| 1 | A bill to be entitled |
| 2 | An act relating to trusts; amending s. 711.501, F.S.; |
| 3 | expanding the definition of the term "security account"; |
| 4 | amending s. 737.402, F.S.; providing certain powers to |
| 5 | trustees; amending s. 737.403, F.S.; specifying when court |
| 6 | authorization is not required for payment from trust |
| 7 | assets; amending s. 738.104, F.S.; providing that |
| 8 | adjustments affecting the value of trust assets are not |
| 9 | deemed to benefit a trustee under certain circumstances; |
| 10 | providing for applicability of trustee adjustment power to |
| 11 | trusts administered under Florida law outside Florida; |
| 12 | amending s. 738.1041, F.S., relating to total return |
| 13 | unitrust; defining the terms "fair market value" and |
| 14 | "unitrust amount"; providing a remedy; providing that |
| 15 | certain provisions shall apply to the administration of |
| 16 | trusts outside Florida; amending s. 738.303, F.S.; |
| 17 | defining the term "undistributed income"; providing an |
| 18 | effective date. |
| 19 |
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| 20 | Be It Enacted by the Legislature of the State of Florida: |
| 21 |
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| 22 | Section 1. Subsection (10) of section 711.501, Florida |
| 23 | Statutes, is amended to read: |
| 24 | 711.501 Definitions.--In ss. 711.50-711.512, unless the |
| 25 | context otherwise requires, the term: |
| 26 | (10) "Security account" means: |
| 27 | (a) A reinvestment account associated with a security, a |
| 28 | securities account with a broker, a cash balance in a brokerage |
| 29 | account, cash, interest, earnings, or dividends earned or |
| 30 | declared on a security in an account, a reinvestment account, or |
| 31 | a brokerage account, whether or not credited to the account |
| 32 | before the owner's death; or |
| 33 | (b) An investment management, investment advisory, |
| 34 | investment agency, custody, or other account with a bank or |
| 35 | trust company, including the securities in the account, the cash |
| 36 | balance in the account, and cash equivalents, and interest, |
| 37 | earnings, or dividends earned or declared on a security in the |
| 38 | account, whether or not credited to the account before the |
| 39 | owner's death; or |
| 40 | (c)(b) A cash balance or other property held for or due to |
| 41 | the owner of a security as a replacement for or product of an |
| 42 | account security, whether or not credited to the account before |
| 43 | the owner's death. |
| 44 | Section 2. Paragraphs (y) and (z) of subsection (2) of |
| 45 | section 737.402, Florida Statutes, are amended to read: |
| 46 | 737.402 Powers of trustees conferred by this part.-- |
| 47 | (2) Unless otherwise provided in the trust instrument, a |
| 48 | trustee has the power: |
| 49 | (y) To employ persons, including attorneys, auditors, |
| 50 | investment advisers, or agents, even if they are the trustee or |
| 51 | associated with the trustee, to advise or assist the trustee in |
| 52 | the performance of his or her administrative duties; to pay |
| 53 | compensation and costs incurred in connection with such |
| 54 | employment from the assets of the trust; to act without |
| 55 | independent investigation upon their recommendations; and, |
| 56 | instead of acting personally, to employ one or more agents to |
| 57 | perform any act of administration, whether or not discretionary. |
| 58 | (z) To prosecute or defend actions, claims, or |
| 59 | proceedings, including appeals, for the protection of trust |
| 60 | assets and of the trustee in the performance of his or her |
| 61 | duties; to employ attorneys and other agents to advise and |
| 62 | assist the trustee in the exercise of such powers; and to pay |
| 63 | compensation and costs incurred in connection with such |
| 64 | employment from the assets of the trust. |
| 65 | Section 3. Subsection (2) of section 737.403, Florida |
| 66 | Statutes, is amended to read: |
| 67 | 737.403 Power of court to permit deviation or to approve |
| 68 | transactions involving conflict of interest.-- |
| 69 | (2) If the duty of the trustee and the trustee's |
| 70 | individual interest or his or her interest as trustee of another |
| 71 | trust conflict in the exercise of a trust power, the power may |
| 72 | be exercised only by court authorization, except as provided in |
| 73 | s. 737.402(2)(a), (e), (g), (s) and (y). Under this section, |
| 74 | personal profit or advantage to an affiliated or subsidiary |
| 75 | company or association is personal profit to any corporate |
| 76 | trustee. Court authorization is not required for any of the |
| 77 | following: |
| 78 | (a) The exercise of any power described in s. |
| 79 | 737.402(2)(a), (e), (g), (s), or (y); |
| 80 | (b) The exercise of any power for which the trust |
| 81 | instrument acknowledges the trustee's conflict of interest and |
| 82 | expressly authorizes the exercise of that power notwithstanding |
| 83 | the conflict; |
| 84 | (c) The exercise of any power consented to in writing by a |
| 85 | settlor of the trust while the settlor holds the right of |
| 86 | revocation of the trust; |
| 87 | (d) The exercise of any power consented to in writing by |
| 88 | each of the beneficiaries to whom the trustee is required to |
| 89 | provide any annual or periodic accounting. Consent under this |
| 90 | paragraph may be given by a person who represents the interest |
| 91 | of the beneficiary pursuant to s. 731.303 or by the legal |
| 92 | guardian of the beneficiary or, if there is no legal guardian, |
| 93 | the natural guardian of the beneficiary; or |
| 94 | (e) Payment of costs or attorney's fees incurred in any |
| 95 | trust proceeding from the assets of the trust unless an action |
| 96 | has been filed or defense asserted against the trustee based |
| 97 | upon a breach of trust. Court authorization is not required if |
| 98 | the action or defense is later withdrawn or dismissed by the |
| 99 | party alleging a breach of trust, or resolved without a |
| 100 | determination by the court that the trustee has committed a |
| 101 | breach of trust. |
| 102 | Section 4. Paragraph (h) of subsection (3) of section |
| 103 | 738.104, Florida Statutes, is amended, and subsection (11) is |
| 104 | added to said section, to read: |
| 105 | 738.104 Trustee's power to adjust.-- |
| 106 | (3) A trustee may not make an adjustment: |
| 107 | (h) If the trustee is not a beneficiary of the trust but |
| 108 | the adjustment would benefit the trustee directly or indirectly, |
| 109 | except that in the case of a trustee whose compensation for |
| 110 | acting as trustee is based upon the value of trust assets, an |
| 111 | adjustment that affects the value of trust assets is not deemed |
| 112 | to benefit the trustee. |
| 113 | (11) This section pertains to the administration of a |
| 114 | trust and is applicable to any trust that is administered under |
| 115 | Florida law. |
| 116 | Section 5. Paragraphs (e) and (f) are added to subsection |
| 117 | (1) of section 738.1041, Florida Statutes, and subsections (10) |
| 118 | and (12) of said section are amended, to read: |
| 119 | 738.1041 Total return unitrust.-- |
| 120 | (1) For purposes of this section, the term: |
| 121 | (e) "Fair market value" means the fair market value of |
| 122 | assets held by the trust as otherwise determined under this |
| 123 | chapter, reduced by all known noncontingent liabilities except |
| 124 | for those liabilities that, upon payment, will represent |
| 125 | expenses under s. 738.701 or s. 738.702. |
| 126 | (f) "Unitrust amount" means the amount determined by |
| 127 | multiplying the fair market value of the assets as defined in |
| 128 | paragraph (e) by the percentage calculated under paragraph |
| 129 | (2)(b). |
| 130 | (10) Any trustee or disinterested person who in good faith |
| 131 | takes or fails to take any action under this section shall not |
| 132 | be liable to any person affected by such action or inaction, |
| 133 | regardless of whether such person received written notice as |
| 134 | provided in this section and regardless of whether such person |
| 135 | was under a legal disability at the time of the delivery of such |
| 136 | notice. Such person's exclusive remedy shall be to obtain, under |
| 137 | subsection (11), an order of the court directing the trustee to |
| 138 | convert an income trust to a total return unitrust, to reconvert |
| 139 | from a total return unitrust to an income trust, or to change |
| 140 | the percentage used to calculate the unitrust amount. If a court |
| 141 | determines that the trustee or disinterested person has not |
| 142 | acted in good faith in taking or failing to take any action |
| 143 | under this section, the provisions of s. 738.105(3) apply. |
| 144 | (12) This section shall be construed as pertaining to the |
| 145 | administration of a trust and shall be available to any trust |
| 146 | that is administered in this state under Florida law unless: |
| 147 | (a) The governing instrument reflects an intention that |
| 148 | the current beneficiary or beneficiaries are to receive an |
| 149 | amount other than a reasonable current return from the trust; |
| 150 | (b) The trust is a trust described in the Internal Revenue |
| 151 | Code, 26 U.S.C. s. 170(f)(2)(B), s. 642(c)(5), s. 664(d), s. |
| 152 | 1361(d), s. 2702(a)(3), or s. 2702(b); |
| 153 | (c) One or more persons to whom the trustee could |
| 154 | distribute income have a power of withdrawal over the trust: |
| 155 | 1. That is not subject to an ascertainable standard under |
| 156 | the Internal Revenue Code, 26 U.S.C. s. 2041 or s. 2514, and |
| 157 | exceeds in any calendar year the amount set forth in the |
| 158 | Internal Revenue Code, 26 U.S.C. s. 2041(b)(2) or s. 2514(e); or |
| 159 | 2. A power of withdrawal over the trust that can be |
| 160 | exercised to discharge a duty of support he or she possesses; |
| 161 | (d) The governing instrument expressly prohibits use of |
| 162 | this section by specific reference to the section. A provision |
| 163 | in the governing instrument that, "The provisions of section |
| 164 | 738.1041, Florida Statutes, as amended, or any corresponding |
| 165 | provision of future law, shall not be used in the administration |
| 166 | of this trust," or similar words reflecting such intent shall be |
| 167 | sufficient to preclude the use of this section; or |
| 168 | (e) The trust is a trust with respect to which a trustee |
| 169 | currently possesses the power to adjust under s. 738.104. |
| 170 | Section 6. Subsection (1) of section 738.303, Florida |
| 171 | Statutes, is amended to read: |
| 172 | 738.303 Apportionment when income interest ends.-- |
| 173 | (1) For purposes of this section, "undistributed income" |
| 174 | means net income received on or before the date on which an |
| 175 | income interest ends. The term does not include an item of |
| 176 | income or expense that is due or accrued or net income that has |
| 177 | been added or is required to be added to principal under the |
| 178 | terms of the trust. In the case of a trust being administered as |
| 179 | a unitrust pursuant to s. 738.1041, the term "undistributed |
| 180 | income" means the prorated unitrust amount computed on a daily |
| 181 | basis through the date on which the income interest ends. |
| 182 | Section 7. This act shall take effect upon becoming a law. |