Bill Text: HB 1071

HB 1071

2003

A bill to be entitled

An act relating to the Florida Uniform Principal and

Income Act; amending s. 738.104, F.S.; revising language

with respect to the trustee's power to adjust; authorizing

the trustee to release certain powers; restricting the

power to adjust under certain circumstances; providing for

service of notice on a legal representative or natural

guardian of a beneficiary without the filing of any

proceeding or approval of any court; amending s. 738.1041,

F.S.; redefining the term "interested trustee" for the

purpose of a provision governing total return unitrust;

providing for notice to be served in a described manner;

providing that an objection may be executed by a legal

representative or natural guardian without the filing of

any proceeding or approval of any court; revising language

with respect to power of withdrawal; amending s. 738.202,

F.S.; revising language with respect to distribution to

residuary and remainder beneficiaries; amending s.

738.401, F.S.; revising language with respect to character

of receipts; providing for retroactive application;

providing an effective date.

Be It Enacted by the Legislature of the State of Florida:

Section 1. Subsections (5), (8), and (9) of section

738.104, Florida Statutes, are amended to read:

738.104 Trustee's power to adjust.--

(5)(a)A trustee may release the entire power to adjust

conferred by subsection (1) if the trustee desires to convert an

income trust to a total return unitrust pursuant to s. 738.1041.

(b) A trusteeor may release the entire power to adjust

conferred by subsection (1) or may releaseonly the power to

adjust from income to principal or the power to adjust from

principal to income if the trustee is uncertain about whether

possessing or exercising the power will cause a result described

in paragraphs (3)(a)-(f) or paragraph (3)(h) or if the trustee

determines that possessing or exercising the power will or may

deprive the trust of a tax benefit or impose a tax burden not

described in subsection (3).

or for a specified period, including a period measured by the

life of an individual. Notwithstanding anything contrary to this

subsection, a release of the power to adjust pursuant to

paragraph (a) shall remain effective only for as long as the

trust is administered as a unitrust pursuant to s. 738.1041.

(8) With respect to a trust in existence on January 1,

2003:

(a) A trustee shall not have the power to adjust under

this section until the statement required in subsection (9) is

provided and either no objection is made or any objection which

is made has been terminated.

1. An objection is madeif, within 60 days after the date

of the statement required in subsection (9), a super majority of

the trust beneficiaries deliver to the trustee a written

objection to the application of this section to such trust. An

objection shall be deemed to be delivered to the trustee on the

date the objection is mailed to the mailing address listed in

the notice provided in subsection (9).

2. An objection is terminated upon the earlier of the

receipt of consent from a super majority of trust beneficiaries

of the class that made the objection, or the resolution of the

objection pursuant to paragraph (c).

(b) An objection or consentunder this section may be

executed by a legal representative or natural guardian of a

beneficiary without the filing of any proceeding or approval of

any court.

trustee may petition the circuit court for an order quashing the

objection and vesting in such trustee the power to adjust under

this section. The burden will be on the objecting beneficiaries

to prove that the power to adjust would be inequitable, illegal,

or otherwise in contravention of the grantor's intent. The court

may award costs and attorney's fees relating to the trustee's

petition in the same manner as in chancery actions. When costs

and attorney's fees are to be paid out of the trust, the court

may, in its discretion, direct from which part of the trust they

shall be paid.

(d) If no timely objection is made or if the trustee is

vested with the power to adjust by court order, the trustee may

thereafter exercise the power to adjust without providing notice

of its intent to do so unless, in vesting the trustee with the

power to adjust, the court determines that unusual circumstances

require otherwise.

(e)1. If a trustee makes a good faith effort to comply

with the notice provisions of subsection (9), but fails to

deliver notice to one or more beneficiaries entitled to such

notice, neither the validity of the notice required under this

subsection nor the trustee's power to adjust under this section

shall be affected until the trustee has actual notice that one

or more beneficiaries entitled to notice were not notified.

Until the trustee has actual notice of the notice deficiency,

the trustee shall have all of the powers and protections granted

a trustee with the power to adjust under this chapter.

2. When the trustee has actual notice that one or more

beneficiaries entitled to notice under subsection (9) were not

notified, the trustee's power to adjust under this section shall

cease until all beneficiaries who are entitled to such notice,

including those who were previously provided with such notice,

are notified and given the opportunity to object as provided for

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under this subsection.

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(f) The objection of a super majority of beneficiaries

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under this subsection shall be valid for a period of 1 year

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after the date of the notice set forth in subsection (9). Upon

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expiration of the objection, the trustee may thereafter give a

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new notice under subsection (9).

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(g) Nothing in this section is intended to create or imply

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a duty of the trustee of a trust existing on January 1, 2003, to

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seek a power to adjust pursuant to this subsection or to give

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the notice described in subsection (9) if the trustee does not

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desire to have a power to adjust under this section, and no

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inference of impropriety shall be made as the result of a

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trustee not seeking a power to adjust pursuant to this

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subsection.

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(9)(a) A trustee of a trust in existence on January 1,

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2003, that is not prohibited under subsection (3) from

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exercising the power to adjust shall, any time prior to

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initially exercising the power, provide to all reasonably

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ascertainable current beneficiaries described in s.

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737.303(4)(b)1. and all reasonably ascertainable remainder

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beneficiaries described in s. 737.303(4)(b)2. a statement

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containing the following:

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1. The name, telephone number, street address, and mailing

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address of the trustee and of any individuals who may be

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contacted for further information;

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2. A statement that unless a super majority of the

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beneficiaries objects to the application of this section to the

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trust within 60 days after the date the statement pursuant to

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this subsection was served, s. 738.104 shall apply to the trust;

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and

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3. A statement that, if s. 738.104 applies to the trust,

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the trustee will have the power to adjust between income and

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principal and that such a power may have an effect on the

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distributions to such beneficiary from the trust.

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(b) The statement may contain information regarding a

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trustee's fiduciary obligations with respect to the power to

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adjust between income and principal under this section.

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served informally, in the manner provided in the Florida Rules

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of Civil Procedure relating to service of pleadings subsequent

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to the initial pleading. The statement may be served on a legal

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representative or natural guardian of a beneficiary without the

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filing of any proceeding or approval of any court.

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(d) For purposes of subsection (8) and this subsection, a

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"super majority of the trust beneficiaries" means at least two-

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thirds in interest of the reasonably ascertainable current

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beneficiaries described in s. 737.303(4)(b)1. or two-thirds in

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interest of the reasonably ascertainable remainder beneficiaries

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described in s. 737.303(4)(b)2., if the interests of the

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beneficiaries are reasonably ascertainable; otherwise, it means

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two-thirds in number of either such class.

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Section 2. Paragraph (d) of subsection (1), paragraphs

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(b), (c), and (e) of subsection (2), and paragraph (c) of

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subsection (12) of section 738.1041, Florida Statutes, are

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amended to read:

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738.1041 Total return unitrust.--

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(1) For purposes of this section, the term:

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(d) "Interested trustee" means an individual trustee to

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whom the net income or principal of the trust can currently be

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distributed or would be distributed if the trust were then to

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terminate and be distributed, any trustee whom~~who may be~~

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~~removed and replaced by~~ an interested distributee has the power

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to remove and replace with a related or subordinate party as

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defined in paragraph (c), or an individual trustee whose legal

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obligation to support a beneficiary may be satisfied by

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distributions of income and principal of the trust.

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(2) A trustee may, without court approval, convert an

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income trust to a total return unitrust, reconvert a total

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return unitrust to an income trust, or change the percentage

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used to calculate the unitrust amount or the method used to

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determine the fair market value of the trust if:

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(b)1. The trustee determines, or if there is no trustee

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other than an interested trustee, the trustee appoints a

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disinterested person who, in its sole discretion but acting in a

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fiduciary capacity, determines for the trustee:

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a. The percentage to be used to calculate the unitrust

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amount, provided the percentage used is not greater than 5

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percent nor less than 3 percent;

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b. The method to be used in determining the fair market

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value of the trust; and

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c. Which assets, if any, are to be excluded in determining

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the unitrust amount; or

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2. The trustee administers the trust such that:

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a. The percentage used to calculate the unitrust amount is

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50 percent of the applicable federal rate as defined in the

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Internal Revenue Code, 26 U.S.C. s. 7520, in effect for the

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month the conversion under this section becomes effective and

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for each January thereafter; however, if the percentage

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calculated exceeds 5 percent, the unitrust percentage shall

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~~never~~ be ~~greater than~~ 5 percent and if the percentage calculated

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is~~nor~~ less than 3 percent, the unitrust percentage shall be 3

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percent; and

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b. The fair market value of the trust shall be determined

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at least annually on an asset-by-asset basis, reasonably and in

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good faith, in accordance with the provisions of s. 738.202(5),

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except the following property shall not be included in

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determining the value of the trust:

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(I) Any residential property or any tangible personal

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property that, as of the first business day of the current

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valuation year, one or more current beneficiaries of the trust

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have or have had the right to occupy, or have or have had the

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right to possess or control (other than in his or her capacity

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as trustee of the trust), and instead the right of occupancy or

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the right to possession and control shall be deemed to be the

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unitrust amount with respect to such property; however, the

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unitrust amount shall be adjusted to take into account partial

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distributions from or receipt into the trust of such property

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during the valuation year.

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(II) Any asset specifically given to a beneficiary and the

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return on investment on such property, which return on

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investment shall be distributable to such beneficiary.

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(III) Any asset while held in a testator's estate;

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take such action, along with copies of such written statement

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and this section, and, if applicable, the determinations of

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either the trustee or the disinterested person to:

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1. The grantor of the trust, if living.

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2. All living persons who are currently receiving or

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eligible to receive distributions of income of the trust.

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3. All living persons who would receive distributions of

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principal of the trust if the trust were to terminate at the

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time of the giving of such notice (without regard to the

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exercise of any power of appointment) or, if the trust does not

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provide for its termination, all living persons who would

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receive or be eligible to receive distributions of income or

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principal of the trust if the persons identified in subparagraph

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2. were deceased.

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4. All persons acting as advisers or protectors of the

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trust.

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Notice under this paragraph shall be served informally, in the

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manner provided in the Florida Rules of Civil Procedure relating

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to service of pleadings subsequent to the initial pleading.

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Notice may be served on a legal representative or natural

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guardian of a person without the filing of any proceeding or

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approval of any court;

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(e) No person receiving such notice objects, by written

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instrument delivered to the trustee, to the proposed action of

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the trustee or the determinations of the disinterested person

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within 60 days after receipt of such notice. An objection under

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this section may be executed by a legal representative or

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natural guardian of a person without the filing of any

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proceeding or approval of any court.

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(12) This section shall be construed as pertaining to the

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administration of a trust and shall be available to any trust

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that is administered in this state under Florida law unless:

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distribute income have a power of withdrawal over the trust:

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1.That is not subject to an ascertainable standard under

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the Internal Revenue Code, 26 U.S.C. s. 2041 or s. 2514, and

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exceeds in any calendar year the amount set forth in the

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Internal Revenue Code, 26 U.S.C. s. 2041(b)(2) or s. 2514(e); or

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2. A power of withdrawal over the trustthat can be

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exercised to discharge a duty of support he or she possesses;

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Section 3. Subsection (5) of section 738.202, Florida

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Statutes, is amended to read:

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738.202 Distribution to residuary and remainder

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beneficiaries.--

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(5) The value of trust assets shall be determined on an

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asset-by-asset basis and shall be conclusive if reasonable and

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determined in good faith. Determinations based on appraisals

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performed within 2 years before orafter the valuation date

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shall be presumed reasonable. The value of trust assets shall be

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conclusively presumed to be reasonable and determined in good

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faith unless proven otherwise in a proceeding commenced by or on

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behalf of a person interested in the trust within the time

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provided in s. 737.307.

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Section 4. Paragraph (d) of subsection (3) of section

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738.401, Florida Statutes, is amended to read:

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738.401 Character of receipts.--

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(3) A trustee shall allocate the following receipts from

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an entity to principal:

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(d) Money received from an entity that is a regulated

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investment company or a real estate investment trust if the

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money distributed represents ~~a distribution of~~short-term or

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long-term capital gain realized within the entity~~for federal~~

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~~income tax purposes~~.

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Section 5. This act shall take effect upon becoming a law

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and shall apply retroactively to January 1, 2003.