(a) or (c)
1220	applies:
1221	(1)  One-half of the regular compensation of the fiduciary
1222	trustee and of any person providing investment advisory or
1223	custodial services to the fiduciary trustee.
1224	(2)  One-half of all expenses for accountings, judicial
1225	proceedings, or other matters that involve both the income and
1226	remainder interests.
1227	(3)  All of the other ordinary expenses incurred in
1228	connection with the administration, management, or preservation
1229	of trust property and the distribution of income, including
1230	interest, ordinary repairs, regularly recurring taxes assessed
1231	against principal, and expenses of a proceeding or other matter
1232	that concerns primarily the income interest.
1233	(4)  Recurring premiums on insurance covering the loss of a
1234	principal asset or the loss of income from or use of the asset.
1235	Section 26.  Subsection (1) of section 738.702, Florida
1236	Statutes, is amended to read:
1237	738.702  Disbursements from principal.-
1238	(1)  A fiduciary trustee shall make the following
1239	disbursements from principal:
1240	(a)  The remaining one-half of the disbursements described
1241	in s. 738.701(1) and (2).
1242	(b)  All of the fiduciary's trustee's compensation
1243	calculated on principal as a fee for acceptance, distribution,
1244	or termination and disbursements made to prepare property for
1245	sale.
1246	(c)  Payments on the principal of a trust debt.
1247	(d)  Expenses of a proceeding that concerns primarily
1248	principal, including a proceeding to construe the trust or will,
1249	or to protect the trust, estate, or its property.
1250	(e)  Premiums paid on a policy of insurance not described
1251	in s. 738.701(4) of which the trust or estate is the owner and
1252	beneficiary.
1253	(f)  Estate, inheritance, and other transfer taxes,
1254	including penalties, apportioned to the trust.
1255	(g)  Disbursements related to environmental matters,
1256	including reclamation, assessing environmental conditions,
1257	remedying and removing environmental contamination, monitoring
1258	remedial activities and the release of substances, preventing
1259	future releases of substances, collecting amounts from persons
1260	liable or potentially liable for the costs of such activities,
1261	penalties imposed under environmental laws or regulations and
1262	other payments made to comply with those laws or regulations,
1263	statutory or common law claims by third parties, and defending
1264	claims based on environmental matters.
1265	(h)  Payments representing extraordinary repairs or
1266	expenses incurred in making a capital improvement to principal,
1267	including special assessments; however, a fiduciary trustee may
1268	establish an allowance for depreciation out of income to the
1269	extent permitted by s. 738.703.
1270	Section 27.  Subsection (2) of section 738.703, Florida
1271	Statutes, is amended to read:
1272	738.703  Transfers from income to principal for
1273	depreciation.-
1274	(2)  A fiduciary trustee may transfer to principal a
1275	reasonable amount of the net cash receipts from a principal
1276	asset that is subject to depreciation but may not transfer any
1277	amount for depreciation:
1278	(a)  Of that portion of real property used or available for
1279	use by a beneficiary as a residence or of tangible personal
1280	property held or made available for the personal use or
1281	enjoyment of a beneficiary;
1282	(b)  During the administration of a decedent's estate; or
1283	(c)  Under this section if the fiduciary trustee is
1284	accounting under s. 738.403 for the business or activity in
1285	which the asset is used.
1286	Section 28.  Subsections (1), (2), and (3) of section
1287	738.704, Florida Statutes, are amended to read:
1288	738.704  Transfers from income to reimburse principal.-
1289	(1)  If a fiduciary trustee makes or expects to make a
1290	principal disbursement described in this section, the fiduciary
1291	trustee may transfer an appropriate amount from income to
1292	principal in one or more accounting periods to reimburse
1293	principal or to provide a reserve for future principal
1294	disbursements.
1295	(2)  Principal disbursements to which subsection (1)
1296	applies include the following, but only to the extent the
1297	fiduciary trustee has not been and does not expect to be
1298	reimbursed by a third party:
1299	(a)  An amount chargeable to income but paid from principal
1300	because the amount is unusually large.
1301	(b)  Disbursements made to prepare property for rental,
1302	including tenant allowances, leasehold improvements, and
1303	broker's commissions.
1304	(c)  Disbursements described in s. 738.702(1)(g).
1305	(3)  If the asset the ownership of which gives rise to the
1306	disbursements becomes subject to a successive income interest
1307	after an income interest ends, a fiduciary trustee may continue
1308	to transfer amounts from income to principal as provided in
1309	subsection (1).
1310	Section 29.  Section 738.705, Florida Statutes, is amended
1311	to read:
1312	738.705  Income taxes.-
1313	(1)  A tax required to be paid by a fiduciary trustee based
1314	on receipts allocated to income shall be paid from income.
1315	(2)  A tax required to be paid by a fiduciary trustee based
1316	on receipts allocated to principal shall be paid from principal,
1317	even if the tax is called an income tax by the taxing authority.
1318	(3)  A tax required to be paid by a fiduciary trustee on
1319	the trust's or estate's share of an entity's taxable income
1320	shall be paid proportionately:
1321	(a)  From income to the extent receipts from the entity are
1322	allocated to income; and
1323	(b)  From principal to the extent:
1324	1.  receipts from the entity are allocated to principal;
1325	and
1326	2.  The trust's share of the entity's taxable income
1327	exceeds the total receipts described in paragraph (a) and
1328	subparagraph 1.
1329	(c)  From principal to the extent that the income taxes
1330	payable by the trust or estate exceed the total distributions
1331	from the entity.
1332	(4)  After applying subsections (1)-(3), the fiduciary
1333	shall adjust income or principal receipts to the extent that the
1334	trust's or estate's income taxes are reduced, but not
1335	eliminated, because the trust or estate receives a deduction for
1336	payments made to a beneficiary. The amount distributable to that
1337	beneficiary as income as a result of this adjustment shall be
1338	equal to the cash received by the trust or estate, reduced, but
1339	not below zero, by the entity's taxable income allocable to the
1340	trust or estate multiplied by the trust's or estate's income tax
1341	rate. The reduced amount shall be divided by the difference
1342	between 1 and the trust's or estate's income tax rate in order
1343	to determine the amount distributable to that beneficiary as
1344	income before giving effect to other receipts or disbursements
1345	allocable to that beneficiary's interest. For purposes of this
1346	section, receipts allocated to principal or income shall be
1347	reduced by the amount distributed to a beneficiary from
1348	principal or income for which the trust receives a deduction in
1349	calculating the tax.
1350	Section 30.  Section 738.801, Florida Statutes, is amended
1351	to read:
1352	(Substantial rewording of section. See
1353	s. 738.801, F.S., for present text.)
1354	738.801  Apportionment of expenses; improvements.-
1355	(1)  For purposes of this section, the term:
1356	(a)  "Remainderman" means the holder of the remainder
1357	interests after the expiration of a tenant's estate in property.
1358	(b)  "Tenant" means the holder of an estate for life or
1359	term of years in real property or personal property, or both.
1360	(2)  If a trust has not been created, expenses shall be
1361	apportioned between the tenant and remainderman as follows:
1362	(a)  The following expenses are allocated to and shall be
1363	paid by the tenant:
1364	1.  All ordinary expenses incurred in connection with the
1365	administration, management, or preservation of the property,
1366	including interest, ordinary repairs, regularly recurring taxes
1367	assessed against the property, and expenses of a proceeding or
1368	other matter that concerns primarily the tenant's estate or use
1369	of the property.
1370	2.  Recurring premiums on insurance covering the loss of
1371	the property or the loss of income from or use of the property.
1372	3.  Any of the expenses described in subparagraph (b)3.
1373	which are attributable to the use of the property by the tenant.
1374	(b)  The following expenses are allocated to and shall be
1375	paid by the remainderman:
1376	1.  Payments on the principal of a debt secured by the
1377	property, except to the extent the debt is for expenses
1378	allocated to the tenant.
1379	2.  Expenses of a proceeding or other matter that concerns
1380	primarily the title to the property, other than title to the
1381	tenant's estate.
1382	3.  Except as provided in subparagraph (a)3., expenses
1383	related to environmental matters, including reclamation,
1384	assessing environmental conditions, remedying and removing
1385	environmental contamination, monitoring remedial activities and
1386	the release of substances, preventing future releases of
1387	substances, collecting amounts from persons liable or
1388	potentially liable for the costs of such activities, penalties
1389	imposed under environmental laws or regulations and other
1390	payments made to comply with those laws or regulations,
1391	statutory or common law claims by third parties, and defending
1392	claims based on environmental matters.
1393	4.  Extraordinary repairs.
1394	(c)  If the tenant or remainderman incurred an expense for
1395	the benefit of his or her own estate without consent or
1396	agreement of the other, he or she must pay such expense in full.
1397	(d)  Except as provided in paragraph (c), the cost of, or
1398	special taxes or assessments for, an improvement representing an
1399	addition of value to property forming part of the principal
1400	shall be paid by the tenant if the improvement is not reasonably
1401	expected to outlast the estate of the tenant. In all other
1402	cases, only a part shall be paid by the tenant while the
1403	remainder shall be paid by the remainderman. The part payable by
1404	the tenant is ascertainable by taking that percentage of the
1405	total that is found by dividing the present value of the
1406	tenant's estate by the present value of an estate of the same
1407	form as that of the tenant, except that it is limited for a
1408	period corresponding to the reasonably expected duration of the
1409	improvement. The computation of present values of the estates
1410	shall be made by using the rate defined in 26 U.S.C. s. 7520,
1411	then in effect and, in the case of an estate for life, the
1412	official mortality tables then in effect under 26 U.S.C. s.
1413	7520. Other evidence of duration or expectancy may not be
1414	considered.
1415	(3)  This section does not apply to the extent it is
1416	inconsistent with the instrument creating the estates, the
1417	agreement of the parties, or the specific direction of the
1418	taxing or other statutes.
1419	(4)  The common law applicable to tenants and remaindermen
1420	supplements this section, except as modified by this section or
1421	other laws.
1422	Section 31.  Section 738.804, Florida Statutes, is amended
1423	to read:
1424	738.804  Application.-
1425	(1)  Except as provided in s. 738.1041(9), this chapter
1426	pertains to the administration of a trust and is applicable to
1427	any trust that is administered in this state or under its law.
1428	This chapter also applies to any estate that is administered in
1429	this state unless the provision is limited in application to a
1430	trustee, rather than a fiduciary.
1431	(2)  Except as provided in the trust instrument, the will,
1432	or this chapter, this chapter applies shall apply to any receipt
1433	or expense received or incurred and any disbursement made after
1434	January 1, 2003, by any trust or decedent's estate, whether
1435	established before or after January 1, 2003, and whether the
1436	asset involved was acquired by the trustee or personal
1437	representative before or after January 1, 2003. Receipts or
1438	expenses received or incurred and disbursements made before
1439	January 1, 2003, are shall be governed by the law of this state
1440	in effect at the time of the event, except as otherwise
1441	expressly provided in the will or terms of the trust or under in
1442	this chapter.
1443	Section 32.  This act shall take effect January 1, 2013.

CODING: Words stricken are deletions; words underlined are additions.