Bill Text: FL S1316 | 2024 | Regular Session | Comm Sub
Bill Title: Florida Uniform Fiduciary Income and Principal Act
Spectrum: Slight Partisan Bill (? 2-1)
Status: (Introduced - Dead) 2024-03-01 - Laid on Table, refer to CS/HB 1093 [S1316 Detail]
Download: Florida-2024-S1316-Comm_Sub.html
Florida Senate - 2024 CS for CS for SB 1316
By the Committees on Rules; and Judiciary; and Senator Berman
595-03345-24 20241316c2
1 A bill to be entitled
2 An act relating to the Florida Uniform Fiduciary
3 Income and Principal Act; amending s. 738.101, F.S.;
4 revising a short title; amending s. 738.102, F.S.;
5 revising and providing definitions governing ch. 738,
6 F.S.; amending s. 738.103, F.S.; specifying the scope
7 of ch. 738, F.S.; amending s. 738.104, F.S.;
8 specifying circumstances under which ch. 738, F.S.,
9 applies to a trust; repealing s. 738.1041, F.S.,
10 relating to total return unitrusts; repealing s.
11 738.105, F.S., relating to judicial control of
12 discretionary powers; amending s. 738.201, F.S.;
13 specifying the duties of a fiduciary; providing that a
14 fiduciary’s allocation, determination, or exercise of
15 discretion is presumed to be fair and reasonable to
16 all beneficiaries; requiring a fiduciary to take
17 specified actions; authorizing a fiduciary to exercise
18 discretionary power of administration under specified
19 circumstances; requiring the fiduciary to consider
20 specified factors before exercising such discretionary
21 power; providing applicability; amending s. 738.202,
22 F.S.; defining the term “fiduciary decision”;
23 prohibiting a court from ordering a fiduciary to
24 change his or her decision unless the decision was an
25 abuse of discretionary power; prohibiting a court from
26 determining that a fiduciary abused his or her
27 discretion under specified conditions; authorizing a
28 court to order a specified remedy; authorizing a court
29 to determine whether a proposed fiduciary decision
30 will result in an abuse of discretion; providing that
31 a beneficiary who opposes a proposed decision has the
32 burden to establish that such decision is an abuse of
33 discretion; requiring that any attorney fees incurred
34 in defending an action related to the abuse of a
35 fiduciary’s discretion be paid from trust assets;
36 creating s. 738.203, F.S.; authorizing a fiduciary to
37 adjust between income and principal if such adjustment
38 assists in administering the trust or estate
39 impartially; providing construction; providing that a
40 fiduciary is not liable to another for an adjustment,
41 or failure to adjust, between income and principal
42 made in good faith; requiring a fiduciary to consider
43 certain relevant factors when considering such
44 adjustment; prohibiting a fiduciary from exercising or
45 considering such adjustment if certain conditions
46 exist; revising applicability; authorizing a fiduciary
47 to release or delegate to a cofiduciary specified
48 powers to adjust under specified conditions; providing
49 requirements and powers for any such releases and
50 delegations; providing applicability; requiring that
51 the description of an exercise of the power to adjust
52 between income and principal contain specified
53 information; amending s. 738.301, F.S.; defining
54 terms; amending s. 738.302, F.S.; specifying
55 applicability of specified provisions; authorizing the
56 conversion of an income trust to a unitrust;
57 restricting provisions to trusts that are
58 beneficiaries of an estate; providing construction;
59 providing that a fiduciary acting in good faith is not
60 liable to a person affected by a certain action or
61 inaction; amending s. 738.303, F.S.; specifying the
62 authority of a fiduciary with respect to the
63 administration of certain trusts; providing the
64 circumstances under which a fiduciary may perform such
65 actions; authorizing a beneficiary or a fiduciary to
66 request the court to allow the beneficiary or
67 fiduciary to take a specified action; requiring a
68 fiduciary to inform specified persons of a decision to
69 take action; authorizing a beneficiary to request a
70 court to direct the fiduciary to take the requested
71 action under specified circumstances; requiring
72 fiduciaries to consider specified factors before
73 taking a certain action; authorizing a fiduciary to
74 release or delegate the power to take certain actions;
75 creating s. 738.304, F.S.; requiring a certain notice
76 to be sent to specified parties; providing
77 applicability; authorizing a person to consent to a
78 specified action in a record; providing that such
79 person does not need to be sent notice of such action;
80 providing requirements for such notices; creating s.
81 738.305, F.S.; requiring a fiduciary of a unitrust to
82 follow a certain policy; providing rules for a
83 unitrust policy; providing additional actions a
84 unitrust policy may contain; creating s. 738.306,
85 F.S.; requiring a unitrust rate to be within a
86 specified range; authorizing a unitrust policy to
87 provide for specified limits within such range;
88 requiring a fiduciary who is a non-independent person
89 to use a specified unitrust rate; creating s. 738.307,
90 F.S.; requiring a unitrust policy to provide a
91 specified method for determining fair market value of
92 an asset in determining a unitrust amount; authorizing
93 specified unitrust policies to provide methods for
94 determining a certain net fair market value;
95 prohibiting certain property from being included in
96 the determination of the value of a trust; creating s.
97 738.308, F.S.; requiring a unitrust policy to provide
98 a specified period; specifying that such period must
99 be a calendar year; authorizing a unitrust policy to
100 provide certain standards for periods; creating s.
101 738.309, F.S.; providing applicability; authorizing a
102 trustee of an express unitrust to determine the
103 unitrust amount by reference to the net fair market
104 value of the unitrust’s assets in a specified
105 timeframe; providing that distribution of a unitrust
106 amount is considered a distribution of all the net
107 income of an express unitrust and is considered an
108 income interest; specifying that the unitrust amount
109 is considered a reasonable apportionment of the total
110 return of the express unitrust; providing that an
111 express unitrust that allows a distribution in excess
112 of a specified unitrust rate is considered a
113 distribution of all of the income of the unitrust;
114 authorizing an express unitrust to provide a mechanism
115 for changing the unitrust rate and for conversion from
116 a unitrust to an income trust or from an income trust
117 to a unitrust; specifying that unless an express
118 unitrust prohibits the power to change the rate or
119 convert the trust, the trustee has such power;
120 authorizing the governing instrument of an express
121 unitrust to grant the trustee discretion to adopt a
122 certain practice; specifying that unless an express
123 unitrust provides otherwise, the distribution of an
124 amount is considered a distribution from specified
125 sources in a specified order of priority; authorizing
126 a governing instrument of an express unitrust to allow
127 exclusion of specified assets; providing that the use
128 of such assets may be considered equivalent to income
129 or to the unitrust amount; creating s. 738.310, F.S.;
130 requiring a trustee, after the conversion of an income
131 trust to a unitrust, to consider the unitrust amount
132 paid from certain sources in a specified order of
133 priority; amending s. 738.401, F.S.; defining and
134 revising terms; specifying that an attribute or action
135 of an entity includes an attribute or action from any
136 other entity in which the initial entity has an
137 ownership interest or holds another interest;
138 requiring a fiduciary to allocate certain money and
139 tangible personal property to income; requiring a
140 fiduciary to allocate specified property and money to
141 principal; providing that certain money received in an
142 entity distribution is a capital distribution in
143 specified circumstances; specifying that in cases of
144 capital distribution, the amount received in an entity
145 distribution must be reduced to the extent that
146 cumulative distributions from the entity to the
147 fiduciary are within certain ranges; authorizing a
148 fiduciary to consider additional information before
149 deciding to make or change a decision to make a
150 payment to a beneficiary; providing that if a
151 fiduciary receives specified additional information
152 after a distribution to a beneficiary, the fiduciary
153 is not required to change or recover the payment;
154 authorizing a fiduciary in such a situation to
155 exercise other specified powers; revising definitions;
156 requiring a fiduciary to allocate certain money and
157 property to principal; providing the mechanism for
158 such allocation; defining the term “public entity”;
159 conforming provisions to changes made by the act;
160 amending s. 738.402, F.S.; conforming provisions to
161 changes made by the act; amending s. 738.403, F.S.;
162 providing applicability; authorizing a fiduciary to
163 make certain determinations separately and differently
164 from the decisions concerning distributions of income
165 or principal; conforming provisions to changes made by
166 the act; making technical changes; creating s.
167 738.404, F.S.; specifying receipts that a fiduciary
168 must allocate to principal; creating s. 738.405, F.S.;
169 providing for the allocation of income from rental
170 property; creating s. 738.406, F.S.; specifying
171 applicability; requiring a fiduciary to allocate to
172 income certain amounts received as interest; requiring
173 a fiduciary to allocate to income increments in value
174 of certain bonds or other obligations; creating s.
175 738.407, F.S.; specifying applicability; requiring a
176 fiduciary to allocate proceeds from insurance policies
177 or contracts to principal in a specified manner;
178 creating s. 738.408, F.S.; specifying circumstances
179 under which a fiduciary may allocate an insubstantial
180 allocation to principal, subject to certain conditions
181 and limitations; creating s. 738.409, F.S.; defining
182 terms; specifying the manner in which a fiduciary may
183 determine incomes of separate funds; providing duties
184 of a fiduciary of a marital trust and other trusts;
185 requiring a fiduciary of a nonseparate fund to
186 calculate internal income in a specified manner;
187 providing construction; transferring, renumbering, and
188 amending s. 738.603, F.S.; revising the definition of
189 the term “liquidating asset”; providing applicability;
190 requiring a fiduciary to allocate to income and
191 principal the receipts produced by liquidating assets
192 in a certain manner; transferring, renumbering, and
193 amending s. 738.604, F.S.; requiring a fiduciary to
194 allocate the receipts from interests in minerals,
195 water, or other natural resources to income,
196 principal, or between income and principal under
197 specified conditions; revising applicability;
198 providing that an allocation between income and
199 principal from a receipt from a natural resource is
200 presumed equitable under a specified condition;
201 providing construction; transferring, renumbering, and
202 amending s. 738.605, F.S.; requiring a fiduciary to
203 allocate receipts from timber to income, principal, or
204 between income and principal under specified
205 conditions; revising applicability; transferring,
206 renumbering, and amending s. 738.606, F.S.;
207 authorizing a settlor’s spouse to require the trustee
208 of a trust that receives certain property to make such
209 property produce income under specified conditions;
210 authorizing the trustee to take specified actions if
211 directed by such spouse; providing that the trustee
212 decides whether to take one or a combination of such
213 actions; revising applicability; providing
214 construction; transferring, renumbering, and amending
215 s. 738.607, F.S.; revising the definition of the term
216 “derivative”; requiring a fiduciary to allocate
217 specified percentages of certain receipts and
218 disbursements to income and allocate the balance to
219 principal; providing construction; requiring certain
220 fiduciaries to allocate a specified percentage to
221 income and allocate the balance to principal of
222 certain amounts; transferring, renumbering, and
223 amending s. 738.608, F.S.; requiring a fiduciary to
224 allocate to income a receipt from or related to asset
225 backed securities under a specified condition;
226 requiring a fiduciary to allocate to income a
227 specified percentage of receipts from the transaction
228 and the disbursement of a payment received as a result
229 of an interest in an asset-backed security; conforming
230 provisions to changes made by the act; creating s.
231 738.416, F.S.; requiring a fiduciary to make specified
232 allocations from receipts from other financial
233 instruments or arrangements; providing construction;
234 amending s. 738.501, F.S.; specifying the manner by
235 which a fiduciary must make disbursements from income;
236 amending s. 738.502, F.S.; specifying the manner by
237 which a fiduciary must make disbursements from
238 principal; amending s. 738.503, F.S.; defining the
239 term “depreciation”; specifying the manner by which a
240 fiduciary may make transfers from income to principal
241 to account for depreciation; amending s. 738.504,
242 F.S.; specifying the manner by which a fiduciary may
243 make transfers from principal to income for
244 reimbursements; transferring, renumbering, and
245 amending s. 738.704, F.S.; providing that a fiduciary
246 that makes or expects to make a certain principal
247 disbursement may transfer an appropriate amount from
248 income to principal in one or more accounting periods;
249 providing applicability; making technical changes;
250 deleting a provision relating to payments necessary to
251 avoid defaulting on a mortgage or security interest on
252 certain property; transferring, renumbering, and
253 amending s. 738.705, F.S.; revising the sources from
254 which a fiduciary must pay a tax required by a share
255 of an entity’s taxable income; requiring a fiduciary
256 to adjust income or principal receipts if the taxes
257 paid are reduced due to a deduction for a payment made
258 to a beneficiary; providing construction; making
259 technical changes; transferring, renumbering, and
260 amending s. 738.706, F.S.; revising the circumstances
261 under which a fiduciary may make adjustments between
262 income and principal to offset shifts in the economic
263 interests or tax benefits of specified beneficiaries;
264 requiring a fiduciary to charge a beneficiary to
265 reimburse the principal if the beneficiary benefits
266 from an applicable tax deduction; requiring the share
267 of reimbursement for each fiduciary or beneficiary to
268 be the same as its share of the decrease in income
269 tax; authorizing such fiduciary to charge a
270 beneficiary to offset the estate tax by obtaining
271 payment from the beneficiary, withholding an amount
272 from future distributions, or adopting another method
273 or combination of methods; creating s. 738.508, F.S.;
274 defining terms; specifying the manner by which
275 property expenses are apportioned between a tenant and
276 remainderman; providing applicability and
277 construction; amending s. 738.601, F.S.; providing
278 applicability; specifying the manner by which a
279 fiduciary determines and distributes net income;
280 providing circumstances under which a fiduciary may
281 not reduce certain principal or income receipts;
282 amending s. 738.602, F.S.; providing that certain
283 beneficiaries of non-unitrusts are entitled to receive
284 a specified share of net income; providing that
285 certain requirements apply in determining a
286 beneficiary’s share of net income; providing
287 construction; amending s. 738.701, F.S.; providing
288 that an income beneficiary is entitled to net income
289 when an asset is subject to a certain trust or
290 successive interest; providing that an asset becomes
291 subject to a specified trust on certain dates;
292 amending s. 738.702, F.S.; specifying the manner by
293 which a fiduciary allocates certain receipts and makes
294 disbursements when a decedent dies or income interest
295 begins; providing construction; amending s. 738.703,
296 F.S.; defining the term “undistributed income”;
297 specifying the manner by which a fiduciary makes
298 allocations of undistributed income when income
299 interest ends; amending s. 738.801, F.S.; providing
300 for uniform application and construction of the act;
301 amending s. 738.802, F.S.; providing construction in
302 relation to federal law; amending s. 738.803, F.S.;
303 making a technical change; amending s. 738.804, F.S.;
304 revising the application of ch. 738, F.S., to conform
305 to changes made by the act; providing an effective
306 date.
307
308 Be It Enacted by the Legislature of the State of Florida:
309
310 Section 1. Section 738.101, Florida Statutes, is amended to
311 read:
312 738.101 Short title.—This chapter may be cited as the
313 “Florida Uniform Fiduciary Income and Principal and Income Act.”
314 Section 2. Section 738.102, Florida Statutes, is amended to
315 read:
316 738.102 Definitions.—As used in this chapter, the term:
317 (1) “Accounting period” means a calendar year unless
318 another 12-month period is selected by a fiduciary selects
319 another period of 12 calendar months or approximately 12
320 calendar months. The term includes a part portion of a calendar
321 year or another period of 12 calendar months or approximately 12
322 calendar months which other 12-month period that begins when an
323 income interest begins or ends when an income interest ends.
324 (2) “Asset-backed security,” as provided in s. 738.415,
325 means a security that is serviced primarily by the cash flows of
326 a discrete pool of fixed or revolving receivables or other
327 financial assets that by their terms convert to cash within a
328 finite time. The term includes rights or other assets that
329 ensure the servicing or timely distribution of proceeds to the
330 holder of the asset-backed security. The term does not include
331 an asset to which s. 738.401, s. 738.409, or s. 738.414 applies.
332 (3) “Beneficiary” includes:
333 (a) For a trust:
334 1. A current beneficiary, including a current income
335 beneficiary and a beneficiary that may receive only principal;
336 2. A remainder beneficiary; and
337 3. Any other successor beneficiary;
338 (b) For an estate, an heir, and a devisee; and
339 (c) For a life estate or term interest, a person who holds
340 a life estate, a term interest, or a remainder or other interest
341 following a life estate or term interest means, in the case of a
342 decedent’s estate, an heir or devisee and, in the case of a
343 trust, an income beneficiary or a remainder beneficiary.
344 (4)(3) “Carrying value” means the fair market value at the
345 time the assets are received by the fiduciary. For an estate and
346 for a trust the estates of decedents and trusts described in s.
347 733.707(3), after the settlor’s grantor’s death, the assets are
348 considered received as of the date of the settlor’s death. If
349 there is a change in fiduciaries, a majority of the continuing
350 fiduciaries may elect to adjust the carrying values to reflect
351 the fair market value of the assets at the beginning of their
352 administration. If such election is made, it must be reflected
353 on the first accounting filed after the election. For assets
354 acquired during the administration of the estate or trust, the
355 carrying value is equal to the acquisition costs of the asset.
356 Carrying value of assets should not be arbitrarily “written up”
357 or “written down.” In some circumstances, including, but not
358 limited to, those described in ss. 738.410 and 738.602, carrying
359 value may be adjusted with proper disclosure to reflect changes
360 in carrying value applied in a consistent manner.
361 (5) “Court” means a circuit court of this state.
362 (6) “Current income beneficiary” means a beneficiary to
363 which a fiduciary may or must distribute net income, regardless
364 of whether the fiduciary also distributes principal to the
365 beneficiary.
366 (7) “Distribution” means a payment or transfer by a
367 fiduciary to a beneficiary in the beneficiary’s capacity as a
368 beneficiary, without consideration other than the beneficiary’s
369 right to receive the payment or transfer under the terms of the
370 trust as defined in subsection (24), or in a will, life estate,
371 or term interest. “Distribute,” “distributed,” and “distributee”
372 have corresponding meanings.
373 (8) “Estate” means a decedent’s estate, including the
374 property of the decedent as the estate is originally constituted
375 and the property of the estate as it exists at any time during
376 administration.
377 (9)(4) “Fiduciary” includes means a trustee, a trust
378 director as defined in s. 736.0103, or a personal
379 representative, and a person acting under a delegation from a
380 fiduciary or a trustee. The term also includes a person that
381 holds property for a successor beneficiary whose interest may be
382 affected by an allocation of receipts and expenditures between
383 income and principal. If there are two or more cofiduciaries,
384 the term includes all cofiduciaries acting under the terms of
385 the trust and applicable law an executor, administrator,
386 successor personal representative, special administrator, or a
387 person performing substantially the same function.
388 (10)(5) “Income” means money or other property that a
389 fiduciary receives as current return from a principal asset. The
390 term includes a part portion of receipts from a sale, exchange,
391 or liquidation of a principal asset, to the extent provided in
392 ss. 738.401-738.416 ss. 738.401-738.403 and s. 738.503.
393 (6) “Income beneficiary” means a person to whom net income
394 of a trust is or may be payable.
395 (11)(7) “Income interest” means the right of a current an
396 income beneficiary to receive all or part of net income, whether
397 the terms of the trust require the net income to be distributed
398 or authorize the net income to be distributed in the fiduciary’s
399 trustee’s discretion. The term includes the right of a current
400 beneficiary to use property held by a fiduciary.
401 (12) “Independent person” means a person who is not:
402 (a) For a trust:
403 1. A qualified beneficiary as defined in s. 736.0103;
404 2. A settlor of the trust;
405 3. An individual whose legal obligation to support a
406 beneficiary may be satisfied by a distribution from the trust;
407 or
408 4. Any trustee whom an interested distributee has the power
409 to remove and replace with a related or subordinate party.
410 (b) For an estate, a beneficiary;
411 (c) A spouse, a parent, a brother, a sister, or an issue of
412 an individual described in paragraph (a) or paragraph (b);
413 (d) A corporation, a partnership, a limited liability
414 company, or another entity in which persons described in
415 paragraphs (a), (b), and (c), in the aggregate, have voting
416 control; or
417 (e) An employee of a person described in paragraph (a),
418 paragraph (b), paragraph (c), or paragraph (d).
419 (13) “Internal Revenue Code” means the Internal Revenue
420 Code of 1986, as amended.
421 (14)(8) “Mandatory income interest” means the right of a
422 current an income beneficiary to receive net income that the
423 terms of the trust require the fiduciary to distribute.
424 (15)(9) “Net income” means the total allocations receipts
425 allocated to income during an accounting period to income under
426 the terms of a trust and this chapter minus the disbursements
427 made from income during the period, other than distributions,
428 allocated to income under the terms of the trust and this
429 chapter. To the extent that the trust is a unitrust under ss.
430 738.301-738.310, the term means the unitrust amount determined
431 under ss. 738.301-738.310. The term includes the amount of an
432 adjustment from principal to income under s. 738.203. The term
433 does not include the amount of an adjustment plus or minus
434 transfers under this chapter to or from income to principal
435 under s. 738.203 during the period.
436 (16)(10) “Person” means an individual, a business or a
437 nonprofit entity, corporation, business trust, an estate, a
438 trust, partnership, limited liability company, association,
439 joint venture, a public corporation, or any other legal or
440 commercial entity or a government or governmental subdivision,
441 agency, or instrumentality, or other legal entity.
442 (17) “Personal representative” means an executor, an
443 administrator, a successor personal representative, a special
444 administrator, or a person that performs substantially the same
445 function with respect to an estate under the law governing the
446 person’s status.
447 (18)(11) “Principal” means property held in trust for
448 distribution to, production of income for, or use by a current
449 or successor a remainder beneficiary when the trust terminates.
450 (19) “Record” means information inscribed on a tangible
451 medium or stored in an electronic or other medium and is
452 retrievable in perceivable form.
453 (20) “Settlor” means a person, including a testator, who
454 creates or contributes property to a trust. If more than one
455 person creates or contributes property to a trust, the term
456 includes each person, to the extent of the trust property
457 attributable to that person’s contribution, except to the extent
458 that another person has the power to revoke or withdraw that
459 portion.
460 (21) “Special tax benefit” means:
461 (a) Exclusion of a transfer to a trust from gifts described
462 in s. 2503(b) of the Internal Revenue Code because of the
463 qualification of an income interest in the trust as a present
464 interest in property;
465 (b) Status as a qualified subchapter S trust described in
466 s. 1361(d)(3) of the Internal Revenue Code at a time the trust
467 holds stock of an S corporation described in s. 1361(a)(1) of
468 the Internal Revenue Code;
469 (c) An estate or gift tax marital deduction for a transfer
470 to a trust under s. 2056 or s. 2523 of the Internal Revenue Code
471 which depends or depended in whole or in part on the right of
472 the settlor’s spouse to receive the net income of the trust;
473 (d) Exemption in whole or in part of a trust from the
474 federal generation-skipping transfer tax imposed by s. 2601 of
475 the Internal Revenue Code because the trust was irrevocable on
476 September 25, 1985, if there is any possibility that:
477 1. A taxable distribution as defined in s. 2612(b) of the
478 Internal Revenue Code could be made from the trust; or
479 2. A taxable termination as defined in s. 2612(a) of the
480 Internal Revenue Code could occur with respect to the trust; or
481 (e) An inclusion ratio as defined in s. 2642(a) of the
482 Internal Revenue Code of the trust which is less than one, if
483 there is any possibility that:
484 1. A taxable distribution as defined in s. 2612(b) of the
485 Internal Revenue Code could be made from the trust; or
486 2. A taxable termination as defined in s. 2612(a) of the
487 Internal Revenue Code could occur with respect to the trust.
488 (22) “Successive interest” means the interest of a
489 successor beneficiary.
490 (23)(12) “Successor Remainder beneficiary” means a person
491 entitled to receive income or principal or to use property when
492 an income interest or other current interest ends.
493 (24)(13) “Terms of a trust” means:
494 (a) Except as otherwise provided in paragraph (b), the
495 manifestation of the settlor’s intent regarding a trust’s
496 provisions as:
497 1. Expressed in the will or trust instrument; or
498 2. Established by other evidence that would be admissible
499 in a judicial proceeding.
500 (b) The trust’s provisions as established, determined, or
501 amended by:
502 1. A trustee or trust director in accordance with the
503 applicable law;
504 2. A court order; or
505 3. A nonjudicial settlement agreement under s. 736.0111.
506 (c) For an estate, a will; or
507 (d) For a life estate or term interest, the corresponding
508 manifestation of the rights of the beneficiaries to the extent
509 provided in s. 738.508 the manifestation of the intent of a
510 grantor or decedent with respect to the trust, expressed in a
511 manner that admits of its proof in a judicial proceeding,
512 whether by written or spoken words or by conduct.
513 (25) “Trust” includes an express trust, whether private or
514 charitable, with additions to the trust, wherever and however
515 created; and a trust created or determined by a judgment or
516 decree under which the trust is to be administered in the manner
517 of an express trust. The term does not include a constructive
518 trust; a resulting trust; a conservatorship; a custodial
519 arrangement under the Florida Uniform Transfers to Minors Act; a
520 business trust providing for certificates to be issued to
521 beneficiaries; a common trust fund; a land trust under s.
522 689.071; a trust created by the form of the account or by the
523 deposit agreement at a financial institution; a voting trust; a
524 security arrangement; a liquidation trust; a trust for the
525 primary purpose of paying debts, dividends, interest, salaries,
526 wages, profits, pensions, retirement benefits, or employee
527 benefits of any kind; or an arrangement under which a person is
528 a nominee, an escrowee, or an agent for another.
529 (26)(14) “Trustee” means a person, other than a personal
530 representative, that owns or holds property for the benefit of a
531 beneficiary. The term includes an original, additional, or
532 successor trustee, regardless of whether they are or not
533 appointed or confirmed by a court.
534 (27) “Will” means any testamentary instrument recognized
535 under applicable law which makes a legally effective disposition
536 of an individual’s property, effective at the individual’s
537 death. The term includes a codicil or other amendment to a
538 testamentary instrument.
539 Section 3. Section 738.103, Florida Statutes, is amended to
540 read:
541 (Substantial rewording of section. See
542 s. 738.103, F.S., for present text.)
543 738.103 Scope.—Except as otherwise provided in the terms of
544 a trust or this chapter, this chapter applies to all of the
545 following:
546 (1) A trust or an estate.
547 (2) A life estate or other term interest in which the
548 interest of one or more persons will be succeeded by the
549 interest of one or more other persons to the extent provided in
550 s. 738.508.
551 Section 4. Section 738.104, Florida Statutes, is amended to
552 read:
553 (Substantial rewording of section. See
554 s. 738.104, F.S., for present text.)
555 738.104 Governing law.—Except as otherwise provided in the
556 terms of a trust or this chapter, this chapter applies when this
557 state is the principal place of administration of a trust or
558 estate or the situs of property that is not held in a trust or
559 estate and is subject to a life estate or other term interest
560 described in s. 738.103(2). By accepting the trusteeship of a
561 trust having its principal place of administration in this state
562 or by moving the principal place of administration of a trust to
563 this state, the trustee submits to the application of this
564 chapter to any matter within the scope of this chapter involving
565 the trust.
566 Section 5. Section 738.1041, Florida Statutes, is repealed.
567 Section 6. Section 738.105, Florida Statutes, is repealed.
568 Section 7. Section 738.201, Florida Statutes, is amended to
569 read:
570 (Substantial rewording of section. See
571 s. 738.201, F.S., for present text.)
572 738.201 Fiduciary duties; general principles.—
573 (1) In making an allocation or determination or exercising
574 discretion under this chapter, a fiduciary shall do all of the
575 following:
576 (a) Act in good faith, based on what is a fair and
577 reasonable fee to all beneficiaries.
578 (b) Administer a trust or estate impartially, except to the
579 extent that the terms of the trust manifest an intent that the
580 fiduciary favors one or more beneficiaries.
581 (c) Administer the trust or estate in accordance with the
582 terms of the trust, even if there is a different provision in
583 this chapter.
584 (d) Administer the trust or estate in accordance with this
585 chapter, except to the extent that the terms of the trust
586 provide otherwise or authorize the fiduciary to determine
587 otherwise.
588 (2) A fiduciary’s allocation, determination, or exercise of
589 discretion under this chapter is presumed to be fair and
590 reasonable to all beneficiaries. A fiduciary may exercise a
591 discretionary power of administration given to the fiduciary by
592 the terms of the trust, and an exercise of the power that
593 produces a result different from a result required or permitted
594 by this chapter does not create an inference that the fiduciary
595 abused the fiduciary’s discretion.
596 (3) A fiduciary shall:
597 (a) Add a receipt to principal, to the extent that the
598 terms of the trust and this chapter do not allocate the receipt
599 between income and principal;
600 (b) Charge a disbursement to principal, to the extent that
601 the terms of the trust and this chapter do not allocate the
602 disbursement between income and principal; and
603 (c) Within 65 days after the fiscal year ends, add any
604 undistributed income to principal, unless otherwise provided by
605 the terms of the trust.
606 (4) A fiduciary may exercise the power to adjust under s.
607 738.203(1), convert an income trust to a unitrust under ss.
608 738.301-738.310, change the percentage or method used to
609 calculate a unitrust amount under ss. 738.301-738.310, or
610 convert a unitrust to an income trust under ss. 738.301-738.310
611 if the fiduciary determines the exercise of the power will
612 assist the fiduciary to administer the trust or estate
613 impartially.
614 (5) The fiduciary must consider the following factors in
615 making the determination in subsection (4), including:
616 (a) The terms of the trust.
617 (b) The nature, distribution standards, and expected
618 duration of the trust.
619 (c) The effect of the allocation rules, including specific
620 adjustments between income and principal, under ss. 738.301
621 738.416.
622 (d) The desirability of liquidity and regularity of income.
623 (e) The desirability of the preservation and appreciation
624 of principal.
625 (f) The extent to which an asset is used or may be used by
626 a beneficiary.
627 (g) The increase or decrease in the value of principal
628 assets, reasonably determined by the fiduciary.
629 (h) Whether and to what extent the terms of the trust give
630 the fiduciary power to accumulate income or invade principal or
631 prohibit the fiduciary from accumulating income or invading
632 principal.
633 (i) The extent to which the fiduciary has accumulated
634 income or invaded principal in preceding accounting periods.
635 (j) The effect of current and reasonably expected economic
636 conditions.
637 (k) The reasonably expected tax consequences of the
638 exercise of the power.
639 (l) The identities and circumstances of the beneficiaries.
640 (6) Except as provided in ss. 738.301-738.310, this chapter
641 pertains to the administration of a trust and is applicable to
642 any trust that is administered in this state or under its law.
643 This chapter also applies to any estate that is administered in
644 this state unless the provision is limited in application to a
645 trustee, rather than a fiduciary.
646 Section 8. Section 738.202, Florida Statutes, is amended to
647 read:
648 (Substantial rewording of section. See
649 s. 738.202, F.S., for present text.)
650 738.202 Judicial review of exercise of discretionary power;
651 request for instruction.—
652 (1) As used in this section, the term “fiduciary decision”
653 means any of the following:
654 (a) A fiduciary’s allocation between income and principal
655 or other determination regarding income and principal required
656 or authorized by the terms of the trust or this chapter.
657 (b) The fiduciary’s exercise or nonexercise of a
658 discretionary power regarding income and principal granted by
659 the terms of the trust or this chapter, including the power to
660 adjust under s. 738.203, convert an income trust to a unitrust
661 under ss. 738.301-738.310, change the percentage or method used
662 to calculate a unitrust amount under ss. 738.301-738.310,
663 convert a unitrust to an income trust under ss. 738.301-738.310,
664 or the method used to make property productive of income under
665 s. 738.413.
666 (c) The fiduciary’s implementation of a decision described
667 in paragraph (a) or paragraph (b).
668 (2) The court may not order a fiduciary to change a
669 fiduciary decision unless the court determines that the
670 fiduciary decision was an abuse of the fiduciary’s discretion. A
671 court may not determine that a fiduciary abused its discretion
672 merely because the court would have exercised the discretion in
673 a different manner or would not have exercised the discretion.
674 (3) If the court determines that a fiduciary decision was
675 an abuse of the fiduciary’s discretion, the court may order a
676 remedy authorized by law, including those prescribed under ss.
677 736.1001 and 736.1002. Following such a determination by the
678 court, the remedy is to place the beneficiaries in the positions
679 the beneficiaries would have occupied if the fiduciary had not
680 abused its discretion, as follows:
681 (a) The court may order the fiduciary to exercise or
682 refrain from exercising the power to adjust under s. 738.203;
683 (b) The court may order the fiduciary to exercise or
684 refrain from exercising the power to convert an income trust to
685 a unitrust under ss. 738.301-738.310, change the percentage or
686 method used to calculate a unitrust amount under ss. 738.301
687 738.310, or convert a unitrust to an income trust under ss.
688 738.301-738.310;
689 (c) The court may compel the fiduciary to take any of the
690 actions listed under s. 738.413;
691 (d) To the extent that the abuse of discretion has resulted
692 in no distribution to a beneficiary or a distribution that is
693 too small, the court shall require the fiduciary to distribute
694 from the trust to the beneficiary an amount the court determines
695 will restore the beneficiary, in whole or in part, to his or her
696 appropriate position;
697 (e) To the extent that the abuse of discretion has resulted
698 in a distribution to a beneficiary that is too large, the court
699 shall restore the beneficiaries, the trust, or both, in whole or
700 in part, to their appropriate positions by requiring the
701 fiduciary to withhold an amount from one or more future
702 distributions to the beneficiary who received the distribution
703 that was too large or requiring that beneficiary to return some
704 or all of the distribution to the trust; or
705 (f) To the extent that the court is unable, after applying
706 paragraphs (a)-(e), to restore the beneficiaries or the trust,
707 or both, to the positions they would have occupied if the
708 fiduciary had not abused its discretion, the court may require
709 the fiduciary to pay an appropriate amount from its own funds to
710 one or more of the beneficiaries or the trust or both.
711 (4) On petition by the fiduciary for instruction, the court
712 may determine whether a proposed fiduciary decision will result
713 in an abuse of the fiduciary’s discretion. If the petition
714 describes the proposed decision, contains sufficient information
715 to inform the beneficiary of the reasons for making the proposed
716 decision and the facts on which the fiduciary relies, and
717 explains how the beneficiary will be affected by the proposed
718 decision, a beneficiary who opposes the proposed decision has
719 the burden to establish that it will result in an abuse of the
720 fiduciary’s discretion.
721 (5) If an action is instituted alleging an abuse of
722 discretion in the exercise or nonexercise of the fiduciary’s
723 discretion under this chapter and the court determines no abuse
724 of discretion has occurred, the fiduciary’s costs and attorney
725 fees incurred in defending the action shall be paid from the
726 trust assets.
727 Section 9. Section 738.203, Florida Statutes, is created to
728 read:
729 738.203 Fiduciary’s power to adjust.—
730 (1) Except as otherwise provided in the terms of a trust or
731 this section, a fiduciary, in a record without court approval,
732 may adjust between income and principal if the fiduciary
733 determines that the exercise of the power to adjust will assist
734 the fiduciary in administering the trust or estate impartially.
735 (2) This section does not create a duty to exercise or
736 consider the power to adjust under subsection (1) or to inform a
737 beneficiary about the applicability of this section.
738 (3) A fiduciary that in good faith exercises or fails to
739 exercise the power to adjust under subsection (1) is not liable
740 to a person affected by the exercise or failure to exercise.
741 (4) In deciding whether and to what extent to exercise the
742 power to adjust under subsection (1), a fiduciary shall consider
743 all factors the fiduciary considers relevant, including relevant
744 factors in s. 738.201(5), and the application of ss. 738.401(9),
745 738.408 and 738.413.
746 (5) A fiduciary may not exercise the power under subsection
747 (1) to make an adjustment or under s. 738.408 to make a
748 determination that an allocation is insubstantial if:
749 (a) The adjustment or determination would reduce the amount
750 payable to a current income beneficiary from a trust that
751 qualifies for a special tax benefit, except to the extent that
752 the adjustment is made to provide for a reasonable apportionment
753 of the total return of the trust between the current income
754 beneficiary and successor beneficiaries;
755 (b) The adjustment or determination would change the amount
756 payable to a beneficiary, as a fixed annuity or a fixed fraction
757 of the value of the trust assets, under the terms of the trust;
758 (c) The adjustment or determination would reduce an amount
759 that is permanently set aside for a charitable purpose under the
760 terms of the trust unless both income and principal are set
761 aside for the charitable purpose;
762 (d) Possessing or exercising the power would cause a person
763 to be treated as the owner of all or part of the trust for
764 federal income tax purposes and the person would not be treated
765 as the owner if the fiduciary did not possess the power to
766 adjust;
767 (e) Possessing or exercising the power would cause all or
768 part of the value of the trust assets to be included in the
769 gross estate of an individual for federal real estate tax
770 purposes and the assets would not be included in the gross
771 estate of the individual if the fiduciary did not possess the
772 power to adjust;
773 (f) Possessing or exercising the power would cause an
774 individual to be treated as making a gift for federal gift tax
775 purposes;
776 (g) The fiduciary is not an independent person;
777 (h) The trust is irrevocable and provides for income to be
778 paid to the settlor, and possessing or exercising the power
779 would cause the adjusted principal or income to be considered an
780 available resource or available income under a public-benefit
781 program; or
782 (i) The trust is a unitrust under ss. 738.301-738.310.
783 (6) If paragraph (5)(d), paragraph (5)(e), paragraph
784 (5)(f), or paragraph (5)(g) applies to a fiduciary:
785 (a) A cofiduciary to which paragraphs (5)(d)-(g) do not
786 apply may exercise the power to adjust, unless the exercise of
787 the power by the remaining cofiduciary or cofiduciaries is not
788 permitted by the terms of the trust or law other than this
789 chapter; or
790 (b) If there is no cofiduciary to which paragraphs (5)(d)
791 (g) do not apply, the fiduciary may appoint a cofiduciary to
792 which paragraphs (5)(d)-(g) do not apply which may be a special
793 fiduciary with limited powers, and the appointed cofiduciary may
794 exercise the power to adjust under subsection (1), unless the
795 appointment of a cofiduciary or the exercise of the power by a
796 cofiduciary is not permitted by the terms of the trust or law
797 other than this chapter.
798 (7) A fiduciary may release or delegate to a cofiduciary
799 the power to adjust under subsection (1) if the fiduciary
800 determines that the fiduciary’s possession or exercise of the
801 power will or may:
802 (a) Cause a result described in paragraph (5)(a), paragraph
803 (5)(b), paragraph (5)(c), paragraph (5)(d), paragraph (5)(e),
804 paragraph (5)(f), or paragraph (5)(h); or
805 (b) Deprive the trust of a tax benefit or impose a tax
806 burden not described in paragraph (5)(a), paragraph (5)(b),
807 paragraph (5)(c), paragraph (5)(d), paragraph (5)(e), or
808 paragraph (5)(f).
809 (8) A fiduciary’s release or delegation to a cofiduciary
810 under subsection (7) of the power to adjust under subsection
811 (1):
812 (a) Must be in a record;
813 (b) Applies to the entire power, unless the release or
814 delegation provides a limitation, which may be a limitation to
815 the power to adjust:
816 1. From income to principal;
817 2. From principal to income;
818 3. For specified property; or
819 4. In specified circumstances;
820 (c) For a delegation, may be modified by a redelegation
821 under this subsection by the cofiduciary to which the delegation
822 is made; and
823 (d) Subject to paragraph (c), is permanent, unless the
824 release or delegation provides a specified period, including a
825 period measured by the life of an individual or the lives of
826 more than one individual.
827 (9) Terms of a trust that deny or limit the power to adjust
828 between income and principal do not affect the application of
829 this section, unless the terms of the trust expressly deny or
830 limit the power to adjust under subsection (1).
831 (10) The exercise of the power to adjust under subsection
832 (1) in any accounting period may apply to the current period,
833 the immediately preceding period, and one or more subsequent
834 periods.
835 (11) A description of the exercise of the power to adjust
836 under subsection (1) must be:
837 (a) Included in a report, if any, sent to beneficiaries
838 under s. 736.0813; or
839 (b) Communicated at least annually to the qualified
840 beneficiaries as defined in s. 736.0103 other than the Attorney
841 General.
842 (12) With respect to a trust in existence on January 1,
843 2003:
844 (a) A fiduciary may not have the power to adjust under this
845 section until the statement required in subsection (13) is
846 provided and either no objection is made or any objection which
847 is made has been terminated.
848 1. An objection is made if, within 60 days after the date
849 of the statement required in subsection (13), a super majority
850 of the eligible beneficiaries deliver to the fiduciary a written
851 objection to the application of this section to such trust. An
852 objection shall be deemed to be delivered to the fiduciary on
853 the date the objection is mailed to the mailing address listed
854 in the notice provided in subsection (13).
855 2. An objection is terminated upon the earlier of the
856 receipt of consent from a super majority of eligible
857 beneficiaries of the class that made the objection, or the
858 resolution of the objection under paragraph (c).
859 (b) An objection or consent under this section may be
860 executed by a legal representative or natural guardian of a
861 beneficiary without the filing of any proceeding or approval of
862 any court.
863 (c) If an objection is delivered to the fiduciary, then the
864 fiduciary may petition the circuit court for an order quashing
865 the objection and vesting in such fiduciary the power to adjust
866 under this section. The burden will be on the objecting
867 beneficiaries to prove that the power to adjust would be
868 inequitable, illegal, or otherwise in contravention of the
869 settlor’s intent. The court may award costs and attorney fees
870 relating to the fiduciary’s petition in the same manner as in
871 chancery actions. When costs and attorney fees are to be paid
872 out of the trust, the court may, in its discretion, direct from
873 which part of the trust they shall be paid.
874 (d) If no timely objection is made or if the fiduciary is
875 vested with the power to adjust by court order, the fiduciary
876 may thereafter exercise the power to adjust without providing
877 notice of its intent to do so unless, in vesting the fiduciary
878 with the power to adjust, the court determines that unusual
879 circumstances require otherwise.
880 (e)1. If a fiduciary makes a good faith effort to comply
881 with the notice provisions of subsection (13), but fails to
882 deliver notice to one or more beneficiaries entitled to such
883 notice, neither the validity of the notice required under this
884 subsection nor the fiduciary’s power to adjust under this
885 section shall be affected until the fiduciary has actual notice
886 that one or more beneficiaries entitled to notice were not
887 notified. Until the fiduciary has actual notice of the notice
888 deficiency, the fiduciary shall have all of the powers and
889 protections granted a fiduciary with the power to adjust under
890 this chapter.
891 2. When the fiduciary has actual notice that one or more
892 beneficiaries entitled to notice under subsection (13) were not
893 notified, the fiduciary’s power to adjust under this section
894 shall cease until all beneficiaries who are entitled to such
895 notice, including those who were previously provided with such
896 notice, are notified and given the opportunity to object as
897 provided for under this subsection.
898 (f) The objection of a super majority of eligible
899 beneficiaries under this subsection shall be valid for a period
900 of 1 year after the date of the notice set forth in subsection
901 (13). Upon expiration of the objection, the fiduciary may
902 thereafter give a new notice under subsection (13).
903 (g) This section is not intended to create or imply a duty
904 of the fiduciary of a trust existing on January 1, 2003, to seek
905 a power to adjust under this subsection or to give the notice
906 described in subsection (13) if the fiduciary does not desire to
907 have a power to adjust under this section, and no inference of
908 impropriety shall be made as the result of a fiduciary not
909 seeking a power to adjust under this subsection.
910 (13)(a) A fiduciary of a trust in existence on January 1,
911 2003, that is not prohibited under subsection (5) from
912 exercising the power to adjust shall, any time before initially
913 exercising the power, provide to all eligible beneficiaries a
914 statement containing the following:
915 1. The name, telephone number, street address, and mailing
916 address of the fiduciary and of any person who may be contacted
917 for further information;
918 2. A statement that unless a super majority of the eligible
919 beneficiaries objects to the application of this section to the
920 trust within 60 days after the date the statement pursuant to
921 this subsection was served, this section shall apply to the
922 trust; and
923 3. A statement that, if this section applies to the trust,
924 the fiduciary will have the power to adjust between income and
925 principal and that such a power may have an effect on the
926 distributions to such beneficiary from the trust.
927 (b) The statement may contain information regarding a
928 fiduciary’s obligation with respect to the power to adjust
929 between income and principal under this section.
930 (c) The statement shall be served informally, in the manner
931 provided in the Florida Rules of Civil Procedure relating to
932 service of pleadings subsequent to the initial pleading. The
933 statement may be served on a legal representative or natural
934 guardian of a beneficiary without the filing of any proceeding
935 or approval of any court.
936 (14) For purposes of subsections (12) and (13), the term:
937 (a) “Eligible beneficiaries” means:
938 1. If at the time the determination is made there are one
939 or more beneficiaries described in s. 736.0103(19)(c), the
940 beneficiaries described in s. 736.0103(19)(a) and (c); or
941 2. If there is no beneficiary described in s.
942 736.0103(19)(c), the beneficiaries described in s.
943 736.0103(19)(a) and (b).
944 (b) “Super majority of the eligible beneficiaries” means:
945 1. If at the time the determination is made there are one
946 or more beneficiaries described in s. 736.0103(19)(c), at least
947 two-thirds in interest of the beneficiaries described in s.
948 736.0103(19)(a) or two-thirds in interest of the beneficiaries
949 described in s. 736.0103(19)(c), if the interests of the
950 beneficiaries are reasonably ascertainable; otherwise, it means
951 two-thirds in number of either such class; or
952 2. If there is no beneficiary described in s.
953 736.0103(19)(c), at least two-thirds in interest of the
954 beneficiaries described in s. 736.0103(19)(a) or two-thirds in
955 interest of the beneficiaries described in s. 736.0103(19)(b),
956 if the interests of the beneficiaries are reasonably
957 ascertainable, otherwise, two-thirds in number of either such
958 class.
959 (15) A trust exists on January 1, 2003, if it is not
960 revocable on January 1, 2003. A trust is revocable if revocable
961 by the settlor alone or in conjunction with any other person. A
962 trust is not revocable for purposes of this section if revocable
963 by the settlor only with the consent of all persons having a
964 beneficial interest in the property.
965 Section 10. Section 738.301, Florida Statutes, is amended
966 to read:
967 (Substantial rewording of section. See
968 s. 738.301, F.S., for present text).
969 738.301 Definitions.—For purposes of this section and ss.
970 738.302-738.310:
971 (1) “Applicable value” means the amount of the net fair
972 market value of a trust taken into account under s. 738.307.
973 (2) “Express unitrust” means a trust for which, under the
974 terms of the trust without regard to this section and ss.
975 738.302-738.310, net income must be calculated as a unitrust
976 amount.
977 (3) “Income trust” means a trust, created by an inter vivos
978 or testamentary instrument, that directs or permits the trustee
979 to distribute the net income of the trust to one or more
980 persons, in fixed proportions or in amounts or proportions
981 determined by the trustee and regardless of whether the trust
982 directs or permits the trustee to distribute the principal of
983 the trust to one or more such persons.
984 (4) “Net fair market value of a trust” means the fair
985 market value of the assets of the trust, less the reasonably
986 known noncontingent liabilities of the trust.
987 (5) “Unitrust” means a trust for which net income is a
988 unitrust amount. The term includes an express unitrust.
989 (6) “Unitrust amount” means an amount computed by
990 multiplying a determined value of a trust by a determined
991 percentage. For a unitrust administered under a unitrust policy,
992 the term means the applicable value multiplied by the unitrust
993 rate.
994 (7) “Unitrust policy” means a policy described in ss.
995 738.301-738.310 and adopted under s. 738.303.
996 (8) “Unitrust rate” means the rate used to compute the
997 unitrust amount for a unitrust administered under a unitrust
998 policy.
999 Section 11. Section 738.302, Florida Statutes, is amended
1000 to read:
1001 (Substantial rewording of section. See
1002 s. 738.302, F.S., for present text.)
1003 738.302 Applications; duties and remedies.—
1004 (1) Except as otherwise provided in subsection (2), ss.
1005 738.301-738.310 apply to all of the following:
1006 (a) An income trust, unless the terms of the trust
1007 expressly prohibit the use of ss. 738.301-738.310 by a specific
1008 reference to this paragraph or corresponding provision of prior
1009 law, or an explicit expression of intent that net income not be
1010 calculated as a unitrust amount.
1011 (b) An express unitrust, except to the extent that the
1012 terms of the trust explicitly:
1013 1. Prohibit the use of ss. 738.301-738.310 by a specific
1014 reference to this paragraph or corresponding provision of prior
1015 law;
1016 2. Prohibit conversion to an income trust; or
1017 3. Limit changes to the method of calculating the unitrust
1018 amount.
1019 (c) A unitrust that had been converted from an income
1020 trust.
1021 (2) The provisions of ss. 738.301-738.310 do not apply to a
1022 trust described in s. 170(f)(2)(B), s. 642(c)(5), s. 664(d), s.
1023 2702(a)(3)(A)(ii) or (iii), or s. 2702(b) of the Internal
1024 Revenue Code.
1025 (3) An income trust to which ss. 738.301-738.310 apply
1026 under paragraph (1)(a) may be converted to a unitrust under ss.
1027 738.301-738.310 regardless of the terms of the trust concerning
1028 distributions. Conversion to a unitrust under ss. 738.301
1029 738.310 does not affect other terms of the trust concerning
1030 distributions of income or principal.
1031 (4) Sections 738.301-738.310 apply to an estate only to the
1032 extent that a trust is a beneficiary of the estate. To the
1033 extent of the trust’s interest in the estate, the estate may be
1034 administered as a unitrust, the administration of the estate as
1035 a unitrust may be discontinued, or the percentage or method used
1036 to calculate the unitrust amount may be changed, in the same
1037 manner as for a trust under those sections.
1038 (5) The provisions of ss. 738.301-738.310 do not create a
1039 duty to take or consider action under ss. 738.301-738.310 or to
1040 inform a beneficiary about the applicability of ss. 738.301
1041 738.310.
1042 (6) A fiduciary that in good faith takes or fails to take
1043 an action under ss. 738.301-738.310 is not liable to a person
1044 affected by the action or inaction.
1045 Section 12. Section 738.303, Florida Statutes, is amended
1046 to read:
1047 (Substantial rewording of section. See
1048 s. 738.303, F.S., for present text.)
1049 738.303 Authority of fiduciary.—
1050 (1) By complying with subsections (2) and (6), and without
1051 court approval, a fiduciary may do any of the following:
1052 (a) Convert an income trust to a unitrust if the fiduciary
1053 adopts in a record a unitrust policy for the trust which
1054 provides:
1055 1. That in administering the trust, the net income of the
1056 trust will be a unitrust amount rather than net income
1057 determined without regard to ss. 738.301-738.310; and
1058 2. The percentage and method used to calculate the unitrust
1059 amount.
1060 (b) Change the percentage or method used to calculate a
1061 unitrust amount for a unitrust if the fiduciary adopts in a
1062 record a unitrust policy or an amendment or replacement of a
1063 unitrust policy providing charges in the percentage or method
1064 used to calculate the unitrust amount.
1065 (c) Convert a unitrust to an income trust if the fiduciary
1066 adopts in a record a determination that, in administering the
1067 trust, the net income of the trust will be net income determined
1068 without regard to ss. 738.301-738.310 rather than a unitrust
1069 amount.
1070 (2) A fiduciary may take an action under subsection (1) if
1071 all of the following apply:
1072 (a) The fiduciary determines that the action will assist
1073 the fiduciary to administer a trust impartially.
1074 (b) The fiduciary sends a notice in a record to the
1075 qualified beneficiaries determined under ss. 736.0103 and
1076 736.0110 in the manner required by s. 738.304, describing and
1077 proposing to take the action.
1078 (c) The fiduciary sends a copy of the notice under
1079 paragraph (b) to each settlor of the trust which is:
1080 1. If an individual, living; or
1081 2. If not an individual, in existence.
1082 (d) At least one member of each class of the qualified
1083 beneficiaries determined under ss. 736.0103 and 736.0110, other
1084 than the Attorney General, receiving the notice under paragraph
1085 (b) is:
1086 1. If an individual, legally competent;
1087 2. If not an individual, in existence; or
1088 3. Represented in the manner provided in s. 738.304(2).
1089 (e) The fiduciary does not receive, by the date specified
1090 in the notice under s. 738.304(4)(e), an objection in a record
1091 to the action proposed under paragraph (b) from a person to
1092 which the notice under paragraph (b) is sent.
1093 (3) If a fiduciary receives, not later than the date stated
1094 in the notice under s. 738.304(4)(e), an objection in a record
1095 described in s. 738.304(4)(d) to a proposed action, the
1096 fiduciary or a beneficiary may request the court to have the
1097 action taken as proposed, taken with modifications, or
1098 prevented. A person described in s. 738.304(1) may oppose the
1099 proposed action in the proceeding under this subsection
1100 regardless of whether the person:
1101 (a) Consented under s. 738.304(3); or
1102 (b) Objected under s. 738.304(4)(d).
1103 (4) If, after sending a notice under paragraph (2)(b), a
1104 fiduciary decides not to take the action proposed in the notice,
1105 the fiduciary must notify in a record each person described in
1106 s. 738.304(1) of the decision not to take the action and the
1107 reasons for the decision.
1108 (5) If a beneficiary requests in a record that a fiduciary
1109 take an action described in subsection (1) and the fiduciary
1110 declines to act or does not act within 60 days after receiving
1111 the request, the beneficiary may request the court to direct the
1112 fiduciary to take the action requested.
1113 (6) In deciding whether and how to take an action
1114 authorized in subsection (1), or whether and how to respond to a
1115 request by a beneficiary under subsection (5), a fiduciary must
1116 consider all factors relevant to the trust and beneficiaries,
1117 including the relevant factors listed in s. 738.201(5).
1118 (7) A fiduciary may release or delegate the power to
1119 convert an income trust to a unitrust under paragraph (1)(a),
1120 change the percentage or method used to calculate a unitrust
1121 amount under paragraph (1)(b), or convert a unitrust to an
1122 income trust under paragraph (1)(c), for a reason described in
1123 s. 738.203(7) and in the manner described in s. 738.203(8).
1124 Section 13. Section 738.304, Florida Statutes, is created
1125 to read:
1126 738.304 Notice.—
1127 (1) A notice required by s. 738.303(2)(b) must be sent in a
1128 manner authorized under s. 736.0109 to all of the following:
1129 (a) The qualified beneficiaries determined under s.
1130 736.0103, other than the Attorney General.
1131 (b) Each person that is granted a power over the trust by
1132 the terms of the trust, to the extent that the power is
1133 exercisable when the person is not then serving as a trustee:
1134 1. Including all of the following:
1135 a. Power over the investment, management, or distribution
1136 of trust property or other matters of trust administration.
1137 b. Power to appoint or remove a trustee or person described
1138 in this paragraph.
1139 2. Excluding all of the following:
1140 a. Power of appointment.
1141 b. Power of a beneficiary over the trust, to the extent
1142 that the exercise or nonexercise of the power affects the
1143 beneficial interest of the beneficiary or another beneficiary
1144 represented by the beneficiary under ss. 736.0301-736.0306 with
1145 respect to the exercise or nonexercise of the power.
1146 c. Power over the trust if the terms of the trust provide
1147 that the power is held in a nonfiduciary capacity and the power
1148 must be held in a nonfiduciary capacity to achieve a tax
1149 objective under the Internal Revenue Code.
1150 (c) Each person that is granted a power by the terms of the
1151 trust to appoint or remove a trustee or person described in
1152 paragraph (b) to the extent that the power is exercisable when
1153 the person that exercises the power is not serving as a trustee
1154 or person described in paragraph (b).
1155 (2) The representation provisions of ss. 736.0301-736.0306
1156 apply to notice under this section.
1157 (3) A person may consent in a record at any time to action
1158 proposed under s. 738.303(2)(b). A notice required by s.
1159 738.303(2)(b) need not be sent to a person that consents under
1160 this subsection.
1161 (4) A notice required under s. 738.303(2)(b) must include
1162 all of the following:
1163 (a) The action proposed under s. 738.303(2)(b).
1164 (b) For a conversion of an income trust to a unitrust, a
1165 copy of the unitrust policy adopted under s. 738.303(1)(a).
1166 (c) For a change in the percentage or method used to
1167 calculate the unitrust amount, a copy of the unitrust policy or
1168 amendment or replacement of the unitrust policy adopted under s.
1169 738.303(1)(b).
1170 (d) A statement that the person to which the notice is sent
1171 may object to the proposed action by stating in a record the
1172 basis for the objection and sending or delivering the record to
1173 the fiduciary.
1174 (e) The date by which an objection under paragraph (d) must
1175 be received by the fiduciary, which must be at least 30 days
1176 after the date the notice is sent.
1177 (f) The date on which the action is proposed to be taken
1178 and the date on which the action is proposed to take effect.
1179 (g) The name and contact information of the fiduciary.
1180 (h) The name and contact information of a person that may
1181 be contacted for additional information.
1182 Section 14. Section 738.305, Florida Statutes, is created
1183 to read:
1184 738.305 Unitrust policy.—
1185 (1) In administering a unitrust under ss. 738.301-738.310,
1186 a fiduciary shall follow a unitrust policy adopted under s.
1187 738.303(1)(a) or (b) or amended or replaced under s.
1188 738.303(1)(b).
1189 (2) A unitrust policy must provide all of the following:
1190 (a) The unitrust rate or method for determining the
1191 unitrust rate under s. 738.306.
1192 (b) The method for determining the applicable value under
1193 s. 738.307.
1194 (c) The rules described in ss. 738.306-738.310 which apply
1195 in the administration of the unitrust, whether the rules are:
1196 1. Mandatory as provided in ss. 738.307(1) and (3),
1197 738.308(1), and 738.310; or
1198 2. Optional as provided in ss. 738.306, 738.307(2), and
1199 738.308(2), to the extent that the fiduciary elects to adopt
1200 those rules.
1201 (3) A unitrust policy may do any of the following:
1202 (a) Provide methods and standards for:
1203 1. Determining the timing of the distributions;
1204 2. Making distributions in cash or in kind or partly in
1205 cash and partly in kind; or
1206 3. Correcting an underpayment or overpayment to a
1207 beneficiary based on the unitrust amount if there is an error in
1208 calculating the unitrust amount.
1209 (b) Specify sources and the order of sources, including
1210 categories of income for federal income tax purposes, from which
1211 distributions of a unitrust amount are paid.
1212 (c) Provide other standards and rules that the fiduciary
1213 determines serve the interests of the beneficiaries.
1214 Section 15. Section 738.306, Florida Statutes, is created
1215 to read:
1216 738.306 Unitrust rate.—
1217 (1) A unitrust rate must be at least 3 percent and not more
1218 than 5 percent. Within those limits, the unitrust rate may be:
1219 (a) A fixed unitrust rate; or
1220 (b)1. A unitrust rate that is determined for each period
1221 using:
1222 a. A market index or other published data; or
1223 b. A mathematical blend of market indices or other
1224 published data over a stated number of preceding periods.
1225 2. If the rate calculated under this paragraph would be
1226 less than 3, the rate is 3; and if the rate calculated would be
1227 more than 5, the rate is 5.
1228 (2) Within the limits of subsection (1), a unitrust policy
1229 may provide for any of the following:
1230 (a) A limit on how much the unitrust rate determined under
1231 paragraph (1)(b) may increase over the unitrust rate for the
1232 preceding period or a mathematical blend of unitrust rates over
1233 a stated number of preceding periods.
1234 (b) A limit on how much the unitrust rate determined under
1235 paragraph (1)(b) may decrease below the unitrust rate for the
1236 preceding period or a mathematical blend of unitrust rates over
1237 a stated number of preceding periods.
1238 (c) A mathematical blend of any of the unitrust rates
1239 determined under paragraph (1)(b) and paragraphs (a) and (b).
1240 (3) If the fiduciary is not an independent person, the
1241 percentage used to calculate the unitrust amount is the rate
1242 determined under s. 7520(a)(2) of the Internal Revenue Code in
1243 effect for the month the conversion under this section becomes
1244 effective and for each January thereafter; however, if the rate
1245 determined under s. 7520(a)(2) of the Internal Revenue Code
1246 exceeds 5 percent, the unitrust rate is 5 percent, and if the
1247 rate determined under s. 7520(a)(2) of the Internal Revenue Code
1248 is less than 3 percent, the unitrust rate is 3 percent.
1249 Section 16. Section 738.307, Florida Statutes, is created
1250 to read:
1251 738.307 Applicable value.—
1252 (1) A unitrust policy must provide the method for
1253 determining the fair market value of an asset for the purpose of
1254 determining the unitrust amount, including all of the following:
1255 (a) The frequency of valuing the asset, which need not
1256 require a valuation in every period.
1257 (b) The date for valuing the asset in each period in which
1258 the asset is valued.
1259 (2) Except as otherwise provided in s. 738.309, a unitrust
1260 policy may provide methods for determining the amount of the net
1261 fair market value of the trust to take into account in
1262 determining the applicable value, including any of the
1263 following:
1264 (a) Obtaining an appraisal of an asset for which fair
1265 market value is not readily available.
1266 (b) Excluding specific assets or groups or types of assets
1267 in addition to those described in subsection (3).
1268 (c) Making other exceptions or modifications of the
1269 treatment of specific assets or groups or types of assets.
1270 (d) Including identification and treatment of cash or
1271 property held for distribution.
1272 (e) Using an average of fair market values over a stated
1273 number of preceding periods, not to exceed 3 calendar years.
1274 (f) Determining the reasonable known liabilities of the
1275 trust, including treatment of liabilities to conform with the
1276 treatment of assets under paragraphs (a)-(e).
1277 (3) The following property may not be included in
1278 determining the value of the trust:
1279 (a) Any residential property or any tangible personal
1280 property that, as of the first business day of the current
1281 valuation year, one or more current beneficiaries of the trust
1282 have or have had the right to occupy or have or have had the
1283 right to possess or control, other than in his or her capacity
1284 as trustee of the trust. Instead, the right of occupancy or the
1285 right to possession and control is the unitrust amount with
1286 respect to such property; however, the unitrust amount must be
1287 adjusted to take into account partial distributions from or
1288 receipt into the trust of such property during the valuation
1289 year;
1290 (b) Any asset specifically given to a beneficiary and the
1291 return on investment on such property, which return on
1292 investment must be distributable to the beneficiary; and
1293 (c) Any asset while held in an estate.
1294 Section 17. Section 738.308, Florida Statutes, is created
1295 to read:
1296 738.308 Period.—
1297 (1) A unitrust policy must provide the period used under
1298 ss. 738.306 and 738.307. The period must be the calendar year.
1299 (2) A unitrust policy may provide standards for:
1300 (a) Using fewer preceding periods under s. 738.306(1)(b)1.
1301 or (2)(a) or (b) if:
1302 1. The trust was not in existence in a preceding period; or
1303 2. Market indices or other published data are not available
1304 for a preceding period;
1305 (b) Using fewer preceding periods under 738.307(2)(e) if:
1306 1. The trust was not in existence in a preceding period; or
1307 2. Fair market values are not available for a preceding
1308 period; and
1309 (c) Prorating a unitrust amount on a daily basis for a part
1310 of a period in which the trust or the administration of the
1311 trust as a unitrust or the interest of any beneficiary commences
1312 or terminates.
1313 Section 18. Section 738.309, Florida Statutes, is created
1314 to read:
1315 738.309 Express unitrust.—
1316 (1) This section applies to a trust that, by its governing
1317 instrument, requires or allows income or net income to be
1318 calculated as a unitrust amount.
1319 (2) The trustee of an express unitrust may determine the
1320 unitrust amount by reference to the net fair market value of the
1321 unitrust’s assets in 1 or more years.
1322 (3) Distribution of a unitrust amount is considered a
1323 distribution of all of the net income of an express unitrust and
1324 is considered to be an income interest.
1325 (4) The unitrust amount is considered to be a reasonable
1326 apportionment of the total return of an express unitrust.
1327 (5) An express unitrust that provides or allows a
1328 distribution based on a unitrust rate in excess of 5 percent per
1329 year of the net fair market value of the unitrust assets is
1330 considered a distribution of all of the income of the unitrust
1331 and a distribution of principal of the unitrust to the extent
1332 that the distribution exceeds 5 percent per year.
1333 (6) An express unitrust may provide a mechanism for
1334 changing the unitrust rate, similar to the mechanism provided
1335 under s. 738.306, based upon the factors noted in that section,
1336 and may provide for a conversion from a unitrust to an income
1337 trust or a reconversion of an income trust to a unitrust under
1338 s. 738.303.
1339 (7) If an express unitrust does not specifically or by
1340 reference to s. 738.306 prohibit a power to change the unitrust
1341 rate or to convert to an income trust under s. 738.303, the
1342 trustee must have such power.
1343 (8) The governing instrument of an express unitrust may
1344 grant the trustee discretion to adopt a consistent practice of
1345 treating capital gains as part of the unitrust amount to the
1346 extent that the unitrust amount exceeds the income determined as
1347 if the trust were not an express unitrust, or the governing
1348 instrument may specify the ordering of classes of income.
1349 (9) Unless the terms of the express unitrust specifically
1350 provide otherwise as provided in subsection (8), the
1351 distribution of a unitrust amount is considered a distribution
1352 made from the following sources, which are listed in order of
1353 priority:
1354 (a) Net accounting income determined under this chapter as
1355 if the trust were not a unitrust;
1356 (b) Ordinary income not allocable to net accounting income;
1357 (c) Net realized short-term capital gains;
1358 (d) Net realized long-term capital gains; and
1359 (e) The principal of the trust.
1360 (10) The governing instrument of an express unitrust may
1361 provide that the trustee may exclude assets used by the
1362 unitrust’s beneficiary, including, but not limited to, a
1363 residence property or tangible personal property, from the net
1364 fair market value of the unitrust’s assets for the purposes of
1365 computing the unitrust amount. The use of these assets may be
1366 considered equivalent to income or to the unitrust amount.
1367 Section 19. Section 738.310, Florida Statutes, is created
1368 to read:
1369 738.310 Other rules.—Following the conversion of an income
1370 trust to a unitrust, the trustee shall consider the unitrust
1371 amount as paid from the following sources, which are listed in
1372 order of priority:
1373 (1) Net accounting income determined under this chapter as
1374 if the trust were not a unitrust;
1375 (2) Ordinary income not allocable to net accounting income;
1376 (3) Net realized short-term capital gains;
1377 (4) Net realized long-term capital gains; and
1378 (5) The principal of the trust.
1379 Section 20. Section 738.401, Florida Statutes, is amended
1380 to read:
1381 738.401 Character of receipts from entity.—
1382 (1) For purposes of this section, the term:
1383 (a) “Capital distribution” means an entity distribution of
1384 money which is a:
1385 1. Return of capital; or
1386 2. Distribution in total or partial liquidation of the
1387 entity.
1388 (b) “Entity”:
1389 1. Means a corporation, partnership, limited liability
1390 company, regulated investment company, real estate investment
1391 trust, common trust fund, or any other organization or
1392 arrangement in which a fiduciary owns or holds has an interest,
1393 regardless of whether the entity is a taxpayer for federal
1394 income tax purposes; and
1395 2. Does not include:
1396 a. A trust or estate to which s. 738.402 applies;
1397 b. A business or other activity to which s. 738.403 applies
1398 which is not conducted by an entity described in subparagraph
1399 1.;
1400 c. An asset-backed security; or
1401 d. An instrument or arrangement to which s. 738.416 applies
1402 other than a trust or estate to which s. 738.402 applies, a
1403 business or activity to which s. 738.403 applies, or an asset
1404 backed security to which s. 738.608 applies.
1405 (c) “Entity distribution” means a payment or transfer by an
1406 entity to a person in the person’s capacity as an owner or
1407 holder of an interest in the entity.
1408 (d) “Lookback period” means the accounting period and the
1409 preceding two accounting periods or, if less, the number of
1410 accounting periods, or portion of accounting periods, that the
1411 interest in the entity has been held by the fiduciary.
1412 (2) In this section, an attribute or action of an entity
1413 includes an attribute or action of any other entity in which the
1414 initial entity owns or holds an interest, including an interest
1415 owned or held indirectly through another entity.
1416 (3) Except as otherwise provided in paragraphs (4)(b), (c),
1417 and (d) this section, a fiduciary shall allocate to income:
1418 (a) Money received in an entity distribution; and
1419 (b) Tangible personal property of nominal value received
1420 from the money received from an entity.
1421 (4)(3) Except as otherwise provided in this section, A
1422 fiduciary shall allocate the following receipts from an entity
1423 to principal:
1424 (a) Property received in an entity distribution which is
1425 not:
1426 1. other than Money; or
1427 2. Tangible personal property of nominal value.
1428 (b) Money received in an entity one distribution or a
1429 series of related distributions in an exchange for part or all
1430 of the fiduciary’s a trust’s or estate’s interest in the entity
1431 to the extent that the entity distribution reduces the
1432 fiduciary’s interest in the entity relative to the interest of
1433 other persons that own or hold interests in the entity.
1434 (c) Money received in an entity distribution that is a
1435 capital distribution, to the extent not allocated to income
1436 total or partial liquidation of the entity.
1437 (d) Money received in an entity distribution from an entity
1438 that is a regulated investment company or a real estate
1439 investment trust if the money received represents short-term or
1440 long-term capital gain realized within the entity.
1441 (e) Money received from an entity listed on a public stock
1442 exchange during any year of the trust or estate which exceeds 10
1443 percent of the fair market value of the trust’s or estate’s
1444 interest in the entity on the first day of that year. The amount
1445 to be allocated to principal must be reduced to the extent that
1446 the cumulative distributions from the entity to the trust or
1447 estate allocated to income do not exceed a cumulative annual
1448 return of 3 percent of the fair market value of the interest in
1449 the entity at the beginning of each year or portion of a year
1450 for the number of years or portion of years in the period that
1451 the interest in the entity has been held by the trust or estate.
1452 If a trustee has exercised a power to adjust under s. 738.104
1453 during any period the interest in the entity has been held by
1454 the trust, the trustee, in determining the total income
1455 distributions from that entity, must take into account the
1456 extent to which the exercise of that power resulted in income to
1457 the trust from that entity for that period. If the income of the
1458 trust for any period has been computed under s. 738.1041, the
1459 trustee, in determining the total income distributions from that
1460 entity for that period, must take into account the portion of
1461 the unitrust amount paid as a result of the ownership of the
1462 trust’s interest in the entity for that period.
1463 (5)(4) If a fiduciary elects, or continues an election made
1464 by its predecessor, to reinvest dividends in shares of stock of
1465 a distributing corporation or fund, whether evidenced by new
1466 certificates or entries on the books of the distributing entity,
1467 the new shares retain their character as income.
1468 (6)(5) Except as otherwise provided in subsections (10) and
1469 (11), money received in an entity distribution is a capital
1470 distribution Money is received in partial liquidation:
1471 (a) To the extent that the entity, at or near the time of
1472 the entity a distribution, indicates that such money is a
1473 capital distribution in partial liquidation; or
1474 (b) To the extent that the total amount of money and
1475 property received by the fiduciary in the entity in a
1476 distribution or a series of related entity distributions is or
1477 will be greater than from an entity that is not listed on a
1478 public stock exchange exceeds 20 percent of the fiduciary’s
1479 trust’s or estate’s pro rata share of the entity’s gross assets,
1480 as shown by the entity’s year-end financial statements
1481 immediately preceding the initial receipt.
1482
1483 This subsection does not apply to an entity to which subsection
1484 (7) applies.
1485 (7)(6) In the case of a capital distribution, the amount
1486 received in an entity distribution allocated to principal must
1487 be reduced to the extent that the cumulative distributions from
1488 the entity to the fiduciary Money may not be taken into account
1489 in determining any excess under paragraph (5)(b), to the extent
1490 that the cumulative distributions from the entity to the trust
1491 or the estate allocated to income do not exceed the greater of:
1492 (a) A cumulative annual return of 3 percent of the entity’s
1493 carrying value computed at the beginning of each accounting
1494 period, or portion of an accounting period, during the lookback
1495 period for the number of years or portion of years that the
1496 entity was held by the fiduciary. If a fiduciary trustee has
1497 exercised a power to adjust under s. 738.203 during the lookback
1498 period, the fiduciary s. 738.104 during any period the interest
1499 in the entity has been held by the trust, the trustee, in
1500 determining the total income distributions from that entity,
1501 must take into account the extent to which the exercise of the
1502 power resulted in income to the fiduciary trust from that entity
1503 for that period. If the income of a fiduciary during the
1504 lookback trust for any period has been computed under ss.
1505 738.301-738.310, the fiduciary pursuant to s. 738.1041, the
1506 trustee, in determining the total income distributions from the
1507 entity for that period, must take into account the portion of
1508 the unitrust amount paid as a result of the ownership of the
1509 trust’s interest in the entity for that period; or
1510 (b) In If the case of an entity is treated as a
1511 partnership, subchapter S corporation, or a disregarded entity
1512 under pursuant to the Internal Revenue Code of 1986, as amended,
1513 the amount of income tax attributable to the fiduciary’s trust’s
1514 or estate’s ownership share of the entity, based on its pro rata
1515 share of the taxable income of the entity that distributes the
1516 money, during the lookback period for the number of years or
1517 portion of years that the interest in the entity was held by the
1518 fiduciary, calculated as if all of the that tax was incurred by
1519 the fiduciary.
1520 (8) If a fiduciary receives additional information about
1521 the application of this section to an entity distribution before
1522 the fiduciary has paid part of the entity distribution to a
1523 beneficiary, the fiduciary may consider the additional
1524 information before making the payment to the beneficiary and may
1525 change a decision to make the payment to the beneficiary.
1526 (9) If a fiduciary receives additional information about
1527 the application of this section to an entity distribution after
1528 the fiduciary has paid part of the entity distribution to a
1529 beneficiary, the fiduciary is not required to change or recover
1530 the payment to the beneficiary but may consider that information
1531 in determining whether to exercise its other powers, including
1532 but not limited to the power to adjust under s. 738.203.
1533 (10)(7) The following applies to money or property received
1534 by a private trustee as a distribution from an investment entity
1535 described in this subsection:
1536 (a) The trustee shall first treat as income of the trust
1537 all of the money or property received from the investment entity
1538 in the current accounting period year which would be considered
1539 income under this chapter if the trustee had directly held the
1540 trust’s pro rata share of the assets of the investment entity.
1541 For this purpose, all distributions received in the current
1542 accounting period year must be aggregated.
1543 (b) The trustee shall next treat as income of the trust any
1544 additional money or property received in the current accounting
1545 period year which would have been considered income in the prior
1546 2 accounting periods years under paragraph (a) if additional
1547 money or property had been received from the investment entity
1548 in any of those prior 2 accounting periods years. The amount to
1549 be treated as income must shall be reduced by any distributions
1550 of money or property made by the investment entity to the trust
1551 during the current and the prior 2 accounting periods years
1552 which were treated as income under this paragraph.
1553 (c) The remainder of the distribution, if any, is treated
1554 as principal.
1555 (d) As used in this subsection, the term:
1556 1. “Investment entity” means an entity, other than a
1557 business activity conducted by the trustee described in s.
1558 738.403 or an entity that is listed on a public stock exchange,
1559 which is treated as a partnership, subchapter S corporation, or
1560 disregarded entity under pursuant to the Internal Revenue Code
1561 of 1986, as amended, and which normally derives 50 percent or
1562 more of its annual cumulative net income from interest,
1563 dividends, annuities, royalties, rental activity, or other
1564 passive investments, including income from the sale or exchange
1565 of such passive investments.
1566 2. “Private trustee” means a trustee who is a natural
1567 person, but is not an independent person as set forth in s.
1568 738.102 only if the trustee is unable to use the power to adjust
1569 between income and principal with respect to receipts from
1570 entities described in this subsection pursuant to s. 738.104. A
1571 bank, trust company, or other commercial trustee is not
1572 considered a private trustee.
1573 (11) A fiduciary shall allocate to principal any money and
1574 property the fiduciary receives in a distribution or series of
1575 related distributions from a public entity which are greater
1576 than 10 percent of the fair market value of the fiduciary’s
1577 interest in the public entity on the first day of the accounting
1578 period. The amount to be allocated to principal must be reduced
1579 to the extent that the cumulative distributions from the entity
1580 to the fiduciary allocated to income do not exceed a cumulative
1581 annual return of 3 percent of the fair market value of the
1582 interest in the entity at the beginning of each accounting
1583 period, or portion of an accounting period, during the lookback
1584 period. If a fiduciary has exercised a power to adjust under s.
1585 738.203 during the lookback period, the fiduciary, in
1586 determining the total income distributions from that entity,
1587 must take into account the extent to which the exercise of that
1588 power resulted in income to the fiduciary from that entity for
1589 that period. If the income of the fiduciary during the lookback
1590 period has been computed under ss. 738.301-738.310, the
1591 fiduciary, in determining the total income distribution from
1592 that entity for that period, must take into account the portion
1593 of the unitrust amount paid as a result of the ownership of the
1594 trust’s interest in the entity for that period. As used in this
1595 subsection, the term “public entity” means an entity listed on a
1596 public stock exchange.
1597 (12)(8) This section must shall be applied before ss.
1598 738.506 and 738.507 ss. 738.705 and 738.706 and does not modify
1599 or change any of the provisions of those sections.
1600 Section 21. Section 738.402, Florida Statutes, is amended
1601 to read:
1602 738.402 Distribution from trust or estate.—A fiduciary
1603 shall allocate to income an amount received as a distribution of
1604 income, including a unitrust distribution under ss. 738.301
1605 738.310, from a trust or an estate in which the fiduciary trust
1606 has an interest, other than an interest a purchased in a trust
1607 that is an investment entity, and shall interest and allocate to
1608 principal an amount received as a distribution of principal from
1609 the such a trust or estate. If a fiduciary purchases, or
1610 receives from a settlor, an interest in a trust that is an
1611 investment entity, or a decedent or donor transfers an interest
1612 in such a trust to a fiduciary, s. 738.401, s. 738.415, or s.
1613 738.416 or s. 738.608 applies to a receipt from the trust.
1614 Section 22. Section 738.403, Florida Statutes, is amended
1615 to read:
1616 738.403 Business and other activity activities conducted by
1617 fiduciary.—
1618 (1) This section applies to If a fiduciary who conducts a
1619 business or other activity conducted by a fiduciary if the
1620 fiduciary determines that it is in the best interests of
1621 interest of all the beneficiaries to account separately for the
1622 business or other activity instead of:
1623 (a) Accounting for the business or other activity as part
1624 of the fiduciary’s trust’s or estate’s general accounting
1625 records; or
1626 (b) Conducting the business or other activity through an
1627 entity described in s. 738.401(1)(b)., the
1628 (2) A fiduciary may account separately under this section
1629 maintain separate accounting records for the transactions of a
1630 the business or another other activity, regardless of whether or
1631 not the assets of the such business or other activity are
1632 segregated from other trust or estate assets held by the
1633 fiduciary.
1634 (3)(2) A fiduciary who accounts separately under this
1635 section for a business or other activity:
1636 (a) May determine:
1637 1. The extent to which the net cash receipts of the
1638 business or other activity must be retained for:
1639 a. Working capital;
1640 b. The acquisition or replacement of fixed assets; and
1641 c. Other reasonably foreseeable needs of the business or
1642 other activity; and working capital, the acquisition or
1643 replacement of fixed assets, and other reasonably foreseeable
1644 needs of the business or activity, and
1645 2. The extent to which the remaining net cash receipts are
1646 accounted for as principal or income in the fiduciary’s trust’s
1647 or estate’s general accounting records for the trust.
1648 (b) May make a determination under paragraph (a) separately
1649 and differently from the fiduciary’s decisions concerning
1650 distributions of income or principal; and
1651 (c) Shall account for the net amount received from the sale
1652 of an asset of If a fiduciary sells assets of the business or
1653 other activity, other than a sale in the ordinary course of the
1654 business or other activity, the fiduciary must account for the
1655 net amount received as principal in the fiduciary’s trust’s or
1656 estate’s general accounting records for the trust, to the extent
1657 the fiduciary determines that the net amount received is no
1658 longer required in the conduct of the business or other
1659 activity.
1660 (4)(3) Activities for which a fiduciary may account
1661 separately under this section maintain separate accounting
1662 records include:
1663 (a) Retail, manufacturing, service, and other traditional
1664 business activities.
1665 (b) Farming.
1666 (c) Raising and selling livestock and other animals.
1667 (d) Managing Management of rental properties.
1668 (e) Extracting Extraction of minerals and other natural
1669 resources.
1670 (f) Growing and cutting timber operations.
1671 (g) An activity Activities to which s. 738.414, s. 738.415,
1672 or s. 738.416 s. 738.607 applies.
1673 (h) Any other business conducted by the fiduciary.
1674 Section 23. Section 738.404, Florida Statutes, is created
1675 to read:
1676 738.404 Principal receipts.—A fiduciary shall allocate to
1677 principal:
1678 (1) To the extent not allocated to income under this
1679 chapter, an asset received from any of the following:
1680 (a) An individual during the individual’s lifetime.
1681 (b) An estate.
1682 (c) A trust on termination of an income interest.
1683 (d) A payor under a contract naming the fiduciary as
1684 beneficiary.
1685 (2) Except as otherwise provided in ss. 738.401-738.416,
1686 money or other property received from the sale, exchange,
1687 liquidation, or change in the form of a principal asset.
1688 (3) An amount recovered from a third party to reimburse the
1689 fiduciary because of a disbursement described in s. 738.502(1)
1690 or for another reason to the extent not based on the loss of
1691 income.
1692 (4) Proceeds of property taken by eminent domain except
1693 that proceeds awarded for loss of income in an accounting period
1694 are income if a current income beneficiary had a mandatory
1695 income interest during the period.
1696 (5) Net income received in an accounting period during
1697 which there is no beneficiary to which a fiduciary may or must
1698 distribute income.
1699 (6) Other receipts as provided in ss. 738.408-738.416.
1700 Section 24. Section 738.405, Florida Statutes, is created
1701 to read:
1702 738.405 Rental property.—To the extent that a fiduciary
1703 does not account for the management of rental property as a
1704 business under s. 738.403, the fiduciary shall allocate to
1705 income an amount received as rent of real or personal property,
1706 including an amount received for cancellation or renewal of a
1707 lease. An amount received as a refundable deposit, including a
1708 security deposit or a deposit that is to be applied as rent for
1709 future periods:
1710 (1) Must be added to principal and held subject to the
1711 terms of the lease, except as otherwise provided by law other
1712 than this chapter; and
1713 (2) Is not allocated to income or available for
1714 distribution to a beneficiary until the fiduciary’s contractual
1715 obligations have been satisfied with respect to that amount.
1716 Section 25. Section 738.406, Florida Statutes, is created
1717 to read:
1718 738.406 Receipt on obligation to be paid in money.—
1719 (1) This section does not apply to an obligation to which
1720 s. 738.409, s. 738.410, s. 738.411, s. 738.412, s. 738.414, s.
1721 738.415, or s. 738.416 applies.
1722 (2) A fiduciary shall allocate to income, without provision
1723 for amortization of premium, an amount received as interest on
1724 an obligation to pay money to the fiduciary, including an amount
1725 received as consideration for prepaying principal.
1726 (3) A fiduciary shall allocate to principal an amount
1727 received from the sale, redemption, or other disposition of an
1728 obligation to pay money to the fiduciary.
1729 (4) A fiduciary shall allocate to income the increment in
1730 value of a bond or other obligation for the payment of money
1731 bearing no stated interest but payable or redeemable, at
1732 maturity or another future time, in an amount that exceeds the
1733 amount in consideration of which it was issued. If the increment
1734 in value accrues and becomes payable pursuant to a fixed
1735 schedule of appreciation, it may be distributed to the
1736 beneficiary who was the income beneficiary at the time of
1737 increment from the first principal cash available or, if none is
1738 available, when the increment is realized by sale, redemption,
1739 or other disposition. If unrealized increment is distributed as
1740 income but out of principal, the principal must be reimbursed
1741 for the increment when realized. If, in the reasonable judgment
1742 of the fiduciary, exercised in good faith, the ultimate payment
1743 of the bond principal is in doubt, the fiduciary may withhold
1744 the payment of incremental interest to the income beneficiary.
1745 Section 26. Section 738.407, Florida Statutes, is created
1746 to read:
1747 738.407 Insurance policy or contract.—
1748 (1) This section does not apply to a contract to which s.
1749 738.409 applies.
1750 (2) Except as otherwise provided in subsection (3), a
1751 fiduciary shall allocate to principal the proceeds of a life
1752 insurance policy or other contract received by the fiduciary as
1753 beneficiary, including a contract that insures against damage
1754 to, destruction of, or loss of title to an asset. The fiduciary
1755 shall allocate dividends on an insurance policy to income to the
1756 extent that premiums on the policy are paid from income and to
1757 principal to the extent premiums on the policy are paid from
1758 principal.
1759 (3) A fiduciary shall allocate to income proceeds of a
1760 contract that insures the fiduciary against loss of:
1761 (a) Occupancy or other use by a current income beneficiary;
1762 (b) Income; or
1763 (c) Subject to s. 738.403, profits from a business.
1764 Section 27. Section 738.408, Florida Statutes, is created
1765 to read:
1766 738.408 Insubstantial allocation not required.—
1767 (1) If a fiduciary determines that an allocation between
1768 income and principal required by s. 738.409, s. 738.410, s.
1769 738.411, s. 738.412, or s. 738.415 is insubstantial, the
1770 fiduciary may allocate the entire amount to principal, unless s.
1771 738.203(5) applies to the allocation.
1772 (2) A fiduciary may presume an allocation is insubstantial
1773 under subsection (1) if:
1774 (a) The amount of the allocation would increase or decrease
1775 net income in an accounting period, as determined before the
1776 allocation, by less than 10 percent; and
1777 (b) The asset producing the receipt to be allocated has a
1778 carrying value less than 10 percent of the total carrying value
1779 of the assets owned or held by the fiduciary at the beginning of
1780 the accounting period.
1781 (3) The power to make a determination under subsection (1)
1782 may be:
1783 (a) Exercised by a cofiduciary in the manner described in
1784 s. 738.203(6); or
1785 (b) Released or delegated for a reason described in s.
1786 738.203(7) and in the manner described in s. 738.203(8).
1787 Section 28. Section 738.409, Florida Statutes, is created
1788 to read:
1789 738.409 Deferred compensation, annuity, or similar
1790 payment.—
1791 (1) As used in this section, the term:
1792 (a) “Internal income of the separate fund” means the amount
1793 determined under subsection (2).
1794 (b) “Marital trust” means a trust:
1795 1. Of which the settlor’s surviving spouse is the only
1796 current income beneficiary and is entitled to a distribution of
1797 all the current net income of the trust; and
1798 2. That qualifies for a marital deduction with respect to
1799 the settlor’s estate under the Internal Revenue Code or
1800 comparable law of any state because:
1801 a. An election to qualify for a marital deduction under s.
1802 2056(b)(7) of the Internal Revenue Code has been made;
1803 b. The trust qualified for a marital deduction under s.
1804 2056(b)(5) of the Internal Revenue Code; or
1805 c. The trust otherwise qualifies for a marital deduction.
1806 (c) “Nonseparate fund” means an annuity, a deferred
1807 compensation plan, a pension plan, or other fund for which the
1808 value of the participant’s or account owner’s right to receive
1809 benefits can be determined only by the occurrence of a date or
1810 event as defined in the instrument governing the fund.
1811 (d) “Payment” means an amount a fiduciary may receive over
1812 a fixed number of years or during the life of one or more
1813 individuals because of services rendered or property transferred
1814 to the payor in exchange for future amounts the fiduciary may
1815 receive. The term includes an amount received in money or
1816 property from the payor’s general assets or from a separate fund
1817 created by the payor.
1818 (e) “Percent calculated” means a percent equal to the rate
1819 determined under s. 7520 of the Internal Revenue Code in effect
1820 for the month preceding the beginning of the accounting period;
1821 however, if the percent calculated exceeds 5 percent, it must be
1822 reduced to 5 percent, and if the percent calculated is less than
1823 3 percent, it must be increased to 3 percent. Notwithstanding
1824 the preceding sentence, a fiduciary who is an independent person
1825 as defined in s. 738.102 may set the percent calculated at a
1826 percentage no less than 3 percent and no greater than 5 percent.
1827 (f) “Separate fund” includes a private or commercial
1828 annuity, an individual retirement account, and a pension,
1829 profit-sharing, stock-bonus, stock ownership plan, or other
1830 deferred compensation fund holding assets exclusively for the
1831 benefit of a participant or account owner.
1832 (2) For each accounting period, the following rules apply
1833 to a separate fund:
1834 (a) The fiduciary may determine the internal income of the
1835 separate fund as if the separate fund were a trust subject to
1836 this chapter.
1837 (b) Alternatively, the fiduciary may deem the internal
1838 income of the separate fund to equal the percent calculated of
1839 the value of the separate fund according to the most recent
1840 statement of value preceding the beginning of the accounting
1841 period. The fiduciary is not liable for good faith reliance upon
1842 any valuation supplied by the person or persons in possession of
1843 the fund. If the fiduciary makes or terminates an election under
1844 this paragraph, the fiduciary must make such disclosure in a
1845 trust disclosure document that satisfies the requirements of s.
1846 736.1008(4)(c).
1847 (c) If the fiduciary cannot determine the value of the
1848 separate fund under paragraph (b), the value of the separate
1849 fund is deemed to equal the present value of the expected future
1850 payments, as determined under s. 7520 of the Internal Revenue
1851 Code for the month preceding the beginning of the accounting
1852 period for which the computation is made.
1853 (d) The fiduciary may elect the method of determining the
1854 income of the fund pursuant to this subsection and may change
1855 the method of determining income of the fund for any future
1856 accounting period.
1857 (3) A fiduciary shall allocate a payment received from a
1858 separate fund during an accounting period to income, to the
1859 extent of the internal income of the separate fund during the
1860 period, and allocate the balance to principal.
1861 (4) The fiduciary of a marital trust shall:
1862 (a) Withdraw from a separate fund the amount the current
1863 income beneficiary of the trust requests the fiduciary to
1864 withdraw, not greater than the amount by which the internal
1865 income of the separate fund during the accounting period exceeds
1866 the amount the fiduciary otherwise receives from the separate
1867 fund during the period.
1868 (b) Transfer from principal to income the amount the
1869 current income beneficiary requests the fiduciary to transfer,
1870 but not greater than the amount by which the internal income of
1871 the separate fund during the period exceeds the amount the
1872 fiduciary receives from the separate fund during the period
1873 after the application of paragraph (a).
1874 (c) Distribute to the current income beneficiary as income:
1875 1. The amount of the internal income of the separate fund
1876 received or withdrawn during the period; and
1877 2. The amount transferred from principal to income under
1878 paragraph (b).
1879 (5) For a trust, other than a marital trust, of which one
1880 or more current income beneficiaries are entitled to a
1881 distribution of all the current net income, the fiduciary shall
1882 transfer from principal to income the amount by which the
1883 internal income of the separate fund during the accounting
1884 period exceeds the amount the fiduciary receives from the
1885 separate fund during the period.
1886 (6) The fiduciary of a nonseparate fund shall calculate
1887 internal income of the fund as the percent calculated of the
1888 present value of the right to receive the remaining payments as
1889 determined under s. 7520(a)(2) of the Internal Revenue Code for
1890 the month preceding the beginning of the accounting period.
1891 (7) If a fiduciary owns a separate fund or a nonseparate
1892 fund before January 1, 2025, the fiduciary may determine
1893 internal income, allocate payments, and account for unwithdrawn
1894 internal income as provided in this section or in the manner
1895 used by the fiduciary before January 1, 2025. Such fiduciary is
1896 not required to consider subsection (5). If the fiduciary
1897 acquires a separate fund or a nonseparate fund on or after
1898 January 1, 2025, the fiduciary must calculate internal income,
1899 allocate payments, and account for unwithdrawn internal income
1900 as provided in this section.
1901 Section 29. Section 738.603, Florida Statutes, is
1902 transferred, renumbered as section 738.410, Florida Statutes,
1903 and amended to read:
1904 738.410 738.603 Liquidating asset.—
1905 (1) As used in For purposes of this section, the term
1906 “liquidating asset” means an asset whose value the value of
1907 which will diminish or terminate because the asset is expected
1908 to produce receipts for a period of limited time duration. The
1909 term includes a leasehold, patent, copyright, royalty right, and
1910 right to receive payments during a period of for more than 1
1911 year under an arrangement that does not provide for the payment
1912 of interest on the unpaid balance. The term does not include a
1913 payment subject to s. 738.602, resources subject to s. 738.604,
1914 timber subject to s. 738.605, an activity subject to s. 738.607,
1915 an asset subject to s. 738.608, or any asset for which the
1916 fiduciary establishes a reserve for depreciation under s.
1917 738.703.
1918 (2) This section does not apply to a receipt that is
1919 subject to s. 738.401, s. 738.409, s. 738.411, s. 738.412, s.
1920 738.414, s. 738.415, s. 738.416, or s. 738.503.
1921 (3) A fiduciary shall allocate to income a receipt produced
1922 by a liquidating asset to the extent that the receipt does not
1923 exceed 5 percent of the receipts from the carrying value of the
1924 asset at the beginning of the accounting period and allocate a
1925 liquidating asset and the balance to principal the balance of
1926 the receipt.
1927 (4) The amount Amounts allocated to principal shall reduce
1928 the carrying value of the liquidating asset, but not below zero.
1929 Amounts received in excess of the remaining carrying value must
1930 be allocated to principal.
1931 Section 30. Section 738.604, Florida Statutes, is
1932 transferred, renumbered as section 738.411, Florida Statutes,
1933 and amended to read:
1934 738.411 738.604 Minerals, water, and other natural
1935 resources.—
1936 (1) To the extent that If a fiduciary does not account for
1937 a receipt accounts for receipts from an interest in minerals,
1938 water, or other natural resources as a business under s. 738.403
1939 pursuant to this section, the fiduciary shall allocate the
1940 receipt such receipts as follows:
1941 (a) To income, to the extent received:
1942 1. If received As nominal delay rental or nominal annual
1943 rent on a lease;
1944 2. As a factor for interest or the equivalent of interest
1945 under an agreement creating a production payment; or
1946 3. On account of an interest in renewable water;, a receipt
1947 shall be allocated to income.
1948 (b) To principal, if received from a production payment, a
1949 receipt shall be allocated to income if and to the extent that
1950 subparagraph (a)2. does not apply; or the agreement creating the
1951 production payment provides a factor for interest or its
1952 equivalent. The balance shall be allocated to principal.
1953 (c) Between income and principal equitably, to the extent
1954 received:
1955 1. On account of an interest in nonrenewable water;
1956 2. If an amount received As a royalty, shut-in-well
1957 payment, take-or-pay payment, or bonus; or, or delay rental is
1958 more than nominal, 90 percent shall be allocated to principal
1959 and the balance to income.
1960 3.(d) If an amount is received From a working interest or
1961 any other interest not provided for in paragraph (a) or,
1962 paragraph (b) or subparagraph 1. or subparagraph 2., or
1963 paragraph (c), 90 percent of the net amount received shall be
1964 allocated to principal and the balance to income.
1965 (2) An amount received on account of an interest in water
1966 that is renewable shall be allocated to income. If the water is
1967 not renewable, 90 percent of the amount shall be allocated to
1968 principal and the balance to income.
1969 (3) This section chapter applies to an interest owned or
1970 held by a fiduciary regardless of whether or not a settlor
1971 decedent or donor was extracting minerals, water, or other
1972 natural resources before the fiduciary owned or held the
1973 interest became subject to the trust or estate.
1974 (3) An allocation of a receipt under paragraph (1)(c) is
1975 presumed to be equitable if the amount allocated to principal is
1976 equal to the amount allowed by the Internal Revenue Code as a
1977 deduction for depletion of the interest.
1978 (4) If a fiduciary trust or estate owns or holds an
1979 interest in minerals, water, or other natural resources before
1980 January 1, 2025 on January 1, 2003, the fiduciary may allocate
1981 receipts from the interest as provided in this section chapter
1982 or in the manner used by the fiduciary before January 1, 2025
1983 January 1, 2003. If the fiduciary trust or estate acquires an
1984 interest in minerals, water, or other natural resources on or
1985 after January 1, 2025 January 1, 2003, the fiduciary must shall
1986 allocate receipts from the interest as provided in this section
1987 chapter.
1988 Section 31. Section 738.605, Florida Statutes, is
1989 transferred, renumbered as section 738.412, Florida Statutes,
1990 and amended to read:
1991 738.412 738.605 Timber.—
1992 (1) To the extent that If a fiduciary does not account
1993 accounts for receipts from the sale of timber and related
1994 products as a business under s. 738.403 pursuant to this
1995 section, the fiduciary shall allocate the such net receipts as
1996 follows:
1997 (a) To income, to the extent that the amount of timber cut
1998 removed from the land does not exceed the rate of growth of the
1999 timber during the accounting periods in which a beneficiary has
2000 a mandatory income interest;
2001 (b) To principal, to the extent that the amount of timber
2002 cut removed from the land exceeds the rate of growth of the
2003 timber or the net receipts are from the sale of standing timber;
2004 (c) To or Between income and principal if the net receipts
2005 are from the lease of land used for growing and cutting timber
2006 timberland or from a contract to cut timber from land owned by a
2007 trust or estate by determining the amount of timber cut removed
2008 from the land under the lease or contract and applying the rules
2009 in paragraphs (a) and (b); or
2010 (d) To principal, to the extent that advance payments,
2011 bonuses, and other payments are not allocated under pursuant to
2012 paragraph (a), paragraph (b), or paragraph (c).
2013 (2) In determining net receipts to be allocated under
2014 pursuant to subsection (1), a fiduciary shall deduct and
2015 transfer to principal a reasonable amount for depletion.
2016 (3) This section chapter applies to land owned or held by a
2017 fiduciary regardless of whether or not a settlor decedent or
2018 donor was cutting harvesting timber from the land property
2019 before the fiduciary owned or held the property became subject
2020 to the trust or estate.
2021 (4) If a fiduciary trust or estate owns or holds an
2022 interest in land used for growing and cutting timber before
2023 January 1, 2025 timberland on January 1, 2003, the fiduciary may
2024 allocate net receipts from the sale of timber and related
2025 products as provided in this section chapter or in the manner
2026 used by the fiduciary before January 1, 2025 January 1, 2003. If
2027 the fiduciary trust or estate acquires an interest in land used
2028 for growing and cutting timber on or after January 1, 2025
2029 timberland after January 1, 2003, the fiduciary must shall
2030 allocate net receipts from the sale of timber and related
2031 products as provided in this section chapter.
2032 Section 32. Section 738.606, Florida Statutes, is
2033 transferred, renumbered as section 738.413, Florida Statutes,
2034 and amended to read:
2035 738.413 738.606 Marital deduction property not productive
2036 of income.—
2037 (1) If a trust received property for which a gift or estate
2038 tax marital deduction was under the Internal Revenue Code or
2039 comparable law of any state is allowed, for all or if part of a
2040 trust received property satisfying, or if assets are transferred
2041 to a trust that satisfies the requirements of s. 732.2025(2)(a)
2042 and (c), and such property has assets have been used in whole or
2043 in part to satisfy an election by a surviving spouse under s.
2044 732.2125, and the settlor’s spouse holds a mandatory income
2045 interest in the trust, the spouse may require the trustee, to
2046 the extent that the trust assets otherwise do consist of
2047 property that, in the aggregate, does not provide the spouse
2048 with sufficient income from or use of the trust assets to
2049 qualify for the deduction, or to satisfy an election by a
2050 surviving spouse under s. 732.2125, to make the property
2051 productive of income within a reasonable time. The trustee may:
2052 (a) Convert property to property productive of income
2053 within a reasonable time;
2054 (b) Exercise the power to adjust under s. 738.203;
2055 (c) Exercise the power to convert to or from a unitrust
2056 under s. 738.303; or
2057 (d) Exercise the fiduciary’s authority under the terms of
2058 the trust to otherwise provide the surviving spouse with
2059 sufficient income from the trust assets, or the use of the trust
2060 assets, to qualify for the marital deduction, or to satisfy an
2061 election by a surviving spouse under s. 732.2125.
2062 (2) The trustee may decide which action or combination of
2063 actions listed in subsection (1) to take.
2064 (3) Subsection (1) shall apply, and if amounts the trustee
2065 transfers from principal to income under s. 738.104 and
2066 distributes to the spouse from principal pursuant to the terms
2067 of the trust are insufficient to provide the spouse with the
2068 beneficial enjoyment required to obtain the marital deduction,
2069 even though, in the case of an elective share trust under s.
2070 732.2025(2), a marital deduction is not made or is only
2071 partially made, the spouse may require the trustee of such
2072 marital trust or elective share trust to make property
2073 productive of income, convert property within a reasonable time,
2074 or exercise the power conferred by ss. 738.104 and 738.1041.
2075 (4) The terms of a trust as defined in s. 738.102 may not
2076 supersede this section unless such terms explicitly reference
2077 this section The trustee may decide which action or combination
2078 of actions to take.
2079 (2) In cases not governed by subsection (1), proceeds from
2080 the sale or other disposition of an asset are principal without
2081 regard to the amount of income the asset produces during any
2082 accounting period.
2083 Section 33. Section 738.607, Florida Statutes, is
2084 transferred, renumbered as section 738.414, Florida Statutes,
2085 and amended to read:
2086 738.414 738.607 Derivatives or and options.—
2087 (1) As used in For purposes of this section, the term
2088 “derivative” means a contract, an or financial instrument, or
2089 other arrangement, or a combination of contracts, and financial
2090 instruments, or other arrangements, of which the value, rights,
2091 and obligations are, in whole or in part, dependent on or
2092 derived from an underlying which gives a trust the right or
2093 obligation to participate in some or all changes in the price of
2094 a tangible or intangible asset, a or group of tangible or
2095 intangible assets, an index, or an occurrence of an event. The
2096 term includes stocks, fixed income securities, and financial
2097 instruments and arrangements based on indices, commodities,
2098 interest rates, weather-related events, and credit-default
2099 events assets, or changes in a rate, an index of prices or
2100 rates, or other market indicator for an asset or a group of
2101 assets.
2102 (2) To the extent that a fiduciary does not account for a
2103 transaction in derivatives as a business under s. 738.403 for
2104 transactions in derivatives, the fiduciary shall allocate 10
2105 percent of to principal receipts from the transaction and 10
2106 percent of and disbursements made in connection with the
2107 transaction to income and allocate the balance to principal
2108 those transactions.
2109 (3) Subsection (4) applies if:
2110 (a) A fiduciary:
2111 1. If a fiduciary Grants an option to buy property from a
2112 the trust, regardless of or estate whether or not the trust or
2113 estate owns the property when the option is granted;,
2114 2. Grants an option that permits another person to sell
2115 property to the trust; or
2116 3. estate, or Acquires an option to buy property for the
2117 trust or estate or an option to sell an asset owned by the trust
2118 or estate;, and
2119 (b) The fiduciary or other owner of the asset is required
2120 to deliver the asset if the option is exercised, an amount
2121 received for granting the option shall be allocated to
2122 principal. An amount paid to acquire the option shall be paid
2123 from principal.
2124 (4) If this subsection applies, the fiduciary must allocate
2125 10 percent to income and allocate the balance to principal of
2126 the following amounts:
2127 (a) An amount received for granting the option;
2128 (b) An amount paid to acquire the option; and
2129 (c) A Gain or loss realized on upon the exercise, exchange,
2130 settlement, offset, closing, or expiration of the option of an
2131 option, including an option granted to a grantor of the trust or
2132 estate for services rendered, shall be allocated to principal.
2133 Section 34. Section 738.608, Florida Statutes, is
2134 transferred, renumbered as section 738.415, Florida Statutes,
2135 and amended to read:
2136 738.415 738.608 Asset-backed securities.—
2137 (1) Except as otherwise provided in subsection (2), a
2138 fiduciary shall allocate to income a receipt from or related to
2139 an asset-backed security, as defined in s. 738.102, to the
2140 extent that the payor identifies the payment as being from For
2141 purposes of this section, “asset-backed security” means an asset
2142 the value of which is based upon the right given the owner to
2143 receive distributions from the proceeds of financial assets that
2144 provide collateral for the security. The term includes an asset
2145 that gives the owner the right to receive from the collateral
2146 financial assets only the interest or other current return and
2147 allocate to principal the balance of the receipt or only the
2148 proceeds other than interest or current return. The term does
2149 not include an asset to which s. 738.401 or s. 738.602 applies.
2150 (2) If a fiduciary receives one or more payments in
2151 exchange for part or all of the fiduciary’s interest in an
2152 asset-backed security, including a liquidation or redemption of
2153 the fiduciary’s interest in the security trust or estate
2154 receives a payment from interest or other current return and
2155 from other proceeds of the collateral financial assets, the
2156 fiduciary must shall allocate to income 10 percent of receipts
2157 from the transaction and 10 percent of disbursements made in
2158 connection with the transaction, and allocate to principal the
2159 portion of the payment which the payor identifies as being from
2160 interest or other current return and allocate the balance of the
2161 receipts and disbursements payment to principal.
2162 (3) If a trust or estate receives one or more payments in
2163 exchange for the trust’s or estate’s entire interest in an
2164 asset-backed security during a single accounting period, the
2165 fiduciary shall allocate the payments to principal. If a payment
2166 is one of a series of payments that will result in the
2167 liquidation of the trust’s or estate’s interest in the security
2168 over more than a single accounting period, the fiduciary shall
2169 allocate 10 percent of the payment to income and the balance to
2170 principal.
2171 Section 35. Section 738.416, Florida Statutes, is created
2172 to read:
2173 738.416 Other financial instrument or arrangement.—A
2174 fiduciary shall allocate receipts from or related to a financial
2175 instrument or arrangement not otherwise addressed by this
2176 chapter. The allocation must be consistent with ss. 738.414 and
2177 738.415.
2178 Section 36. Section 738.501, Florida Statutes, is amended
2179 to read:
2180 (Substantial rewording of section. See
2181 s. 738.501, F.S., for present text.)
2182 738.501 Disbursement from income.—Subject to s. 738.504,
2183 and except as otherwise provided in s. 738.601(3)(b) or (c), a
2184 fiduciary shall disburse from income:
2185 (1) One-half of:
2186 (a) The regular compensation of the fiduciary and of any
2187 person providing investment advisory, custodial, or other
2188 services to the fiduciary to the extent that income is
2189 sufficient; and
2190 (b) An expense for an accounting, judicial or nonjudicial
2191 proceeding, or other matter that involves both income and
2192 successive interests to the extent income is sufficient.
2193 (2) The balance of the disbursements described in
2194 subsection (1), to the extent that a fiduciary who is an
2195 independent person determines that making those disbursements
2196 from income would be in the interests of the beneficiaries.
2197 (3) Any other ordinary expense incurred in connection with
2198 administration, management, or preservation of property and
2199 distribution of income, including interest, an ordinary repair,
2200 a regularly recurring tax assessed against principal, and an
2201 expense of an accounting, judicial or nonjudicial proceeding, or
2202 other matter that involves primarily an income interest, to the
2203 extent that income is sufficient.
2204 (4) A premium on insurance covering loss of a principal
2205 asset or income from or use of the asset.
2206 Section 37. Section 738.502, Florida Statutes, is amended
2207 to read:
2208 (Substantial rewording of section. See
2209 s. 738.502, F.S., for present text.)
2210 738.502 Disbursement from principal.—
2211 (1) Subject to s. 738.505, and except as otherwise provided
2212 in s. 738.601(3)(b), a fiduciary shall disburse all of the
2213 following from principal:
2214 (a) The balance of the disbursements described in s.
2215 738.501(1) and (3), after application of s. 738.501(2).
2216 (b) The fiduciary’s compensation calculated on principal as
2217 a fee for acceptance, distribution, or termination.
2218 (c) A payment of an expense to prepare for or execute a
2219 sale or other disposition of property.
2220 (d) A payment on the principal of a trust debt.
2221 (e) A payment of an expense of an accounting, judicial or
2222 nonjudicial proceeding, or other matter that involves primarily
2223 principal, including a proceeding to construe the terms of the
2224 trust or protect property.
2225 (f) A payment of a premium for insurance, including title
2226 insurance, not described in s. 738.501(4) of which the fiduciary
2227 is the owner and beneficiary.
2228 (g) A payment of estate, inheritance, and other transfer
2229 taxes, including penalties, apportioned to the trust.
2230 (h) A payment related to environmental matters including:
2231 1. Reclamation;
2232 2. Assessing environmental conditions;
2233 3. Remedying and removing environmental contamination;
2234 4. Monitoring remedial activities and the release of
2235 substances;
2236 5. Preventing future releases of substances;
2237 6. Collecting amounts from persons liable or potentially
2238 liable for the costs of the activities described in
2239 subparagraphs 1.-5.;
2240 7. Penalties imposed under environmental laws or
2241 regulations;
2242 8. Other actions to comply with environmental laws or
2243 regulations;
2244 9. Statutory or common law claims by third parties; and
2245 10. Defending claims based on environmental matters.
2246 (i) A payment of a premium for insurance for matters
2247 described in paragraph (h).
2248 (2) If a principal asset is encumbered with an obligation
2249 that requires income from the asset to be paid directly to a
2250 creditor, the fiduciary must transfer from principal to income
2251 an amount equal to the income paid to the creditor in reduction
2252 of the principal balance of the obligation.
2253 Section 38. Section 738.503, Florida Statutes, is amended
2254 to read:
2255 (Substantial rewording of section. See
2256 s. 738.503, F.S., for present text.)
2257 738.503 Transfers from income to principal for
2258 depreciation.—
2259 (1) For purposes of this section, “depreciation” means a
2260 reduction in value due to wear, tear, decay, corrosion, or
2261 gradual obsolescence of a tangible asset having a useful life of
2262 more than 1 year.
2263 (2) A fiduciary may transfer to principal a reasonable
2264 amount of the net cash receipts from a principal asset that is
2265 subject to depreciation but may not transfer any amount for
2266 depreciation:
2267 (a) Of the part of real property used or available for use
2268 by a beneficiary as a residence;
2269 (b) Of tangible personal property held or made available
2270 for the personal use or enjoyment of a beneficiary; or
2271 (c) Under this section, to the extent that the fiduciary
2272 accounts:
2273 1. Under s. 738.410 for the asset; or
2274 2. Under s. 738.403 for the business or other activity in
2275 which the asset is used.
2276 (3) An amount transferred to principal under this section
2277 need not be separately held.
2278 Section 39. Section 738.504, Florida Statutes, is amended
2279 to read:
2280 (Substantial rewording of section. See
2281 s. 738.504, F.S., for present text.)
2282 738.504 Reimbursement of income from principal.—
2283 (1) If a fiduciary makes or expects to make an income
2284 disbursement described in subsection (2), the fiduciary may
2285 transfer an appropriate amount from principal to income in one
2286 or more accounting periods to reimburse income.
2287 (2) To the extent that the fiduciary has not been and does
2288 not expect to be reimbursed by a third party, income
2289 disbursements to which subsection (1) applies include:
2290 (a) An amount chargeable to principal but paid from income
2291 because principal is illiquid;
2292 (b) A disbursement made to prepare property for sale,
2293 including improvements and commissions; and
2294 (c) A disbursement described in s. 738.502(1).
2295 (3) If an asset whose ownership gives rise to an income
2296 disbursement becomes subject to a successive interest after an
2297 income interest ends, the fiduciary may continue to make
2298 transfers under subsection (1).
2299 Section 40. Section 738.704, is transferred, renumbered as
2300 section 738.505, Florida Statutes, and amended to read:
2301 738.505 738.704 Reimbursement of principal from income
2302 Transfers from income to reimburse principal.—
2303 (1) If a fiduciary makes or expects to make a principal
2304 disbursement described in subsection (2) this section, the
2305 fiduciary may transfer an appropriate amount from income to
2306 principal in one or more accounting periods to reimburse
2307 principal or to provide a reserve for future principal
2308 disbursements.
2309 (2) Principal disbursements to which subsection (1) applies
2310 include the following, but only To the extent that a the
2311 fiduciary has not been and does not expect to be reimbursed by a
2312 third party, principal disbursements to which subsection (1)
2313 applies include:
2314 (a) An amount chargeable to income but paid from principal
2315 because income is not sufficient; the amount is unusually large.
2316 (b) The cost of an improvement to principal, whether a
2317 change to an existing asset or the construction of a new asset,
2318 including a special assessment; Disbursements made to prepare
2319 property for rental, including tenant allowances, leasehold
2320 improvements, and broker’s commissions.
2321 (c) A disbursement made to prepare property for rental,
2322 including tenant allowances, leasehold improvements, and
2323 commissions; Disbursements described in s. 738.702(1)(g).
2324 (d) A periodic payment on an obligation secured by a
2325 principal asset, to the extent the amount transferred from
2326 income to principal for depreciation is less than the periodic
2327 payment; and
2328 (e) A disbursement described in s. 738.502(1).
2329 (3) If an the asset whose the ownership of which gives rise
2330 to a principal disbursement the disbursements becomes subject to
2331 a successive income interest after an income interest ends, the
2332 a fiduciary may continue to make transfers under transfer
2333 amounts from income to principal as provided in subsection (1).
2334 (4) To the extent principal cash is not sufficient to pay
2335 the principal balance of payments due on mortgaged property,
2336 income may be applied to such payment in order to avoid a
2337 default on any mortgage or security interest securing the
2338 property. Income shall be reimbursed for such payments out of
2339 the first available principal cash. If the asset the ownership
2340 of which gives rise to the disbursements described in this
2341 subsection becomes subject to a successive income interest after
2342 an income interest ends, all rights of the initial income
2343 interest shall lapse, and amounts remaining due from principal
2344 shall not be a lien on the assets of the trust.
2345 Section 41. Section 738.705, Florida Statutes, is
2346 transferred, renumbered as section 738.506, Florida Statutes,
2347 and amended to read:
2348 738.506 738.705 Income taxes.—
2349 (1) A tax required to be paid by a fiduciary which is based
2350 on receipts allocated to income must shall be paid from income.
2351 (2) A tax required to be paid by a fiduciary which is based
2352 on receipts allocated to principal must shall be paid from
2353 principal, even if the tax is called an income tax by the taxing
2354 authority.
2355 (3) Subject to subsection (4) and ss. 738.504, 738.505, and
2356 738.507, a tax required to be paid by a fiduciary on a the
2357 trust’s or estate’s share of an entity’s taxable income in an
2358 accounting period must shall be paid from proportionately:
2359 (a) From Income and principal proportionately to the
2360 allocation between income and principal of to the extent
2361 receipts from the entity in the period are allocated to income.
2362 (b) From principal to the extent receipts from the entity
2363 are allocated to principal.
2364 (c) From Principal to the extent that the tax exceeds the
2365 income taxes payable by the trust or estate exceed the total
2366 receipts from the entity in the period.
2367 (4) After applying subsections (1), (2), and (3), a
2368 fiduciary shall adjust income or principal receipts, to the
2369 extent the taxes that the fiduciary pays are reduced because of
2370 a deduction for a payment made to a beneficiary.
2371 (5) Subject to the limitations and excluded assets provided
2372 under s. 736.08145, a reimbursement of state or federal income
2373 tax elected to be made by a fiduciary pursuant to s. 736.08145
2374 must be allocated and paid under paragraphs (3)(a) and (b) After
2375 applying subsections (1)-(3), the fiduciary shall adjust income
2376 or principal receipts to the extent that the trust’s or estate’s
2377 income taxes are reduced, but not eliminated, because the trust
2378 or estate receives a deduction for payments made to a
2379 beneficiary. The amount distributable to that beneficiary as
2380 income as a result of this adjustment shall be equal to the cash
2381 received by the trust or estate, reduced, but not below zero, by
2382 the entity’s taxable income allocable to the trust or estate
2383 multiplied by the trust’s or estate’s income tax rate. The
2384 reduced amount shall be divided by the difference between 1 and
2385 the trust’s or estate’s income tax rate in order to determine
2386 the amount distributable to that beneficiary as income before
2387 giving effect to other receipts or disbursements allocable to
2388 that beneficiary’s interest.
2389 Section 42. Section 738.706, Florida Statutes, is
2390 transferred, renumbered as section 738.507, Florida Statutes,
2391 and amended to read:
2392 738.507 738.706 Adjustment Adjustments between principal
2393 and income because of taxes.—
2394 (1) A fiduciary may make an adjustment adjustments between
2395 principal and income and principal to offset the shifting of
2396 economic interests or tax benefits between current income
2397 beneficiaries and successor remainder beneficiaries which arises
2398 arise from:
2399 (a) An election or decision Elections and decisions, other
2400 than those described in paragraph (b), that the fiduciary makes
2401 from time to time regarding a tax matter, other than a decision
2402 to claim an income tax deduction to which subsection (2) applies
2403 matters;
2404 (b) An income tax or any other tax that is imposed on upon
2405 the fiduciary or a beneficiary as a result of a transaction
2406 involving the fiduciary or a distribution by from the fiduciary
2407 estate or trust; or
2408 (c) The Ownership by the fiduciary an estate or trust of an
2409 interest in an entity a part of whose taxable income, regardless
2410 of whether or not distributed, is includable in the taxable
2411 income of the fiduciary estate, trust, or a beneficiary; or
2412 (d) An election or decision a fiduciary makes to reimburse
2413 any tax under s. 736.08145.
2414 (2) If the amount of an estate tax marital deduction or
2415 charitable contribution deduction is reduced because a fiduciary
2416 deducts an amount paid from principal for income tax purposes
2417 instead of deducting it such amount for estate tax purposes,
2418 and, as a result, estate taxes paid from principal are increased
2419 and income taxes paid by a fiduciary or a an estate, trust, or
2420 beneficiary are decreased, the fiduciary shall charge each
2421 estate, trust, or beneficiary that benefits from the decrease in
2422 income tax to shall reimburse the principal from which the
2423 increase in estate tax is paid. The total reimbursement must
2424 shall equal the increase in the estate tax, to the extent that
2425 the principal used to pay the increase would have qualified for
2426 a marital deduction or charitable contribution deduction but for
2427 the payment. The proportionate share of the reimbursement for
2428 each fiduciary estate, trust, or beneficiary whose income taxes
2429 are reduced must shall be the same as its such estate’s,
2430 trust’s, or beneficiary’s proportionate share of the total
2431 decrease in income tax. An estate or trust shall reimburse
2432 principal from income.
2433 (3) A fiduciary that charges a beneficiary under subsection
2434 (2) may offset the charge by obtaining payment from the
2435 beneficiary, withholding an amount from future distributions to
2436 the beneficiary, or adopting another method or combination of
2437 methods.
2438 Section 43. Section 738.508, Florida Statutes, is created
2439 to read:
2440 738.508 Apportionment of property expenses between tenant
2441 and remainderman.—
2442 (1) For purposes of this section, the term:
2443 (a) “Remainderman” means the holder of the remainder
2444 interests after the expiration of a tenant’s estate in property.
2445 (b) “Tenant” means the holder of an estate for life or term
2446 of years in real property or personal property, or both.
2447 (2) If a trust has not been created, expenses shall be
2448 apportioned between the tenant and remainderman as follows:
2449 (a) The following expenses are allocated to and shall be
2450 paid by the tenant:
2451 1. All ordinary expenses incurred in connection with the
2452 administration, management, or preservation of the property,
2453 including interest, ordinary repairs, regularly recurring taxes
2454 assessed against the property, and expenses of a proceeding or
2455 other matter that concerns primarily the tenant’s estate or use
2456 of the property.
2457 2. Recurring premiums on insurance covering the loss of the
2458 property or the loss of income from or use of the property.
2459 3. Any of the expenses described in subparagraph (b)3.
2460 which are attributable to the use of the property by the tenant.
2461 (b) The following expenses are allocated to and shall be
2462 paid by the remainderman:
2463 1. Payments on the principal of a debt secured by the
2464 property, except to the extent that the debt is for expenses
2465 allocated to the tenant.
2466 2. Expenses of a proceeding or other matter that concerns
2467 primarily the title to the property, other than title to the
2468 tenant’s estate.
2469 3. Except as provided in subparagraph (a)3., expenses
2470 related to environmental matters, including reclamation,
2471 assessing environmental conditions, remedying and removing
2472 environmental contamination, monitoring remedial activities and
2473 the release of substances, preventing future releases of
2474 substances, collecting amounts from persons liable or
2475 potentially liable for the costs of such activities, penalties
2476 imposed under environmental laws or regulations and other
2477 payments made to comply with those laws or regulations,
2478 statutory or common law claims by third parties, and defending
2479 claims based on environmental matters.
2480 4. Extraordinary repairs.
2481 (c) If the tenant or remainderman incurred an expense for
2482 the benefit of his or her own estate without consent or
2483 agreement of the other, he or she must pay such expense in full.
2484 (d) Except as provided in paragraph (c), the cost of, or
2485 special taxes or assessments for, an improvement representing an
2486 addition of value to property forming part of the principal
2487 shall be paid by the tenant if the improvement is not reasonably
2488 expected to outlast the estate of the tenant. In all other
2489 cases, only a part shall be paid by the tenant while the
2490 remainder shall be paid by the remainderman. The part payable by
2491 the tenant is ascertainable by taking that percentage of the
2492 total that is found by dividing the present value of the
2493 tenant’s estate by the present value of an estate of the same
2494 form as that of the tenant, except that it is limited for a
2495 period corresponding to the reasonably expected duration of the
2496 improvement. The computation of present values of the estates
2497 shall be made by using the rate determined under s. 7520(a)(2)
2498 of the Internal Revenue Code then in effect and, in the case of
2499 an estate for life, the official mortality tables then in effect
2500 under s. 7520 of the Internal Revenue Code. Other evidence of
2501 duration or expectancy may not be considered.
2502 (3) This section does not apply to the extent that it is
2503 inconsistent with the instrument creating the estates, the
2504 agreement of the parties, or the specific direction of the
2505 Internal Revenue Code taxing or other applicable law.
2506 (4) The common law applicable to tenants and remaindermen
2507 supplements this section, except as modified by this section or
2508 other laws.
2509 Section 44. Section 738.601, Florida Statutes, is amended
2510 to read:
2511 (Substantial rewording of section. See
2512 s. 738.601, F.S., for present text.)
2513 738.601 Determination and distribution of net income.—
2514 (1) This section applies when:
2515 (a) The death of an individual results in the creation of
2516 an estate or trust; or
2517 (b) An income interest in a trust terminates, whether the
2518 trust continues or is distributed.
2519 (2) A fiduciary of an estate or trust with an income
2520 interest that terminates shall determine, under subsection (6)
2521 and ss. 738.401-738.508 and 738.701-738.703, the amount of net
2522 income and net principal receipts received from property
2523 specifically given to a beneficiary. The fiduciary shall
2524 distribute the net income and net principal receipts to the
2525 beneficiary who is to receive the specific property.
2526 (3) A fiduciary shall determine the income and net income
2527 of an estate or income interest in a trust which terminates,
2528 other than the amount of net income determined under subsection
2529 (2), under ss. 738.401-738.508 and 738.701-738.703, and by:
2530 (a) Including in net income all income from property used
2531 or sold to discharge liabilities.
2532 (b) Paying from income or principal, in the fiduciary’s
2533 discretion, fees of attorneys, accountants, and fiduciaries;
2534 court costs and other expenses of administration; and interest
2535 on estate and inheritance taxes and other taxes imposed because
2536 of the decedent’s death, but the fiduciary may pay the expenses
2537 from income of property passing to a trust for which the
2538 fiduciary claims an estate tax marital or charitable deduction
2539 under the Internal Revenue Code or comparable law of any state
2540 only to the extent that:
2541 1. The payment of the those expenses from income will not
2542 cause the reduction or loss of the deduction; or
2543 2. The fiduciary makes an adjustment under s. 738.507(2).
2544 (c) Paying from principal other disbursements made or
2545 incurred in connection with the settlement of the estate or the
2546 winding up of an income interest that terminates, including:
2547 1. To the extent authorized by the decedent’s will, the
2548 terms of the trust, or applicable law, debts, funeral expenses,
2549 disposition of remains, family allowances, estate and
2550 inheritance taxes, and other taxes imposed because of the
2551 decedent’s death; and
2552 2. Related penalties apportioned by the decedent’s will,
2553 the terms of the trust, or applicable law to the estate or
2554 income interest that terminates.
2555 (4) If a decedent’s will or the terms of a trust provide
2556 for the payment of interest or the equivalent of interest to a
2557 beneficiary who receives a pecuniary amount outright, the
2558 fiduciary shall make the payment from net income determined
2559 under subsection (3) or from principal to the extent that net
2560 income is insufficient.
2561 (5) A fiduciary shall distribute net income remaining after
2562 payments required by subsection (4) in the manner described in
2563 s. 738.602 to all other beneficiaries, including a beneficiary
2564 who receives a pecuniary amount in trust, even if the
2565 beneficiary holds an unqualified power to withdraw assets from
2566 the trust or other presently exercisable general power of
2567 appointment over the trust.
2568 (6) A fiduciary may not reduce principal or income receipts
2569 from property described in subsection (2) because of a payment
2570 described in s. 738.501 or s. 738.502 to the extent that the
2571 decedent’s will, the terms of the trust, or applicable law
2572 requires the fiduciary to make the payment from assets other
2573 than the property or that the fiduciary recovers or expects to
2574 recover the payment from a third party. The net income and
2575 principal receipts from the property must be determined by
2576 including the amount the fiduciary receives or pays regarding
2577 the property, whether the amount accrued or became due before,
2578 on, or after the date of the decedent’s death or an income
2579 interest’s terminating event, and making a reasonable provision
2580 for an amount the estate or income interest may become obligated
2581 to pay after the property is distributed.
2582 Section 45. Section 738.602, Florida Statutes, is amended
2583 to read:
2584 (Substantial rewording of section. See
2585 s. 738.602, F.S., for present text.)
2586 738.602 Distribution to successor beneficiary.—
2587 (1) Except to the extent that ss. 738.301-738.310 apply for
2588 a beneficiary that is a trust, each beneficiary described in s.
2589 738.601(5) is entitled to receive a share of the net income
2590 equal to the beneficiary’s fractional interest in undistributed
2591 principal assets, using carrying values as of the distribution
2592 date. If a fiduciary makes more than one distribution of assets
2593 to beneficiaries to which this section applies, each
2594 beneficiary, including a beneficiary who does not receive part
2595 of the distribution, is entitled, as of each distribution date,
2596 to a share of the net income the fiduciary received after the
2597 decedent’s death, an income interest’s other terminating event,
2598 or the preceding distribution by the fiduciary.
2599 (2) In determining a beneficiary’s share of net income
2600 under subsection (1), the following rules apply:
2601 (a) The beneficiary is entitled to receive a share of the
2602 net income equal to the beneficiary’s fractional interest in the
2603 undistributed principal assets immediately before the
2604 distribution date.
2605 (b) The beneficiary’s fractional interest under paragraph
2606 (a) must be calculated:
2607 1. On the aggregate carrying value of the assets as of the
2608 distribution date; and
2609 2. Reduced by:
2610 a. Any liabilities of the estate or trust;
2611 b. Property specifically given to a beneficiary under the
2612 decedent’s will or the terms of the trust; and
2613 c. Property required to pay pecuniary amounts not in trust.
2614 (c) If a disproportionate distribution of principal is made
2615 to any beneficiary, the respective fractional interests of all
2616 beneficiaries in the undistributed principal assets must be
2617 recomputed by:
2618 1. Adjusting the carrying value of the principal assets to
2619 their fair market value before the distribution;
2620 2. Reducing the fractional interest of the recipient of the
2621 disproportionate distribution in the remaining principal assets
2622 by the fair market value of the principal distribution; and
2623 3. Recomputing the fractional interests of all
2624 beneficiaries in the remaining principal assets based upon the
2625 now restated carrying values.
2626 (d) The distribution date under paragraph (a) may be the
2627 date as of which the fiduciary calculates the value of the
2628 assets if that date is reasonably near the date on which the
2629 assets are distributed. All distributions to a beneficiary must
2630 be valued based on the assets’ fair market value on the date of
2631 the distribution.
2632 (3) To the extent that a fiduciary does not distribute
2633 under this section all the collected but undistributed net
2634 income to each beneficiary as of a distribution date, the
2635 fiduciary shall maintain records showing the interest of each
2636 beneficiary in the net income.
2637 (4) If this section applies to income from an asset, a
2638 fiduciary may apply the requirements in this section to net gain
2639 or loss realized from the disposition of the asset after the
2640 decedent’s date of death, an income interest’s terminating
2641 event, or the preceding distribution by the fiduciary.
2642 (5) The carrying value or fair market value of trust assets
2643 shall be determined on an asset-by-asset basis and is conclusive
2644 if reasonable and determined in good faith. Determinations of
2645 fair market value based on appraisals performed within 2 years
2646 before or after the valuation date are presumed reasonable. The
2647 values of trust assets are conclusively presumed to be
2648 reasonable and determined in good faith unless proven otherwise
2649 in a proceeding commenced by or on behalf of a person interested
2650 in the trust within the time provided in s. 736.1008.
2651 Section 46. Section 738.701, Florida Statutes, is amended
2652 to read:
2653 (Substantial rewording of section. See
2654 s. 738.701, F.S., for present text.)
2655 738.701 When right to income begins and ends.—
2656 (1) An income beneficiary is entitled to net income in
2657 accordance with the terms of the trust from the date an income
2658 interest begins. The income interest begins on the date
2659 specified in the terms of the trust or, if no date is specified,
2660 on the date an asset becomes subject to:
2661 (a) The trust for the current income beneficiary; or
2662 (b) A successive interest for a successor beneficiary.
2663 (2) An asset becomes subject to a trust under paragraph
2664 (1)(a):
2665 (a) For an asset that is transferred to the trust during
2666 the settlor’s life, on the date the asset is transferred;
2667 (b) For an asset that becomes subject to the trust because
2668 of a decedent’s death, on the date of the decedent’s death, even
2669 if there is an intervening period of administration of the
2670 decedent’s estate; or
2671 (c) For an asset that is transferred to a fiduciary by a
2672 third party because of a decedent’s death, on the date of the
2673 decedent’s death.
2674 (3) An asset becomes subject to a successive interest under
2675 paragraph (1)(b) on the day after the preceding income interest
2676 ends, as determined under subsection (4), even if there is an
2677 intervening period of administration to wind up the preceding
2678 income interest.
2679 (4) An income interest ends on the day before an income
2680 beneficiary dies or another terminating event occurs, or on the
2681 last day of a period during which there is no beneficiary to
2682 which a fiduciary may or must distribute income.
2683 Section 47. Section 738.702, Florida Statutes, is amended
2684 to read:
2685 (Substantial rewording of section. See
2686 s. 738.702, F.S., for present text.)
2687 738.702 Apportionment of receipts and disbursements when
2688 decedent dies or income interest begins.—
2689 (1) A fiduciary shall allocate an income receipt or
2690 disbursement, other than a receipt to which s. 738.601(2)
2691 applies, to principal if its due date occurs before the date on
2692 which:
2693 (a) For an estate, the decedent died; or
2694 (b) For a trust or successive interest, an income interest
2695 begins.
2696 (2) If the due date of a periodic income receipt or
2697 disbursement occurs on or after the date on which a decedent
2698 died or an income interest begins, a fiduciary must allocate the
2699 receipt or disbursement to income.
2700 (3) If an income receipt or disbursement is not periodic or
2701 has no due date, a fiduciary must treat the receipt or
2702 disbursement under this section as accruing from day to day. The
2703 fiduciary shall allocate to principal the portion of the receipt
2704 or disbursement accruing before the date on which a decedent
2705 died or an income interest begins, and shall allocate to income
2706 the balance.
2707 (4) A receipt or disbursement is periodic under subsections
2708 (2) and (3) if:
2709 (a) The receipt or disbursement must be paid at regular
2710 intervals under an obligation to make payments; or
2711 (b) The payor customarily makes payments at regular
2712 intervals.
2713 (5) An item of income or an obligation is due under this
2714 section on the date the payor is required to make a payment. If
2715 a payment date is not stated, there is no due date.
2716 (6) Distributions to shareholders or other owners from an
2717 entity to which s. 738.401 applies are due:
2718 (a) On the date fixed by or on behalf of the entity for
2719 determining the persons entitled to receive the distribution;
2720 (b) If no date is fixed, on the date of the decision by or
2721 on behalf of the entity to make the distribution; or
2722 (c) If no date is fixed and the fiduciary does not know the
2723 date of the decision by or on behalf of the entity to make the
2724 distribution, on the date the fiduciary learns of the decision.
2725 (7) Section 733.817 controls over any provision of this
2726 chapter to the contrary.
2727 Section 48. Section 738.703, Florida Statutes, is amended
2728 to read:
2729 (Substantial rewording of section. See
2730 s. 738.703, F.S., for present text.)
2731 738.703 Apportionment when income interest ends.—
2732 (1) As used in this section, the term “undistributed
2733 income” means net income received on or before the date on which
2734 an income interest ends. The term does not include an item of
2735 income or expense which is due or accrued or net income that has
2736 been added or is required to be added to principal under the
2737 terms of the trust.
2738 (2) Except as otherwise provided in subsection (3), when a
2739 mandatory income interest of a beneficiary ends, the fiduciary
2740 shall pay the beneficiary’s share of the undistributed income
2741 that is not disposed of under the terms of the trust to the
2742 beneficiary or, if the beneficiary does not survive the date the
2743 interest ends, to the beneficiary’s estate.
2744 (3) If a beneficiary has an unqualified power to withdraw
2745 more than 5 percent of the value of a trust immediately before
2746 an income interest ends:
2747 (a) The fiduciary shall allocate to principal the
2748 undistributed income from the portion of the trust which may be
2749 withdrawn; and
2750 (b) Subsection (2) applies only to the balance of the
2751 undistributed income.
2752 (4) When a fiduciary’s obligation to pay a fixed annuity or
2753 a fixed fraction of the value of assets ends, the fiduciary
2754 shall prorate the final payment as required to preserve income
2755 tax, gift tax, estate tax, or other tax benefits.
2756 Section 49. Section 738.801, Florida Statutes, is amended
2757 to read:
2758 (Substantial rewording of section. See
2759 s. 738.801, F.S., for present text.)
2760 738.801 Uniformity of application and construction.—In
2761 applying and construing this act, consideration shall be given
2762 to the need to promote uniformity of the law with respect to its
2763 subject matter among states that enact it.
2764 Section 50. Section 738.802, Florida Statutes, is amended
2765 to read:
2766 (Substantial rewording of section. See
2767 s. 738.802, F.S., for present text.)
2768 738.802 Relation to Electronic Signatures in Global and
2769 National Commerce Act.—This chapter modifies, limits, or
2770 supersedes the Electronic Signatures in Global and National
2771 Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not modify,
2772 limit, or supersede section 101(c) of that act, 15 U.S.C. s.
2773 7001(c), or authorize electronic delivery of any of the notices
2774 described in s. 103(b) of that act, 15 U.S.C. s. 7003(b). This
2775 chapter does not modify, limit, or supersede s. 117.285.
2776 Section 51. Section 738.803, Florida Statutes, is amended
2777 to read:
2778 738.803 Severability.—If any provision of this chapter or
2779 its application to any person or circumstance is held invalid,
2780 the invalidity does shall not affect other provisions or
2781 applications of this chapter which can be given effect without
2782 the invalid provision or application, and to this end the
2783 provisions of this chapter are severable.
2784 Section 52. Section 738.804, Florida Statutes, is amended
2785 to read:
2786 738.804 Application.—Except as provided in the terms of the
2787 trust instrument, the will, or this chapter, this chapter shall
2788 apply to any receipt or expense received or incurred and any
2789 disbursement made after January 1, 2025 January 1, 2003, by any
2790 trust or decedent’s estate, whether established before or after
2791 January 1, 2025 January 1, 2003, and whether the asset involved
2792 was acquired by the trustee or personal representative before or
2793 after January 1, 2025 January 1, 2003. Receipts or expenses
2794 received or incurred and disbursements made before January 1,
2795 2025, must January 1, 2003, shall be governed by the law of this
2796 state in effect at the time of the event, except as otherwise
2797 expressly provided in the will or terms of the trust or in this
2798 chapter.
2799 Section 53. This act shall take effect January 1, 2025.
