Bill Text: FL S1050 | 2012 | Regular Session | Comm Sub
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Fiduciaries
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2012-03-07 - Ordered enrolled -SJ 958 [S1050 Detail]
Download: Florida-2012-S1050-Comm_Sub.html
Bill Title: Fiduciaries
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2012-03-07 - Ordered enrolled -SJ 958 [S1050 Detail]
Download: Florida-2012-S1050-Comm_Sub.html
Florida Senate - 2012 CS for SB 1050 By the Committee on Banking and Insurance; and Senator Bogdanoff 597-03059-12 20121050c1 1 A bill to be entitled 2 An act relating to fiduciaries; amending s. 701.04, 3 F.S.; requiring a mortgage holder to provide certain 4 information within a specified time relating to the 5 unpaid loan balance due under a mortgage if a 6 mortgagor, a record title owner of the property, a 7 fiduciary or trustee lawfully acting on behalf of a 8 record title owner, or any person lawfully authorized 9 to act on behalf of a mortgagor or record title owner 10 of the property makes a written request under certain 11 circumstances; allowing financial institutions to 12 release certain mortgagor information to specified 13 persons without penalty; amending s. 738.102, F.S.; 14 defining the term “carrying value”; amending s. 15 738.103, F.S.; providing for application; amending s. 16 738.104, F.S.; deleting a provision authorizing a 17 trustee to release the power to adjust between 18 principal and income if the trustee desires to convert 19 the form of certain trusts; limiting the power to 20 adjust a trust; deleting a provision that provides for 21 construction and application relating to the 22 administration of trusts in this state or under this 23 state’s law; amending s. 738.1041, F.S.; defining the 24 term “average fair market value” and revising 25 definition of the term “unitrust amount”; deleting a 26 duplicative provision relating to conclusive 27 determinations of the terms of a unitrust; revising 28 provisions relating to an express total return 29 unitrust; amending s. 738.105, F.S.; substituting the 30 term “trustee” for “fiduciary” with respect to 31 judicial control of discretionary powers; amending s. 32 738.201, F.S.; revising provisions relating to the 33 determination and distribution of net income; amending 34 s. 738.202, F.S.; revising provisions relating to 35 distributions to residuary and remainder 36 beneficiaries; amending ss. 738.301, 738.302, and 37 738.303, F.S.; substituting the term “fiduciary” for 38 “trustee” to clarify that provisions apply to all 39 fiduciaries; amending s. 738.401, F.S.; substituting 40 the term “fiduciary” for “trustee” to clarify that 41 provisions apply to all fiduciaries; revising how 42 distributions from entities are allocated between 43 income and principal; amending ss. 738.402, 738.403, 44 738.501, 738.502, 738.503, 738.504, and 738.601, F.S.; 45 substituting the term “fiduciary” for “trustee” to 46 clarify that provisions apply to all fiduciaries; 47 amending s. 738.602, F.S.; substituting the term 48 “fiduciary” for “trustee” to clarify that provisions 49 apply to all fiduciaries; revising provisions relating 50 to allocations to trusts; amending s. 738.603, F.S.; 51 substituting the term “fiduciary” for “trustee” to 52 clarify that provisions apply to all fiduciaries; 53 revising provisions relating to the allocation between 54 income and principal when liquidating assets; amending 55 ss. 738.604, 738.605, 738.606, 738.607, 738.608, 56 738.701, 738.702, 738.703, and 738.704, F.S.; 57 substituting the term “fiduciary” for “trustee” to 58 clarify that provisions apply to all fiduciaries; 59 amending s. 738.705, F.S.; substituting the term 60 “fiduciary” for “trustee” to clarify that provisions 61 apply to all fiduciaries; revising the method for 62 allocating income taxes between income and principal; 63 amending s. 738.801, F.S.; clarifying the 64 apportionment of expenses between tenants and 65 remaindermen; providing an effective date. 66 67 Be It Enacted by the Legislature of the State of Florida: 68 69 Section 1. Section 701.04, Florida Statutes, is amended to 70 read: 71 701.04 Cancellation of mortgages, liens, and judgments.— 72 (1) Within 14 days after receipt of the written request of 73 a mortgagor, a record title owner of the property, a fiduciary 74 or trustee lawfully acting on behalf of a record title owner, or 75 any other person lawfully authorized to act on behalf of a 76 mortgagor or record title owner of the property, the holder of a 77 mortgage shall deliver or cause the servicer of the mortgage to 78 deliver to the person making the requestmortgagorat a place 79 designated in the written request an estoppel letter setting 80 forth the unpaid balance of the loan secured by the mortgage.,81 (a) If the mortgagor, or any person lawfully authorized to 82 act on behalf of the mortgagor, makes the request, the estoppel 83 letter must include an itemization of theincludingprincipal, 84 interest, and any other charges properly due under or secured by 85 the mortgage and interest on a per-day basis for the unpaid 86 balance. 87 (b) If a record title owner of the property, or any person 88 lawfully authorized to act on behalf of a mortgagor or record 89 title owner of the property, makes the request: 90 1. The request must include a copy of the instrument 91 showing title in the property or lawful authorization. 92 2. The estoppel letter may include the itemization of 93 information required under paragraph (a), but must at a minimum 94 include the total unpaid balance due under or secured by the 95 mortgage on a per-day basis. 96 3. The mortgagee or servicer of the mortgagee acting in 97 accordance with a request in substantial compliance with this 98 paragraph is expressly discharged from any obligation or 99 liability to any person on account of the release of the 100 requested information, other than the obligation to comply with 101 the terms of the estoppel letter. 102 (c) A mortgage holder may provide the financial information 103 required under this subsection to a person authorized under this 104 subsection to request the financial information notwithstanding 105 s. 655.059. 106 (2) Whenever the amount of money due on any mortgage, lien, 107 or judgment has beenshall befully paid to the person or party 108 entitled to the payment thereof, the mortgagee, creditor, or 109 assignee, or the attorney of record in the case of a judgment, 110 to whom thesuchpayment wasshall have beenmade, shall execute 111 in writing an instrument acknowledging satisfaction of thesaid112 mortgage, lien, or judgment and have the instrumentsame113 acknowledged, or proven, and duly enteredof record in the book114provided by law for such purposesin the official records of the 115 proper county. Within 60 days afterofthe date of receipt of 116 the full payment of the mortgage, lien, or judgment, the person 117 required to acknowledge satisfaction of the mortgage, lien, or 118 judgment shall send or cause to be sent the recorded 119 satisfaction to the person who has made the full payment. In the 120 case of a civil action arising out ofthe provisions ofthis 121 section, the prevailing party isshall beentitled to attorney 122attorney’sfees and costs. 123 (3)(2)Whenever a writ of execution has been issued, 124 docketed, and indexed with a sheriff and the judgment upon which 125 it was issued has been fully paid, it isshall bethe 126 responsibility of the party receiving payment to request, in 127 writing, addressed to the sheriff, return of the writ of 128 execution as fully satisfied. 129 Section 2. Present subsections (3) through (13) of section 130 738.102, Florida Statutes, are renumbered as subsections (4) 131 through (14), respectively, and a new subsection (3) is added to 132 that section, to read: 133 738.102 Definitions.—As used in this chapter, the term: 134 (3) “Carrying value” means the fair market value at the 135 time the assets are received by the fiduciary. For the estates 136 of decedents and trusts described in s. 733.707(3), after the 137 grantor’s death, the assets are considered received as of the 138 date of death. If there is a change in fiduciaries, a majority 139 of the continuing fiduciaries may elect to adjust the carrying 140 values to reflect the fair market value of the assets at the 141 beginning of their administration. If such election is made, it 142 must be reflected on the first accounting filed after the 143 election. For assets acquired during the administration of the 144 estate or trust, the carrying value is equal to the acquisition 145 costs of the asset. 146 Section 3. Subsection (3) is added to section 738.103, 147 Florida Statutes, to read: 148 738.103 Fiduciary duties; general principles.— 149 (3) Except as provided in s. 738.1041(9), this chapter 150 pertains to the administration of a trust and is applicable to 151 any trust that is administered in this state or under its law. 152 This chapter also applies to any estate that is administered in 153 this state unless the provision is limited in application to a 154 trustee, rather than a fiduciary. 155 Section 4. Subsections (5) and (11) of section 738.104, 156 Florida Statutes, are amended to read: 157 738.104 Trustee’s power to adjust.— 158 (5)(a) A trustee may release the entire power to adjust159conferred by subsection (1) if the trustee desires to convert an160income trust to a total return unitrust pursuant to s.738.1041.161(b)A trustee may release the entire power to adjust 162 conferred by subsection (1) or may release only the power to 163 adjust from income to principal or the power to adjust from 164 principal to income if the trustee is uncertain about whether 165 possessing or exercising the power will cause a result described 166 in paragraphs (3)(a)-(e) or paragraph (3)(g) or if the trustee 167 determines that possessing or exercising the power will or may 168 deprive the trust of a tax benefit or impose a tax burden not 169 described in subsection (3). 170(c)A release under this subsection may be permanent or for 171 a specified period, including a period measured by the life of 172 an individual.Notwithstanding anything contrary to this173subsection, a release of the power to adjust pursuant to174paragraph (a) shall remain effective only for as long as the175trust is administered as a unitrust pursuant to s.738.1041.176(11) This section shall be construed as pertaining to the177administration of a trust and is applicable to any trust that is178administered either in this state or under Florida law.179 Section 5. Section 738.1041, Florida Statutes, is amended 180 to read: 181 738.1041 Total return unitrust.— 182 (1) For purposes of this section, the term: 183 (a) “Average fair market value” means the average of the 184 fair market values of assets held by the trust at the beginning 185 of the current and each of the 2 preceding years, or for the 186 entire term of the trust if there are less than 2 preceding 187 years, and adjusted as follows: 188 1. If assets have been added to the trust during the years 189 used to determine the average, the amount of each addition is 190 added to all years in which such addition was not included. 191 2. If assets have been distributed from the trust during 192 the years used to determine the average, other than in 193 satisfaction of the unitrust amount, the amount of each 194 distribution is subtracted from all years in which such 195 distribution was not included. 196 (b)(a)“Disinterested person” means a person who is not a 197“related or subordinate party” as defined in s. 672(c) of the198United States Internal Revenue Code, 26 U.S.C. ss. 1 et seq., or199any successor provision thereof,with respect to the personthen200 acting as trustee of the trust and excludes the grantor and any 201 interested trustee. 202 (c)(b)“Fair market value” means the fair market value of 203 the assets held by the trust as otherwise determined under this 204 chapter, reduced by all known noncontingent liabilities. 205 (d)(c)“Income trust” means a trust, created byeitheran 206 inter vivos or a testamentary instrument, which directs or 207 permits the trustee to distribute the net income of the trust to 208 one or more persons,eitherin fixed proportions or in amounts 209 or proportions determined by the trustee and regardless of 210 whether the trust directs or permits the trustee to distribute 211 the principal of the trust to one or more such persons. 212 (e)(d)“Interested distributee” means a person to whom 213 distributions of income or principal can currently be made and 214 who has the power to remove the existing trustee and designate 215 as successor a person who may be a“related or subordinate 216 party,” as defined in the Internal Revenue Code, 26 U.S.C. s.217672(c),with respect to such distributee. 218 (f)(e)“Interested trustee” means an individual trustee to 219 whom the net income or principal of the trust can currently be 220 distributed or would be distributed if the trust were then to 221 terminate and be distributed, any trustee whom an interested 222 distributee has the power to remove and replace with a related 223 or subordinate partyas defined in paragraph (d), or an 224 individual trustee whose legal obligation to support a 225 beneficiary may be satisfied by distributions of income and 226 principal of the trust. 227 (g) “Related or subordinate party” has the same meaning as 228 provided in 26 U.S.C. s. 672(c) of the Internal Revenue Code, or 229 any successor provision thereof. 230 (h)(f)“Unitrust amount” means the amount determined by 231 multiplying the average fair market value of the assets as 232 calculateddefinedin paragraph (a)(b)by the percentage 233 calculated under paragraph (2)(b). 234 (2) A trustee may, without court approval, convert an 235 income trust to a total return unitrust, reconvert a total 236 return unitrust to an income trust, or change the percentage 237 used to calculate the unitrust amount or the method used to 238 determine the fair market value of the trust if: 239 (a) The trustee adopts a written statement regarding trust 240 distributions whichthatprovides: 241 1. In the case of a trust being administered as an income 242 trust, that future distributions from the trust will be unitrust 243 amounts rather than net income, and indicates the manner in 244 which the unitrust amount will be calculated and the method in 245 which the fair market value of the trust will be determined. 246 2. In the case of a trust being administered as a total 247 return unitrust, that: 248 a. Future distributions from the trust will be net income 249 rather than unitrust amounts; or 250 b. The percentage used to calculate the unitrust amount or 251 the method used to determine the fair market value of the trust 252 will be changed, and indicates the manner in which the new 253 unitrust amount will be calculated and the method in which the 254 new fair market value of the trust will be determined; 255 (b) The trustee determines the terms of the unitrust under 256 one of the following methods: 257 1. A disinterested trustee determines, or if there is no 258 trustee other than an interested trustee, the interested trustee 259 appoints a disinterested person who, in its sole discretion but 260 acting in a fiduciary capacity, determines for the interested 261 trustee: 262 a. The percentage to be used to calculate the unitrust 263 amount, provided the percentage used is not greater than 5 264 percent nor less than 3 percent; 265 b. The method to be used in determining the fair market 266 value of the trust; and 267 c. Which assets, if any, are to be excluded in determining 268 the unitrust amount; or 269 2. The interested trustee or disinterested trustee 270 administers the trust such that: 271 a. The percentage used to calculate the unitrust amount is 272 50 percent of theapplicable federalrate as defined in the 273 Internal Revenue Code, 26 U.S.C. s. 7520, in effect for the 274 month the conversion under this section becomes effective and 275 for each January thereafter; however, if the percentage 276 calculated exceeds 5 percent, the unitrust percentage isshall277be5 percent and if the percentage calculated is less than 3 278 percent, the unitrust percentage isshall be3 percent; and 279 b. The fair market value of the trust shall be determined 280 at least annually on an asset-by-asset basis, reasonably and in 281 good faith, in accordance withthe provisions ofs. 738.202(5), 282 except the following property shall not be included in 283 determining the value of the trust: 284 (I) Any residential property or any tangible personal 285 property that, as of the first business day of the current 286 valuation year, one or more current beneficiaries of the trust 287 have or have had the right to occupy, or have or have had the 288 right to possess or control,(other than in his or her capacity 289 as trustee of the trust), and instead the right of occupancy or 290 the right to possession and control isshall be deemed to bethe 291 unitrust amount with respect to such property; however, the 292 unitrust amount mustshallbe adjusted to take into account 293 partial distributions from or receipt into the trust of such 294 property during the valuation year;.295 (II) Any asset specifically given to a beneficiary and the 296 return on investment on such property, which return on 297 investment shall be distributable to thesuchbeneficiary; or.298 (III) Any asset while held in a decedent’stestator’s299 estate; 300 (c) The trustee sends written notice of its intention to 301 take such action, along with copies of thesuchwritten 302 statement regarding trust distributions and this section, and, 303 if applicable, the determinations ofeitherthe trustee or the 304 disinterested person to: 305 1. The grantor of the trust, if living. 306 2. All living persons who are currently receiving or 307 eligible to receive distributions of income fromofthe trust. 308 3. All living persons who would receive distributions of 309 principal of the trust if the trust were to terminate at the 310 time ofthegivingofsuch notice(without regard to the 311 exercise of any power of appointment,)or, if the trust does not 312 provide for its termination, all living persons who would 313 receive or be eligible to receive distributions of income or 314 principal of the trust if the persons identified in subparagraph 315 2. were deceased. 316 4. All persons acting as advisers or protectors of the 317 trust. 318 319 Notice under this paragraph shall be served informally,in the 320 manner provided in the Florida Rules of Civil Procedure relating 321 to service of pleadings subsequent to the initial pleading. 322 Notice may be served on a legal representative or natural 323 guardian of a person withoutthefilingofany proceeding or 324 approval of any court; 325 (d) At least one person receiving notice under each of 326 subparagraphs (c)2. and 3. is legally competent; and 327 (e) No person receiving such notice objects, by written 328 instrument delivered to the trustee, to the proposed action of 329 the trustee or the determinations of the disinterested person 330 within 60 days after service of such notice. An objectionunder331this sectionmay be executed by a legal representative or 332 natural guardian of a person withoutthefilingofany 333 proceeding or approval of any court. 334 (3) If a trustee desires to convert an income trust to a 335 total return unitrust, reconvert a total return unitrust to an 336 income trust, or change the percentage used to calculate the 337 unitrust amount or the method used to determine a fair market 338 value of the trust but does not have the ability to or elects 339 not to do it under subsection (2), the trustee may petition the 340 circuit court for such order as the trustee deems appropriate. 341 In that event, the court, in its own discretion or on the 342 petition of such trustee or any person having an income or 343 remainder interest in the trust, may appoint a disinterested 344 person who, acting in a fiduciary capacity, shall present such 345 information to the court as isshall benecessary for the court 346 to make a determination hereunder. 347(4) All determinations made pursuant to sub-subparagraph348(2)(b)2.b. shall be conclusive if reasonable and made in good349faith. Such determination shall be conclusively presumed to have350been made reasonably and in good faith unless proven otherwise351in a proceeding commenced by or on behalf of a person interested352in the trust within the time provided in s.736.1008. The burden353will be on the objecting interested party to prove that the354determinations were not made reasonably and in good faith.355 (4)(5)Following the conversion of an income trust to a 356 total return unitrust, the trustee: 357 (a) Shall treat the unitrust amount as if it were net 358 income of the trust for purposes of determining the amount 359 available, from time to time, for distribution from the trust. 360 (b) May allocate to trust income for each taxable year of 361 the trust, or portion thereof: 362 1. Net short-term capital gain described in the Internal 363 Revenue Code, 26 U.S.C. s. 1222(5), for such year, or portion 364 thereof, but only to the extent that the amount so allocated 365 together with all other amounts allocated to trust income, as 366 determined under the provisions of this chapter without regard 367 to this section and s. 738.104, for such year, or portion 368 thereof, does not exceed the unitrust amount for such year, or 369 portion thereof. 370 2. Net long-term capital gain described in the Internal 371 Revenue Code, 26 U.S.C. s. 1222(7), for such year, or portion 372 thereof, but only to the extent that the amount so allocated 373 together with all other amounts, including amounts described in 374 subparagraph 1., allocated to trust income for such year, or 375 portion thereof, does not exceed the unitrust amount for such 376 year, or portion thereof. 377 (5)(6)In administering a total return unitrust, the 378 trustee may, in its sole discretion but subject to the 379 provisions of the governing instrument, determine: 380 (a) The effective date of the conversion. 381 (b) The timing of distributions, including provisions for 382 prorating a distribution for a short year in which a 383 beneficiary’s right to payments commences or ceases. 384 (c) Whether distributions are to be made in cash or in kind 385 or partly in cash and partly in kind. 386 (d) If the trust is reconverted to an income trust, the 387 effective date of such reconversion. 388 (e) Such other administrative issues as may be necessary or 389 appropriate to carry out the purposes of this section. 390 (6)(7)Conversion to a total return unitrust underthe391provisions ofthis section doesshallnot affect any other 392 provision of the governing instrument, if any, regarding 393 distributions of principal. 394 (7)(8)Any trustee or disinterested person who in good 395 faith takes or fails to take any action under this section is 396shallnotbeliable to any person affected by such action or 397 inaction, regardless of whether such person received written 398 notice as provided in this section orand regardless of whether399 such person was under a legal disability at the time of the 400 delivery of such notice. Such person’s exclusive remedy isshall401beto obtain, under subsection (8)(9), an order of the court 402 directing the trustee to convert an income trust to a total 403 return unitrust, to reconvert from a total return unitrust to an 404 income trust, or to change the percentage used to calculate the 405 unitrust amount. If a court determines that the trustee or 406 disinterested person has not acted in good faith in taking or 407 failing to take any action under this section,the provisions of408 s. 738.105(3) appliesapply. 409 (8)(9)If a majority in interest ofeitherthe income or 410 remainder beneficiaries of an income trust has delivered to the 411 trustee a written objection to the amount of the income 412 distributions of the trust, and, if the trustee has failed to 413 resolve the objection to the satisfaction of the objecting 414 beneficiaries within 6 months afterfrom thereceipt of such 415 written objection,thenthe objecting beneficiaries may petition 416 the court in accordance with subsection (3). 417 (9)(10)This section pertainsshall be construed as418pertainingto the administration of a trust and is applicable to 419 any trust that is administeredeitherin this state or under 420 Florida law unless: 421 (a) The governing instrument reflects an intention that the 422 current beneficiary or beneficiaries are to receive an amount 423 other than a reasonable current return from the trust; 424 (b) The trust is a trust described in the Internal Revenue 425 Code, 26 U.S.C. s. 170(f)(2)(B), s. 642(c)(5), s. 664(d), s. 426 2702(a)(3), or s. 2702(b); 427 (c) One or more persons to whom the trustee could 428 distribute income have a power of withdrawal over the trust: 429 1. That is not subject to an ascertainable standard under 430 the Internal Revenue Code, 26 U.S.C. s. 2041 or s. 2514, and 431 exceeds in any calendar year the amount set forth in the 432 Internal Revenue Code, 26 U.S.C. s. 2041(b)(2) or s. 2514(e); or 433 2. A power of withdrawal over the trust that can be 434 exercised to discharge a duty of support he or she possesses; or 435 (d) The governing instrument expressly prohibits use of 436 this section by specific reference to the section. A provision 437 in the governing instrument that, “The provisions of section 438 738.1041, Florida Statutes, as amended, or any corresponding 439 provision of future law, mayshallnot be used in the 440 administration of this trust,” or similar words reflecting such 441 intent areshall besufficient to preclude the use of this 442 section; or443(e) The trust is a trust with respect to which a trustee444currently possesses the power to adjust under s.738.104. 445 (10)(11)The grantor of a trust may create an express total 446 return unitrust thatwhichwill bebecomeeffective as provided 447 in the trust instrumentdocumentwithout requiring a conversion 448 under this section. 449 (a) An express total return unitrust created by the grantor 450 of the trust isshall betreated as a unitrustunder this451sectiononly if the terms of the trust instrumentdocument452 contain all of the following provisions: 453 1.(a)That distributions from the trust will be unitrust 454 amounts and the manner in which the unitrust amount will be 455 calculated; andthe method in which the fair market value of the456trust will be determined.457 2.(b)The percentage to be used to calculate the unitrust 458 amount, provided the percentage used is not greater than 5 459 percent nor less than 3 percent. 460 (b) The trust instrument may also contain provisions 461 specifying: 462 1.(c)The method to be used in determining the fair market 463 value of the trust, including whether to use an average fair 464 market value or the fair market value of the assets held by the 465 trust at the beginning of the current year; or.466 2.(d)Which assets, if any, are to be excluded in 467 determining the unitrust amount. 468 (c) This section establishes the method of determining the 469 fair market value of the trust if the trust instrument is silent 470 as to subparagraph (b)1., and to specify those assets, if any, 471 which are to be excluded in determining the unitrust amount if 472 the trust instrument is silent as to subparagraph (b)2. 473 Section 6. Subsections (1), (3), and (4) of section 474 738.105, Florida Statutes, are amended to read: 475 738.105 Judicial control of discretionary powers.— 476 (1) A court mayshallnot change a trustee’sfiduciary’s477 decision to exercise or not to exercise a discretionary power 478 conferred by this chapter unless the court determines that the 479 decision was an abuse of the trustee’sfiduciary’sdiscretion. A 480 court mayshallnot determine that a trusteefiduciaryabused 481 its discretion merely because the court would have exercised the 482 discretion in a different manner or would not have exercised the 483 discretion. 484 (3) If a court determines that a trusteefiduciaryhas 485 abused its discretion, the remedy isshall beto restore the 486 income and remainder beneficiaries to the positions they would 487 have occupied if the trusteefiduciaryhad not abused its 488 discretion, in accordance withaccording tothe followingrules: 489 (a) To the extent the abuse of discretion has resulted in 490 no distribution to a beneficiary or a distribution that is too 491 small, the court shall require the trusteefiduciaryto 492 distribute from the trust to the beneficiary an amount the court 493 determines will restore the beneficiary, in whole or in part, to 494 his or her appropriate position. 495 (b) To the extent the abuse of discretion has resulted in a 496 distribution to a beneficiary that is too large, the court shall 497 restore the beneficiaries, the trust, or both, in whole or in 498 part, to their appropriate positions by requiring the trustee 499fiduciaryto withhold an amount from one or more future 500 distributions to the beneficiary who received the distribution 501 that was too large or requiring that beneficiary to return some 502 or all of the distribution to the trust. 503 (c) To the extent the court is unable, after applying 504 paragraphs (a) and (b), to restore the beneficiaries or,the 505 trust, or both, to the positions they would have occupied if the 506 trusteefiduciaryhad not abused its discretion, the court may 507 require the trusteefiduciaryto pay an appropriate amount from 508 its own funds to one or more of the beneficiaries or the trust 509 or both. 510 (4) Upon the filing of a petition by the trusteefiduciary, 511 the court having jurisdiction over the trustor estateshall 512 determine whether a proposed exercise or nonexercise by the 513 trusteefiduciaryof a discretionary power conferred by this 514 chapter will result in an abuse of the trustee’sfiduciary’s515 discretion. If the petition describes the proposed exercise or 516 nonexercise of the power and contains sufficient information to 517 inform the beneficiaries of the reasons for the proposal, the 518 facts upon which the trusteefiduciaryrelies, and an 519 explanation of how the income and remainder beneficiaries will 520 be affected by the proposed exercise or nonexercise of the 521 power, a beneficiary who challenges the proposed exercise or 522 nonexercise has the burden of establishing that such exercise or 523 nonexercise will result in an abuse of discretion. 524 Section 7. Subsections (1) through (4) of section 738.201, 525 Florida Statutes, are amended to read: 526 738.201 Determination and distribution of net income.—After 527 a decedent dies, in the case of an estate, or after an income 528 interest in a trust ends, the following rules apply: 529 (1) A fiduciary of an estate or of a terminating income 530 interest shall determine the amount of net income and net 531 principal receipts received from property specifically given to 532 a beneficiary underthe rules inss. 738.301-738.706which apply533to trusteesandthe rules insubsection (5). The fiduciary shall 534 distribute the net income and net principal receipts to the 535 beneficiary who is to receive the specific property. 536 (2) A fiduciary shall determine the remaining net income of 537 a decedent’s estate or a terminating income interest underthe538rules inss. 738.301-738.706which apply to trusteesand by: 539 (a) Including in net income all income from property used 540 to discharge liabilities. 541 (b) Paying from income or principal, in the fiduciary’s 542 discretion, fees of attorneys, accountants, and fiduciaries; 543 court costs and other expenses of administration; and interest 544 on death taxes., butThe fiduciary may pay those expenses from 545 income of property passing to a trust for which the fiduciary 546 claims an estate tax marital or charitable deduction under the 547 Internal Revenue Code or comparable law of any state only to the 548 extent the payment of those expenses from income will not cause 549 the reduction or loss of the deduction. 550 (c) Paying from principal all other disbursements made or 551 incurred in connection with the settlement of a decedent’s 552 estate or the winding up of a terminating income interest, 553 including debts, funeral expenses, disposition of remains, 554 family allowances, and death taxes and related penalties that 555 are apportioned to the estate or terminating income interest by 556 the will, the terms of the trust, or applicable law. 557 (3) IfA fiduciary shall distribute toa beneficiary who 558 receives a pecuniary deviseamountoutright is also entitled to 559 receivetheinterest or any other amount on the devise under the 560 terms ofprovided bythe will or, the terms of thetrust, the 561 fiduciary shall distribute the interest or other amount 562applicable lawfrom net income determined under subsection (2) 563 or from principal to the extent net income is insufficient.If a564beneficiary is to receive a pecuniary amount outright from a565trust after an income interest ends and no interest or other566amount is provided for by the terms of the trust or applicable567law, the fiduciary shall distribute the interest or other amount568to which the beneficiary would be entitled under applicable law569if the pecuniary amount were required to be paid under a will.570 (4) A fiduciary shall distribute the net income remaining 571 after distributions required under subsections (1)-(3)by572subsection (3)in the manner described in s. 738.202 to all 573 other beneficiaries, including a beneficiary who receives a 574 pecuniary amount in trust, even if the beneficiary holds an 575 unqualified power to withdraw assets from the trust or other 576 presently exercisable general power of appointment over the 577 trust. 578 Section 8. Section 738.202, Florida Statutes, is amended to 579 read: 580 738.202 Distribution to residuary and remainder 581 beneficiaries.— 582 (1) Each beneficiary described in s. 738.201(4) is entitled 583 to receive a portion of the net income remaining after the 584 application of s. 738.201(1)-(3), which is equal to the 585 beneficiary’s fractional interest in undistributed principal 586 assets, using carrying values as of the distribution date. If a 587 fiduciary makes more than one distribution of assets to 588 beneficiaries to whom this section applies, each beneficiary, 589 including one who does not receive part of the distribution, is 590 entitled, as of each distribution date, to the net income the 591 fiduciaryhasreceived after the date of death or terminating 592 event or earlier distribution date but has not distributed as of 593 the current distribution date. 594 (2) In determining a beneficiary’s share of net income, the 595 following appliesrules apply: 596 (a) The beneficiary is entitled to receive a portion of the 597 net income equal to the beneficiary’s fractional interest in the 598 carrying value of the undistributed principal assets immediately 599 before the distribution date, excluding the amount of unpaid 600 liabilitiesincluding assets that later may be sold to meet601principal obligations. 602 (b) The beneficiary’s fractional interest in the 603 undistributed principal assets shall be calculated:without604regard to605 1. At the time the interest began and adjusted for any 606 disproportionate distributions since the interest began; 607 2. By excluding any liabilities of the estate or trust from 608 the calculation; 609 3. By also excluding property specifically given to a 610 beneficiary and property required to pay pecuniary amounts not 611 in trust; and.612 4.(c)The beneficiary’s fractional interest in the613undistributed principal assets shall be calculatedOn the basis 614 of the aggregate carrying value of those assets determined under 615 subsection (1) as of the distribution datewithout reducing the616value by any unpaid principal obligation. 617 (c) If a disproportionate distribution of principal is made 618 to any beneficiary, the respective fractional interests of all 619 beneficiaries in the remaining underlying assets shall be 620 recomputed by: 621 1. Adjusting the carrying value of the principal assets to 622 their fair market value before the distribution; 623 2. Reducing the fractional interest of the recipient of the 624 disproportionate distribution in the remaining principal assets 625 by the fair market value of the principal distribution; and 626 3. Recomputing the fractional interests of all 627 beneficiaries in the remaining principal assets based upon the 628 now restated carrying values. 629(d) The distribution date for purposes of this section may630be the date as of which the fiduciary calculates the value of631the assets if that date is reasonably near the date on which632assets are actually distributed.633 (3) If a fiduciary does not distribute all of the collected 634 but undistributed net income to each person as of a distribution 635 date, the fiduciary shall maintain appropriate records showing 636 the interest of each beneficiary in that net income. 637 (4) A fiduciary may apply the provisions ofrules inthis 638 section, to the extent the fiduciary considers appropriate, to 639 net gain or loss realized after the date of death or terminating 640 event or earlier distribution date from the disposition of a 641 principal asset if this section applies to the income from the 642 asset. 643 (5) The carrying value or fair market value of trust assets 644 shall be determined on an asset-by-asset basis and areshall be645 conclusive if reasonable and determined in good faith. 646 Determinations of fair market value based on appraisals 647 performed within 2 years before or after the valuation date are 648shall bepresumed reasonable. The valuesvalueof trust assets 649 areshall beconclusively presumed to be reasonable and 650 determined in good faith unless proven otherwise in a proceeding 651 commenced by or on behalf of a person interested in the trust 652 within the time provided in s. 736.1008. 653 (6) All distributions to a beneficiary shall be valued 654 based on their fair market value on the date of distribution. 655 Section 9. Subsection (4) of section 738.301, Florida 656 Statutes, is amended to read: 657 738.301 When right to income begins and ends.—An income 658 beneficiary is entitled to net income from the date on which the 659 income interest begins. 660 (4) An income interest ends on the day before an income 661 beneficiary dies or another terminating event occurs, or on the 662 last day of a period during which there is no beneficiary to 663 whom a fiduciarytrusteemay distribute income. 664 Section 10. Subsections (1) and (2) of section 738.302, 665 Florida Statutes, are amended to read: 666 738.302 Apportionment of receipts and disbursements when 667 decedent dies or income interest begins.— 668 (1) A fiduciarytrusteeshall allocate an income receipt or 669 disbursement other than one to which s. 738.201(1) applies to 670 principal if the due date of the receipt or disbursement occurs 671 before a decedent dies in the case of an estate or before an 672 income interest begins in the case of a trust or successive 673 income interest. 674 (2) A fiduciarytrusteeshall allocate an income receipt or 675 disbursement to income if the due date of the receipt or 676 disbursement occurs on or after the date on which a decedent 677 dies or an income interest begins and the due date is a periodic 678 due date. An income receipt or disbursement shall be treated as 679 accruing from day to day if the due date of the receipt or 680 disbursement is not periodic or the receipt or disbursement has 681 no due date. The portion of the receipt or disbursement accruing 682 before the date on which a decedent dies or an income interest 683 begins shall be allocated to principal and the balance shall be 684 allocated to income. 685 Section 11. Subsections (2) and (3) of section 738.303, 686 Florida Statutes, are amended to read: 687 738.303 Apportionment when income interest ends.— 688 (2) When a mandatory income interest ends, the fiduciary 689trusteeshall pay to a mandatory income beneficiary who survives 690 that date, or the estate of a deceased mandatory income 691 beneficiary whose death causes the interest to end, the 692 beneficiary’s share of the undistributed income that is not 693 disposed of under the terms of the trust unless the beneficiary 694 has an unqualified power to revoke more than 5 percent of the 695 trust immediately before the income interest ends. In the latter 696 case, the undistributed income from the portion of the trust 697 that may be revoked shall be added to principal. 698 (3) When a fiduciary’strustee’sobligation to pay a fixed 699 annuity or a fixed fraction of the value of the trust’s assets 700 ends, the fiduciarytrusteeshall prorate the final payment if 701 and to the extent required by applicable law to accomplish a 702 purpose of the trust or its grantor relating to income, gift, 703 estate, or other tax requirements. 704 Section 12. Section 738.401, Florida Statutes, is amended 705 to read: 706 738.401 Character of receipts.— 707 (1) For purposes of this section, the term “entity” means a 708 corporation, partnership, limited liability company, regulated 709 investment company, real estate investment trust, common trust 710 fund, or any other organization in which a fiduciarytrusteehas 711 an interest other than a trust or estate to which s. 738.402 712 applies, a business or activity to which s. 738.403 applies, or 713 an asset-backed security to which s. 738.608 applies. 714 (2) Except as otherwise provided in this section, a 715 fiduciarytrusteeshall allocate to income money received from 716 an entity. 717 (3) Except as otherwise provided in this section, a 718 fiduciarytrusteeshall allocate the following receipts from an 719 entity to principal: 720 (a) Property other than money. 721 (b) Money received in one distribution or a series of 722 related distributions in exchange for part or all of a trust’s 723 or estate’s interest in the entity. 724 (c) Money received in total or partial liquidation of the 725 entity. 726 (d) Money received from an entity that is a regulated 727 investment company or a real estate investment trust if the 728 money receiveddistributedrepresents short-term or long-term 729 capital gain realized within the entity. 730 (e) Money received from an entity listed on a public stock 731 exchange during any year of the trust or estate which exceeds 10 732 percent of the fair market value of the trust’s or estate’s 733 interest in the entity on the first day of that year. The amount 734 to be allocated to principal must be reduced to the extent that 735 the cumulative distributions from the entity to the trust or 736 estate allocated to income does not exceed a cumulative annual 737 return of 3 percent of the fair market value of the interest in 738 the entity at the beginning of each year or portion of a year 739 for the number of years or portion of years in the period that 740 the interest in the entity has been held by the trust or estate. 741 If a trustee has exercised a power to adjust under s. 738.104 742 during any period the interest in the entity has been held by 743 the trust, the trustee, in determining the total income 744 distributions from that entity, must take into account the 745 extent to which the exercise of that power resulted in income to 746 the trust from that entity for that period. If the income of the 747 trust for any period has been computed under s. 738.1041, the 748 trustee, in determining the total income distributions from that 749 entity for that period, must take into account the portion of 750 the unitrust amount paid as a result of the ownership of the 751 trust’s interest in the entity for that period. 752 (4) If a fiduciarytrusteeelects, or continues an election 753 made by its predecessor, to reinvest dividends in shares of 754 stock of a distributing corporation or fund, whether evidenced 755 by new certificates or entries on the books of the distributing 756 entity, the new sharesshallretain their character as income. 757 (5) Money is received in partial liquidation: 758 (a) To the extent the entity, at or near the time of a 759 distribution, indicates that such money is a distribution in 760 partial liquidation; or 761 (b) To the extentIfthe total amount of money and property 762 received in a distribution or series of related distributions 763 from an entity that is not listed on a public stock exchange 764 exceedsis greater than20 percent of the trust’s or estate’s 765 pro rata share of the entity’s gross assets, as shown by the 766 entity’s year-end financial statements immediately preceding the 767 initial receipt. 768 769 This subsection does not apply to an entity to which subsection 770 (7) applies. 771 (6) Money may notis not received in partial liquidation,772nor may moneybe taken into account in determining any excess 773 under paragraph (5)(b), to the extent that the cumulative 774 distributions from the entity to the trust or the estate 775 allocated to income do not exceed the greater of:such money776does not exceed the amount of income tax a trustee or777beneficiary must pay on taxable income of the entity that778distributes the money.779 (a) A cumulative annual return of 3 percent of the entity’s 780 carrying value computed at the beginning of each period for the 781 number of years or portion of years that the entity was held by 782 the fiduciary. If a trustee has exercised a power to adjust 783 under s. 738.104 during any period the interest in the entity 784 has been held by the trust, the trustee, in determining the 785 total income distributions from that entity, must take into 786 account the extent to which exercise of the power resulted in 787 income to the trust from that entity for that period. If the 788 income of a trust for any period has been computed pursuant to 789 s. 738.1041, the trustee, in determining the total income 790 distributions from the entity for that period, must take into 791 account the portion of the unitrust amount paid as a result of 792 the ownership of the trust’s interest in the entity for that 793 period; or 794 (b) If the entity is treated as a partnership, subchapter S 795 corporation, or a disregarded entity pursuant to the Internal 796 Revenue Code of 1986, as amended, the amount of income tax 797 attributable to the trust’s or estate’s ownership share of the 798 entity, based on its pro rata share of the taxable income of the 799 entity that distributes the money, for the number of years or 800 portion of years that the interest in the entity was held by the 801 fiduciary, calculated as if all of that tax was incurred by the 802 fiduciary. 803 (7) The following appliesspecial rules shall applyto 804 moneymoneysor property received by a private trustee as a 805 distribution from an investment entityentitiesdescribed in 806 this subsection: 807 (a) The trustee shall first treat as income of the trust 808 all of the money or property received from the investment entity 809 in the current year which would be considered income under this 810 chapter if the trustee had directly held the trust’s pro rata 811 share of the assets of the investment entity. For this purpose, 812 all distributions received in the current year must be 813 aggregated. 814 (b) The trustee shall next treat as income of the trust any 815 additional money or property received in the current year which 816 would have been considered income in the prior 2 years under 817 paragraph (a) if additional money or property had been received 818 from the investment entity in any of those prior 2 years. The 819 amount to be treated as income shall be reduced by any 820 distributions of money or property made by the investment entity 821 to the trust during the current and prior 2 years which were 822 treated as income under this paragraph. 823 (c) The remainder of the distribution, if any, is treated 824 as principal. 825 (d) As used in this subsection, the term: 826 1. “Investment entity” means an entity, other than a 827 business activity conducted by the trustee described in s. 828 738.403 or an entity that is listed on a public stock exchange, 829 which is treated as a partnership, subchapter S corporation, or 830 disregarded entity pursuant to the Internal Revenue Code of 831 1986, as amended, and which normally derives 50 percent or more 832 of its annual cumulative net income from interest, dividends, 833 annuities, royalties, rental activity, or other passive 834 investments, including income from the sale or exchange of such 835 passive investments. 836 2. “Private trustee” means a trustee who is a natural 837 person, but only if the trustee is unable to use the power to 838 adjust between income and principal with respect to receipts 839 from entities described in this subsection pursuant to s. 840 738.104. A bank, trust company, or other commercial trustee is 841 not considered a private trustee. 842 (8) This section shall be applied before ss. 738.705 and 843 738.706 and does not modify or change any of the provisions of 844 those sections. 845(a) Moneys or property received from a targeted entity that846is not an investment entity which do not exceed the trust’s pro847rata share of the undistributed cumulative net income of the848targeted entity during the time an ownership interest in the849targeted entity was held by the trust shall be allocated to850income. The balance of moneys or property received from a851targeted entity shall be allocated to principal.852(b) If trust assets include any interest in an investment853entity, the designated amount of moneys or property received854from the investment entity shall be treated by the trustee in855the same manner as if the trustee had directly held the trust’s856pro rata share of the assets of the investment entity857attributable to the distribution of such designated amount.858Thereafter, distributions shall be treated as principal.859(c) For purposes of this subsection, the following860definitions shall apply:8611. “Cumulative net income” means the targeted entity’s net862income as determined using the method of accounting regularly863used by the targeted entity in preparing its financial864statements, or if no financial statements are prepared, the net865book income computed for federal income tax purposes, for every866year an ownership interest in the entity is held by the trust.867The trust’s pro rata share shall be the cumulative net income868multiplied by the percentage ownership of the trust.8692. “Designated amount” means moneys or property received870from an investment entity during any year that is equal to the871amount of the distribution that does not exceed the greater of:872a. The amount of income of the investment entity for the873current year, as reported to the trustee by the investment874entity for federal income tax purposes; or875b. The amount of income of the investment entity for the876current year and the prior 2 years, as reported to the trustee877by the investment entity for federal income tax purposes, less878any distributions of moneys or property made by the investment879entity to the trustee during the prior 2 years.8803. “Investment entity” means a targeted entity that881normally derives 50 percent or more of its annual cumulative net882income from interest, dividends, annuities, royalties, rental883activity, or other passive investments, including income from884the sale or exchange of such passive investments.8854. “Private trustee” means a trustee who is an individual,886but only if the trustee is unable to utilize the power to adjust887between income and principal with respect to receipts from888entities described in this subsection pursuant to s.738.104. A889bank, trust company, or other commercial trustee shall not be890considered to be a private trustee.8915. “Targeted entity” means any entity that is treated as a892partnership, subchapter S corporation, or disregarded entity893pursuant to the Internal Revenue Code of 1986, as amended, other894than an entity described in s.738.403.8956. “Undistributed cumulative net income” means the trust’s896pro rata share of cumulative net income, less all prior897distributions from the targeted entity to the trust that have898been allocated to income.899(d) This subsection shall not be construed to modify or900change any of the provisions of ss.738.705and738.706relating901to income taxes.902(8) A trustee may rely upon a statement made by an entity903about the source or character of a distribution, about the904amount of profits of a targeted entity, or about the nature and905value of assets of an investment entity if the statement is made906at or near the time of distribution by the entity’s board of907directors or other person or group of persons authorized to908exercise powers to pay money or transfer property comparable to909those of a corporation’s board of directors.910 Section 13. Section 738.402, Florida Statutes, is amended 911 to read: 912 738.402 Distribution from trust or estate.—A fiduciary 913trusteeshall allocate to income an amount received as a 914 distribution of income from a trust or an estate in which the 915 trust has an interest other than a purchased interest andshall916 allocate to principal an amount received as a distribution of 917 principal from such a trust or estate. If a fiduciarytrustee918 purchases an interest in a trust that is an investment entity, 919 or a decedent or donor transfers an interest in such a trust to 920 a fiduciarytrustee, s. 738.401 or s. 738.608 applies to a 921 receipt from the trust. 922 Section 14. Section 738.403, Florida Statutes, is amended 923 to read: 924 738.403 Business and other activities conducted by 925 fiduciarytrustee.— 926 (1) If a fiduciarytrusteewho conducts a business or other 927 activity determines that it is in the best interest of all the 928 beneficiaries to account separately for the business or activity 929 instead of accounting for the business or activity as part of 930 the trust’s or estate’s general accounting records, the 931 fiduciarytrusteemay maintain separate accounting records for 932 the transactions of thesuchbusiness or other activity, whether 933 or not the assets of such business or activity are segregated 934 from other trust or estate assets. 935 (2) A fiduciarytrusteewho accounts separately for a 936 business or other activity may determine the extent to which the 937 net cash receipts of thesuchbusiness or activity must be 938 retained for working capital, the acquisition or replacement of 939 fixed assets, and other reasonably foreseeable needs of the 940 business or activity, and the extent to which the remaining net 941 cash receipts are accounted for as principal or income in the 942 trust’s or estate’s general accounting records. If a fiduciary 943trusteesells assets of the business or other activity, other 944 than in the ordinary course of the business or activity, the 945 fiduciary musttrustee shallaccount for the net amount received 946 as principal in the trust’s or estate’s general accounting 947 records to the extent the fiduciarytrusteedetermines that the 948 amount received is no longer required in the conduct of the 949 business. 950 (3) Activities for which a fiduciarytrusteemay maintain 951 separate accounting records include: 952 (a) Retail, manufacturing, service, and other traditional 953 business activities. 954 (b) Farming. 955 (c) Raising and selling livestock and other animals. 956 (d) Management of rental properties. 957 (e) Extraction of minerals and other natural resources. 958 (f) Timber operations. 959 (g) Activities to which s. 738.607738.608applies. 960 Section 15. Section 738.501, Florida Statutes, is amended 961 to read: 962 738.501 Principal receipts.—A fiduciarytrusteeshall 963 allocate to principal: 964 (1) To the extent not allocated to income under this 965 chapter, assets received from a donortransferorduring the 966 donor’stransferor’slifetime, a decedent’s estate, a trust with 967 a terminating income interest, or a payor under a contract 968 naming the trust, estate, or fiduciaryits trusteeas 969 beneficiary. 970 (2) Money or other property received from the sale, 971 exchange, liquidation, or change in form of a principal asset, 972 including realized profit, subject to this section. 973 (3) Amounts recovered from third parties to reimburse the 974 trust or estate because of disbursements described in s. 975 738.702(1)(g) or for other reasons to the extent not based on 976 the loss of income. 977 (4) Proceeds of property taken by eminent domain; however, 978buta separate award made for the loss of income with respect to 979 an accounting period during which a current income beneficiary 980 had a mandatory income interest is income. 981 (5) Net income received in an accounting period during 982 which there is no beneficiary to whom a fiduciarytrusteemay or 983 shall distribute income. 984 (6) Other receipts as provided in ss. 738.601-738.608. 985 Section 16. Section 738.502, Florida Statutes, is amended 986 to read: 987 738.502 Rental property.—IfTo the extenta fiduciary 988trusteeaccounts for receipts from rental property pursuant to 989 this section, the fiduciarytrusteeshall allocate to income an 990 amount received as rent of real or personal property, including 991 an amount received for cancellation or renewal of a lease. An 992 amount received as a refundable deposit, including a security 993 deposit or a deposit that is to be applied as rent for future 994 periods, mustshallbe added to principal and held subject to 995 the terms of the lease and is not available for distribution to 996 a beneficiary until the fiduciary’strustee’scontractual 997 obligations have been satisfied with respect to that amount. 998 Section 17. Subsections (1), (2), and (3) of section 999 738.503, Florida Statutes, are amended to read: 1000 738.503 Obligation to pay money.— 1001 (1) An amount received as interest, whether determined at a 1002 fixed, variable, or floating rate, on an obligation to pay money 1003 to the fiduciarytrustee, including an amount received as 1004 consideration for prepaying principal, shall be allocated to 1005 income without any provision for amortization of premium. 1006 (2) Except as otherwise provided herein, a fiduciary 1007trusteeshall allocate to principal an amount received from the 1008 sale, redemption, or other disposition of an obligation to pay 1009 money to the fiduciarytrustee. 1010 (3) The increment in value of a bond or other obligation 1011 for the payment of money bearing no stated interest but payable 1012 at a future time in excess of the price at which it was issued 1013 or purchased, if purchased after issuance, is distributable as 1014 income. If the increment in value accrues and becomes payable 1015 pursuant to a fixed schedule of appreciation, it may be 1016 distributed to the beneficiary who was the income beneficiary at 1017 thethistime of increment from the first principal cash 1018 available or, if none is available, when the increment is 1019 realized by sale, redemption, or other disposition. IfWhen1020 unrealized increment is distributed as income but out of 1021 principal, the principal mustshallbe reimbursed for the 1022 increment when realized. If, in the reasonable judgment of the 1023 fiduciarytrustee, exercised in good faith, the ultimate payment 1024 of the bond principal is in doubt, the fiduciarytrusteemay 1025 withhold the payment of incremental interest to the income 1026 beneficiary. 1027 Section 18. Subsections (1) and (2) of section 738.504, 1028 Florida Statutes, are amended to read: 1029 738.504 Insurance policies and similar contracts.— 1030 (1) Except as otherwise provided in subsection (2), a 1031 fiduciarytrusteeshall allocate to principal the proceeds of a 1032 life insurance policy or other contract in which the trust, 1033 estate, or fiduciaryits trusteeis named as beneficiary, 1034 including a contract that insures the trust, estate, or 1035 fiduciaryits trusteeagainst loss for damage to, destruction 1036 of, or loss of title to a trust or estate asset. The fiduciary 1037trusteeshall allocate dividends on an insurance policy to 1038 income if the premiums on the policy are paid from income and to 1039 principal if the premiums are paid from principal. 1040 (2) A fiduciarytrusteeshall allocate to income the 1041 proceeds of a contract that insures the fiduciarytrustee1042 against loss of occupancy or other use by an income beneficiary, 1043 loss of income, or, subject to s. 738.403, loss of profits from 1044 a business. 1045 Section 19. Section 738.601, Florida Statutes, is amended 1046 to read: 1047 738.601 Insubstantial allocations not required.—If a 1048 fiduciarytrusteedetermines that an allocation between 1049 principal and income required by s. 738.602, s. 738.603, s. 1050 738.604, s. 738.605, or s. 738.608 is insubstantial, the 1051 fiduciarytrusteemay allocate the entire amount to principal 1052 unless one of the circumstances described in s. 738.104(3) 1053 applies to the allocation. This power may be exercised by a 1054 cofiduciary undercotrustee inthe circumstances described in s. 1055 738.104(4) and may be released for the reasons and in the manner 1056 described in s. 738.104(5). An allocation is presumed to be 1057 insubstantial if: 1058 (1) The amount of the allocation would increase or decrease 1059 net income in an accounting period, as determined before the 1060 allocation, by less than 10 percent; or 1061 (2) The value of the asset producing the receipt for which 1062 the allocation would be made is less than 10 percent of the 1063 total value of the trust or estatetrust’sassets at the 1064 beginning of the accounting period. 1065 Section 20. Section 738.602, Florida Statutes, is amended 1066 to read: 1067 738.602 Payments from deferred compensation plans, 1068 annuities, and retirement plans or accounts.— 1069 (1) As used inFor purposes ofthis section, the term: 1070 (a) “Fund” means a private or commercial annuity, an 1071 individual retirement account, an individual retirement annuity, 1072 a deferred compensation plan, a pension plan, a profit-sharing 1073 plan, a stock-bonus plan, an employee stock-ownership plan, or 1074 another similar arrangement in which federal income tax is 1075 deferred. 1076 (b) “Income of the fund” means income that is determined 1077 according to subsection (2) or subsection (3). 1078 (c) “Nonseparate account” means a fund for which the value 1079 of the participant’s or account owner’s right to receive 1080 benefits can be determined only by the occurrence of a date or 1081 event as defined in the instrument governing the fund. 1082 (d) “Payment” means a distribution from a fund that a 1083 fiduciarytrusteemay receive over a fixed number of years or 1084 during the life of one or more individuals because of services 1085 rendered or property transferred to the payor in exchange for 1086 future payments. The term includes a distribution made in money 1087 or property from the payor’s general assets or from a fund 1088 created by the payor or payee. 1089 (e) “Separate account” means a fund holding assets 1090 exclusively for the benefit of a participant or account owner 1091 and: 1092 1. The value of such assets or the value of the separate 1093 account is ascertainable at any time; or 1094 2. The administrator of the fund maintains records that 1095 show receipts and disbursements associated with such assets. 1096 (2)(a) For a fund that is a separate account, income of the 1097 fund shall be determined: 1098 1. As if the fund were a trust subject to the provisions of 1099 ss. 738.401-738.706; or 1100 2. As a unitrust amount calculated by multiplying the fair 1101 market value of the fund as of the first day of the first 1102 accounting period and, thereafter, as of the last day of the 1103 accounting period that immediately precedes the accounting 1104 period during which a payment is received by the percentage 1105 determined in accordance with s. 738.1041(2)(b)2.a. The 1106 fiduciarytrusteeshall determine such percentage as of the 1107 first month that the fiduciary’strustee’selection to treat the 1108 income of the fund as a unitrust amount becomes effective. For 1109 purposes of this subparagraph, “fair market value” means the 1110 fair market value of the assets held in the fund as of the 1111 applicable valuation date determined as provided in this 1112 subparagraph. The fiduciarytrusteeis not liable for good faith 1113 reliance upon any valuation supplied by the person or persons in 1114 possession of the fund. If the fiduciarytrusteemakes or 1115 terminates an election under this subparagraph, the fiduciary 1116trusteeshall make such disclosure in a trust disclosure 1117 document that satisfies the requirements of s. 736.1008(4)(a). 1118 (b) The fiduciary maytrustee shall have discretion to1119 elect the method of determining the income of the fund pursuant 1120 to this subsection and may change the method of determining 1121 income of the fund for any future accounting period. 1122 (3) For a fund that is a nonseparate account, income of the 1123 fund is a unitrust amount determined by calculating the present 1124 value of the right to receive the remaining payments under 26 1125 U.S.C. s. 7520 of the Internal Revenue Code as of the first day 1126 of the accounting period and multiplying it by the percentage 1127 determined in accordance with s. 738.1041(2)(b)2.a. The 1128 fiduciarytrusteeshall determine the unitrust amount as of the 1129 first month that the fiduciary’strustee’selection to treat the 1130 income of the fund as a unitrust amount becomes effective. 1131 (4) Except for those trusts described in subsection (5), 1132 the fiduciarytrusteeshall allocate to income the lesser of the 1133 payment received from a fund or the income determined under 1134 subsection (2) or subsection (3). Any remaining amount of the 1135 payment shall be allocated to principala payment from a fund as1136follows:1137(a) That portion of the payment the payor characterizes as1138income shall be allocated to income, and any remaining portion1139of the payment shall be allocated to principal. 1140(b) To the extent that the payor does not characterize any1141portion of a payment as income or principal and the trustee can1142ascertain the income of the fund by the fund’s account1143statements or any other reasonable source, the trustee shall1144allocate to income the lesser of the income of the fund or the1145entire payment and shall allocate to principal any remaining1146portion of the payment.1147(c) If the trustee, acting reasonably and in good faith,1148determines that neither paragraph (a) nor paragraph (b) applies1149and all or part of the payment is required to be made, the1150trustee shall allocate to income 10 percent of the portion of1151the payment that is required to be made during the accounting1152period and shall allocate the balance to principal. If no part1153of a payment is required to be made or the payment received is1154the entire amount to which the trustee is entitled, the trustee1155shall allocate the entire payment to principal. For purposes of1156this paragraph, a payment is not “required to be made” to the1157extent the payment is made because the trustee exercises a right1158of withdrawal.1159 (5) For a trust thatwhich, in order to qualify for the 1160 estate or gift tax marital deduction under the Internal Revenue 1161 Code or comparable law of any state, entitles the spouse to all 1162 of the income of the trust, and the terms of the trust are 1163 silent as to the time and frequency for distribution of the 1164 income of the fund, then: 1165 (a) For a fund that is a separate account, unless the 1166 spouse directs the fiduciarytrusteeto leave the income of the 1167 fund in the fund, the fiduciarytrusteeshall withdraw and pay 1168 to the spouse, at leastno less frequently thanannually: 1169 1. All of the income of the fund determined in accordance 1170 with subparagraph (2)(a)1.; or 1171 2. The income of the fund as a unitrust amount determined 1172 in accordance with subparagraph (2)(a)2. 1173 (b) For a fund that is a nonseparate account, the fiduciary 1174trusteeshall withdraw and pay to the spouse, at leastno less1175frequently thanannually, the income of the fund as a unitrust 1176 amount determined in accordance with subsection (3). 1177 (6) This section does not apply to payments to which s. 1178 738.603 applies. 1179 Section 21. Section 738.603, Florida Statutes, is amended 1180 to read: 1181 738.603 Liquidating asset.— 1182 (1) For purposes of this section, the term “liquidating 1183 asset” means an asset the value of which will diminish or 1184 terminate because the asset is expected to produce receipts for 1185 a period of limited duration. The term includes a leasehold, 1186 patent, copyright, royalty right, and right to receive payments 1187 forduring a period ofmore than 1 year under an arrangement 1188 that does not provide for the payment of interest on the unpaid 1189 balance. The term does not include a payment subject to s. 1190 738.602, resources subject to s. 738.604, timber subject to s. 1191 738.605, an activity subject to s. 738.607, an asset subject to 1192 s. 738.608, or any asset for which the fiduciarytrustee1193 establishes a reserve for depreciation under s. 738.703. 1194 (2) A fiduciarytrusteeshall allocate to income 5101195 percent of the receipts from the carrying value of a liquidating 1196 asset and the balance to principal. Amounts allocated to 1197 principal shall reduce the carrying value of the liquidating 1198 asset, but not below zero. Amounts received in excess of the 1199 remaining carrying value must be allocated to principal. 1200 Section 22. Subsections (1), (3), and (4) of section 1201 738.604, Florida Statutes, are amended to read: 1202 738.604 Minerals, water, and other natural resources.— 1203 (1) IfTo the extenta fiduciarytrusteeaccounts for 1204 receipts from an interest in minerals or other natural resources 1205 pursuant to this section, the fiduciarytrusteeshall allocate 1206 such receipts as follows: 1207 (a) If received as nominal delay rental or nominal annual 1208 rent on a lease, a receipt shall be allocated to income. 1209 (b) If received from a production payment, a receipt shall 1210 be allocated to income if and to the extent the agreement 1211 creating the production payment provides a factor for interest 1212 or its equivalent. The balance shall be allocated to principal. 1213 (c) If an amount received as a royalty, shut-in-well 1214 payment, take-or-pay payment, bonus, or delay rental is more 1215 than nominal, 90 percent shall be allocated to principal and the 1216 balance to income. 1217 (d) If an amount is received from a working interest or any 1218 other interest not provided for in paragraph (a), paragraph (b), 1219 or paragraph (c), 90 percent of the net amount received shall be 1220 allocated to principal and the balance to income. 1221 (3) This chapter applies whether or not a decedent or donor 1222 was extracting minerals, water, or other natural resources 1223 before the interest became subject to the trust or estate. 1224 (4) If a trust or estate owns an interest in minerals, 1225 water, or other natural resources on January 1, 2003, the 1226 fiduciarytrusteemay allocate receipts from the interest as 1227 provided in this chapter or in the manner used by the fiduciary 1228trusteebefore January 1, 2003. If the trust or estate acquires 1229 an interest in minerals, water, or other natural resources after 1230 January 1, 2003, the fiduciarytrusteeshall allocate receipts 1231 from the interest as provided in this chapter. 1232 Section 23. Section 738.605, Florida Statutes, is amended 1233 to read: 1234 738.605 Timber.— 1235 (1) IfTo the extenta fiduciarytrusteeaccounts for 1236 receipts from the sale of timber and related products pursuant 1237 to this section, the fiduciarytrusteeshall allocate suchthe1238 net receipts as follows: 1239 (a) To income to the extent the amount of timber removed 1240 from the land does not exceed the rate of growth of the timber 1241 during the accounting periods in which a beneficiary has a 1242 mandatory income interest; 1243 (b) To principal to the extent the amount of timber removed 1244 from the land exceeds the rate of growth of the timber or the 1245 net receipts are from the sale of standing timber; 1246 (c) To or between income and principal if the net receipts 1247 are from the lease of timberland or from a contract to cut 1248 timber from land owned by a trust or estate by determining the 1249 amount of timber removed from the land under the lease or 1250 contract and applying the rules in paragraphs (a) and (b); or 1251 (d) To principal to the extent advance payments, bonuses, 1252 and other payments are not allocated pursuant to paragraph (a), 1253 paragraph (b), or paragraph (c). 1254 (2) In determining net receipts to be allocated pursuant to 1255 subsection (1), a fiduciarytrusteeshall deduct and transfer to 1256 principal a reasonable amount for depletion. 1257 (3) This chapter applies whether or not a decedent or donor 1258transferorwas harvesting timber from the property before the 1259 property became subject to the trust or estate. 1260 (4) If a trust or estate owns an interest in timberland on 1261 January 1, 2003, the fiduciarytrusteemay allocate net receipts 1262 from the sale of timber and related products as provided in this 1263 chapter or in the manner used by the fiduciarytrusteebefore 1264 January 1, 2003. If the trust or estate acquires an interest in 1265 timberland after January 1, 2003, the fiduciarytrusteeshall 1266 allocate net receipts from the sale of timber and related 1267 products as provided in this chapter. 1268 Section 24. Subsection (1) of section 738.606, Florida 1269 Statutes, is amended to read: 1270 738.606 Property not productive of income.— 1271 (1) If a marital deduction under the Internal Revenue Code 1272 or comparable law of any state is allowed for all or part of a 1273 trust the income of which mustis required tobe distributed to 1274 the grantor’s spouse and the assets of which consist 1275 substantially of property that does not provide the spouse with 1276 sufficient income from or use of the trust assets, and if the 1277 amounts the trustee transfers from principal to income under s. 1278 738.104 and distributes to the spouse from principal pursuant to 1279 the terms of the trust are insufficient to provide the spouse 1280 with the beneficial enjoyment required to obtain the marital 1281 deduction, the spouse may require the trustee to make property 1282 productive of income, convert property within a reasonable time, 1283 or exercise the power conferred by ss. 738.104 and 738.1041. The 1284 trustee may decide which action or combination of actions to 1285 take. 1286 Section 25. Subsections (2) and (3) of section 738.607, 1287 Florida Statutes, are amended to read: 1288 738.607 Derivatives and options.— 1289 (2) To the extent a fiduciarytrusteedoes not account 1290 under s. 738.403 for transactions in derivatives, the fiduciary 1291trusteeshall allocate to principal receipts from and 1292 disbursements made in connection with those transactions. 1293 (3) If a fiduciarytrusteegrants an option to buy property 1294 from the trust or estate whether or not the trust or estate owns 1295 the property when the option is granted, grants an option that 1296 permits another person to sell property to the trust or estate, 1297 or acquires an option to buy property for the trust or estate or 1298 an option to sell an asset owned by the trust or estate, and the 1299 fiduciarytrusteeor other owner of the asset is required to 1300 deliver the asset if the option is exercised, an amount received 1301 for granting the option shall be allocated to principal. An 1302 amount paid to acquire the option shall be paid from principal. 1303 A gain or loss realized upon the exercise of an option, 1304 including an option granted to a grantor of the trust or estate 1305 for services rendered, shall be allocated to principal. 1306 Section 26. Subsections (2) and (3) of section 738.608, 1307 Florida Statutes, are amended to read: 1308 738.608 Asset-backed securities.— 1309 (2) If a trust or estate receives a payment from interest 1310 or other current return and from other proceeds of the 1311 collateral financial assets, the fiduciarytrusteeshall 1312 allocate to income the portion of the payment which the payor 1313 identifies as being from interest or other current return and 1314shallallocate the balance of the payment to principal. 1315 (3) If a trust or estate receives one or more payments in 1316 exchange for the trust’s or estate’s entire interest in an 1317 asset-backed security during a single accounting period, the 1318 fiduciarytrusteeshall allocate the payments to principal. If a 1319 payment is one of a series of payments that will result in the 1320 liquidation of the trust’s or estate’s interest in the security 1321 over more than a single accounting period, the fiduciarytrustee1322 shall allocate 10 percent of the payment to income and the 1323 balance to principal. 1324 Section 27. Section 738.701, Florida Statutes, is amended 1325 to read: 1326 738.701 Disbursements from income.—A fiduciarytrustee1327 shall make the following disbursements from income to the extent 1328 they are not disbursements to which s. 738.201(2)(a) or (c)1329 applies: 1330 (1) One-half of the regular compensation of the fiduciary 1331trusteeand of any person providing investment advisory or 1332 custodial services to the fiduciarytrustee. 1333 (2) One-half of all expenses for accountings, judicial 1334 proceedings, or other matters that involve both the income and 1335 remainder interests. 1336 (3) All of the other ordinary expenses incurred in 1337 connection with the administration, management, or preservation 1338 of trust property and the distribution of income, including 1339 interest, ordinary repairs, regularly recurring taxes assessed 1340 against principal, and expenses of a proceeding or other matter 1341 that concerns primarily the income interest. 1342 (4) Recurring premiums on insurance covering the loss of a 1343 principal asset or the loss of income from or use of the asset. 1344 Section 28. Subsection (1) of section 738.702, Florida 1345 Statutes, is amended to read: 1346 738.702 Disbursements from principal.— 1347 (1) A fiduciarytrusteeshall make the following 1348 disbursements from principal: 1349 (a) The remaining one-half of the disbursements described 1350 in s. 738.701(1) and (2). 1351 (b) All of the trustee’s compensation calculated on 1352 principal as a fee for acceptance, distribution, or termination 1353 and disbursements made to prepare property for sale. 1354 (c) Payments on the principal of a trust debt. 1355 (d) Expenses of a proceeding that concerns primarily 1356 principal, including a proceeding to construe the trust or will, 1357 or to protect the trust, estate, or its property. 1358 (e) Premiums paid on a policy of insurance not described in 1359 s. 738.701(4) of which the trust or estate is the owner and 1360 beneficiary. 1361 (f) Estate, inheritance, and other transfer taxes, 1362 including penalties, apportioned to the trust. 1363 (g) Disbursements related to environmental matters, 1364 including reclamation, assessing environmental conditions, 1365 remedying and removing environmental contamination, monitoring 1366 remedial activities and the release of substances, preventing 1367 future releases of substances, collecting amounts from persons 1368 liable or potentially liable for the costs of such activities, 1369 penalties imposed under environmental laws or regulations and 1370 other payments made to comply with those laws or regulations, 1371 statutory or common law claims by third parties, and defending 1372 claims based on environmental matters. 1373 (h) Payments representing extraordinary repairs or expenses 1374 incurred in making a capital improvement to principal, including 1375 special assessments; however, a fiduciarytrusteemay establish 1376 an allowance for depreciation out of income to the extent 1377 permitted by s. 738.703. 1378 Section 29. Subsection (2) of section 738.703, Florida 1379 Statutes, is amended to read: 1380 738.703 Transfers from income to principal for 1381 depreciation.— 1382 (2) A fiduciarytrusteemay transfer to principal a 1383 reasonable amount of the net cash receipts from a principal 1384 asset that is subject to depreciation but may not transfer any 1385 amount for depreciation: 1386 (a) Of that portion of real property used or available for 1387 use by a beneficiary as a residence or of tangible personal 1388 property held or made available for the personal use or 1389 enjoyment of a beneficiary; 1390 (b) During the administration of a decedent’s estate; or 1391 (c) Under this section if the fiduciarytrusteeis 1392 accounting under s. 738.403 for the business or activity in 1393 which the asset is used. 1394 Section 30. Subsections (1), (2), and (3) of section 1395 738.704, Florida Statutes, are amended to read: 1396 738.704 Transfers from income to reimburse principal.— 1397 (1) If a fiduciarytrusteemakes or expects to make a 1398 principal disbursement described in this section, the fiduciary 1399trusteemay transfer an appropriate amount from income to 1400 principal in one or more accounting periods to reimburse 1401 principal or to provide a reserve for future principal 1402 disbursements. 1403 (2) Principal disbursements to which subsection (1) applies 1404 include the following, but only to the extent the fiduciary 1405trusteehas not been and does not expect to be reimbursed by a 1406 third party: 1407 (a) An amount chargeable to income but paid from principal 1408 because the amount is unusually large. 1409 (b) Disbursements made to prepare property for rental, 1410 including tenant allowances, leasehold improvements, and 1411 broker’s commissions. 1412 (c) Disbursements described in s. 738.702(1)(g). 1413 (3) If the asset the ownership of which gives rise to the 1414 disbursements becomes subject to a successive income interest 1415 after an income interest ends, a fiduciarytrusteemay continue 1416 to transfer amounts from income to principal as provided in 1417 subsection (1). 1418 Section 31. Section 738.705, Florida Statutes, is amended 1419 to read: 1420 738.705 Income taxes.— 1421 (1) A tax required to be paid by a fiduciarytrusteebased 1422 on receipts allocated to income shall be paid from income. 1423 (2) A tax required to be paid by a fiduciarytrusteebased 1424 on receipts allocated to principal shall be paid from principal, 1425 even if the tax is called an income tax by the taxing authority. 1426 (3) A tax required to be paid by a fiduciarytrusteeon the 1427 trust’s or estate’s share of an entity’s taxable income shall be 1428 paid proportionately: 1429 (a) From income to the extent receipts from the entity are 1430 allocated to income;and1431 (b) From principal to the extent:14321.receipts from the entity are allocated to principal; and14332. The trust’s share of the entity’s taxable income exceeds1434the total receipts described in paragraph (a) and subparagraph14351. 1436 (c) From principal to the extent that the income taxes 1437 payable by the trust or estate exceed the total receipts from 1438 the entity. 1439 (4) After applying subsections (1)-(3), the fiduciary shall 1440 adjust income or principal receipts to the extent that the 1441 trust’s or estate’s income taxes are reduced, but not 1442 eliminated, because the trust or estate receives a deduction for 1443 payments made to a beneficiary. The amount distributable to that 1444 beneficiary as income as a result of this adjustment shall be 1445 equal to the cash received by the trust or estate, reduced, but 1446 not below zero, by the entity’s taxable income allocable to the 1447 trust or estate multiplied by the trust’s or estate’s income tax 1448 rate. The reduced amount shall be divided by the difference 1449 between 1 and the trust’s or estate’s income tax rate in order 1450 to determine the amount distributable to that beneficiary as 1451 income before giving effect to other receipts or disbursements 1452 allocable to that beneficiary’s interest.For purposes of this1453section, receipts allocated to principal or income shall be1454reduced by the amount distributed to a beneficiary from1455principal or income for which the trust receives a deduction in1456calculating the tax.1457 Section 32. Section 738.801, Florida Statutes, is amended 1458 to read: 1459 (Substantial rewording of section. See 1460 s. 738.801, F.S., for present text.) 1461 738.801 Apportionment of expenses; improvements.— 1462 (1) For purposes of this section, the term: 1463 (a) “Remainderman” means the holder of the remainder 1464 interests after the expiration of a tenant’s estate in property. 1465 (b) “Tenant” means the holder of an estate for life or term 1466 of years in real property or personal property, or both. 1467 (2) If a trust has not been created, expenses shall be 1468 apportioned between the tenant and remainderman as follows: 1469 (a) The following expenses are allocated to and shall be 1470 paid by the tenant: 1471 1. All ordinary expenses incurred in connection with the 1472 administration, management, or preservation of the property, 1473 including interest, ordinary repairs, regularly recurring taxes 1474 assessed against the property, and expenses of a proceeding or 1475 other matter that concerns primarily the tenant’s estate or use 1476 of the property. 1477 2. Recurring premiums on insurance covering the loss of the 1478 property or the loss of income from or use of the property. 1479 3. Any of the expenses described in subparagraph (b)3. 1480 which are attributable to the use of the property by the tenant. 1481 (b) The following expenses are allocated to and shall be 1482 paid by the remainderman: 1483 1. Payments on the principal of a debt secured by the 1484 property, except to the extent the debt is for expenses 1485 allocated to the tenant. 1486 2. Expenses of a proceeding or other matter that concerns 1487 primarily the title to the property, other than title to the 1488 tenant’s estate. 1489 3. Except as provided in subparagraph (a)3., expenses 1490 related to environmental matters, including reclamation, 1491 assessing environmental conditions, remedying and removing 1492 environmental contamination, monitoring remedial activities and 1493 the release of substances, preventing future releases of 1494 substances, collecting amounts from persons liable or 1495 potentially liable for the costs of such activities, penalties 1496 imposed under environmental laws or regulations and other 1497 payments made to comply with those laws or regulations, 1498 statutory or common law claims by third parties, and defending 1499 claims based on environmental matters. 1500 4. Extraordinary repairs. 1501 (c) If the tenant or remainderman incurred an expense for 1502 the benefit of his or her own estate without consent or 1503 agreement of the other, he or she must pay such expense in full. 1504 (d) Except as provided in paragraph (c), the cost of, or 1505 special taxes or assessments for, an improvement representing an 1506 addition of value to property forming part of the principal 1507 shall be paid by the tenant if the improvement is not reasonably 1508 expected to outlast the estate of the tenant. In all other 1509 cases, only a part shall be paid by the tenant while the 1510 remainder shall be paid by the remainderman. The part payable by 1511 the tenant is ascertainable by taking that percentage of the 1512 total that is found by dividing the present value of the 1513 tenant’s estate by the present value of an estate of the same 1514 form as that of the tenant, except that it is limited for a 1515 period corresponding to the reasonably expected duration of the 1516 improvement. The computation of present values of the estates 1517 shall be made by using the rate defined in 26 U.S.C. s. 7520, 1518 then in effect and, in the case of an estate for life, the 1519 official mortality tables then in effect under 26 U.S.C. s. 1520 7520. Other evidence of duration or expectancy may not be 1521 considered. 1522 (3) This section does not apply to the extent it is 1523 inconsistent with the instrument creating the estates, the 1524 agreement of the parties, or the specific direction of the 1525 taxing or other statutes. 1526 (4) The common law applicable to tenants and remaindermen 1527 supplements this section, except as modified by this section or 1528 other laws. 1529 Section 33. This act shall take effect January 1, 2013.