Senate Bill sb1688c1
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By the Committee on Judiciary; and Senator Atwater
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1 A bill to be entitled
2 An act relating to trusts and other agency
3 relationships; amending s. 711.501, F.S.;
4 including additional investment instruments
5 within the definition of the term "security
6 account"; amending s. 737.402, F.S.; revising
7 the powers conferred upon a trustee; amending
8 s. 737.403, F.S.; specifying circumstances in
9 which court authorization is not required for a
10 trustee to exercise his or her power when a
11 conflict of interest exists; amending s.
12 738.104, F.S.; revising the circumstances in
13 which a trustee is prohibited from making an
14 adjustment when such adjustment would benefit
15 the trustee; clarifying the application of law
16 pertaining to the trustee's power to adjust;
17 amending s. 738.1041, F.S.; providing
18 definitions governing certain trust
19 conversions; revising method of determining
20 fair market value; specifying consequences when
21 a court determines that a fiduciary has not
22 acted in good faith; providing for creating an
23 express total return unitrust; amending s.
24 738.303, F.S.; defining the term "undistributed
25 income" for purposes of a trust that is
26 administered as a unitrust; amending s.
27 738.401, F.S.; providing guidelines for
28 allocation of certain moneys received from
29 targeted entities and investment entities;
30 defining terms; creating s. 737.309, F.S.;
31 providing procedures for the resignation of a
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1 trustee; providing that such resignation does
2 not discharge or affect any liability of the
3 resigning trustee; providing for notice of
4 resignation; providing an effective date.
5
6 Be It Enacted by the Legislature of the State of Florida:
7
8 Section 1. Subsection (10) of section 711.501, Florida
9 Statutes, is amended to read:
10 711.501 Definitions.--In ss. 711.50-711.512, unless
11 the context otherwise requires, the term:
12 (10) "Security account" means:
13 (a) A reinvestment account associated with a security,
14 a securities account with a broker, a cash balance in a
15 brokerage account, cash, interest, earnings, or dividends
16 earned or declared on a security in an account, a reinvestment
17 account, or a brokerage account, whether or not credited to
18 the account before the owner's death; or
19 (b) An investment management, investment advisory,
20 investment agency, custody, or other account with a bank or
21 trust company, including the securities in the account, the
22 cash balance in the account, cash equivalents, and interest,
23 earnings, or dividends earned or declared on a security in the
24 account, whether or not credited to the account before the
25 owner's death; or
26 (c)(b) A cash balance or other property held for or
27 due to the owner of a security as a replacement for or product
28 of an account security, whether or not credited to the account
29 before the owner's death.
30 Section 2. Paragraphs (y) and (z) of subsection (2) of
31 section 737.402, Florida Statutes, are amended to read:
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1 737.402 Powers of trustees conferred by this part.--
2 (2) Unless otherwise provided in the trust instrument,
3 a trustee has the power:
4 (y) To employ persons, including attorneys, auditors,
5 investment advisers, or agents, even if they are the trustee
6 or associated with the trustee, to advise or assist the
7 trustee in the performance of his or her administrative duties
8 and to pay compensation and costs incurred in connection with
9 such employment from the assets of the trust; to act without
10 independent investigation upon their recommendations; and,
11 instead of acting personally, to employ one or more agents to
12 perform any act of administration, whether or not
13 discretionary.
14 (z) To prosecute or defend actions, claims, or
15 proceedings, including appeals, for the protection of trust
16 assets and of the trustee in the performance of his or her
17 duties; to employ attorneys and other agents to advise and
18 assist the trustee in the exercise of those powers; and to pay
19 compensation and costs incurred in connection with such
20 employment from the assets of the trust.
21 Section 3. Subsection (2) of section 737.403, Florida
22 Statutes, is amended to read:
23 737.403 Power of court to permit deviation or to
24 approve transactions involving conflict of interest.--
25 (2) If the duty of the trustee and the trustee's
26 individual interest or his or her interest as trustee of
27 another trust conflict in the exercise of a trust power, the
28 power may be exercised only by court authorization, except as
29 provided in s. 737.402(2)(a), (e), (g), (s) or (y). Under this
30 section, personal profit or advantage to an affiliated or
31 subsidiary company or association is personal profit to any
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1 corporate trustee. Court authorization is not required for any
2 of the following:
3 (a) The exercise of any power described in s.
4 737.402(2)(a), (e), (g), (s), or (y);
5 (b) The exercise of any power for which the trust
6 instrument acknowledges the trustee's conflict of interest and
7 expressly authorizes the exercise of that power
8 notwithstanding conflict;
9 (c) The exercise of any power consented to in writing
10 by a settlor of the trust while the settlor holds the right of
11 revocation of the trust;
12 (d) The exercise of any power consented to in writing
13 by each of the beneficiaries to whom the trustee is required
14 to provide any annual or periodic accounting. Consent under
15 this paragraph may be given by a person who represents the
16 interest of the beneficiary under s. 731.303, or by the legal
17 guardian of the beneficiary or, if there is no legal guardian,
18 by the natural guardian of the beneficiary; or
19 (e) Payment of costs or attorney's fees incurred in
20 any trust proceeding from the assets of the trust unless an
21 action has been filed or defense asserted against the trustee
22 based upon a breach of trust. Court authorization is not
23 required if the action or defense is later withdrawn or
24 dismissed by the party that is alleging a breach of trust, or
25 resolved without a determination by the court that the trustee
26 has committed a breach of trust.
27 Section 4. Subsections (3) and (4) and paragraph (b)
28 of subsection (5) of section 738.104, Florida Statutes, are
29 amended, and subsection (11) is added to that section, to
30 read:
31 738.104 Trustee's power to adjust.--
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1 (3) A trustee may not make an adjustment:
2 (a) That diminishes the income interest in a trust
3 that requires all of the income to be paid at least annually
4 to a spouse and for which an estate tax or gift tax marital
5 deduction would be allowed, in whole or in part, if the
6 trustee did not have the power to adjust;
7 (a)(b) That reduces the actuarial value of the income
8 interest in a trust to which a person transfers property with
9 the intent to qualify for a gift tax exclusion;
10 (b)(c) That changes the amount payable to a
11 beneficiary as a fixed annuity or a fixed fraction of the
12 value of the trust assets;
13 (c)(d) From any amount that is permanently set aside
14 for charitable purposes under a will or the terms of a trust
15 unless both income and principal are so set aside;
16 (d)(e) If possessing or exercising the power to adjust
17 causes an individual to be treated as the owner of all or part
18 of the trust for income tax purposes and the individual would
19 not be treated as the owner if the trustee did not possess the
20 power to adjust;
21 (e)(f) If possessing or exercising the power to adjust
22 causes all or part of the trust assets to be included for
23 estate tax purposes in the estate of an individual who has the
24 power to remove a trustee or appoint a trustee, or both, and
25 the assets would not be included in the estate of the
26 individual if the trustee did not possess the power to adjust;
27 (f)(g) If the trustee is a beneficiary of the trust;
28 or
29 (g)(h) If the trustee is not a beneficiary of the
30 trust but the adjustment would benefit the trustee directly or
31 indirectly, except that, in the case of a trustee whose
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1 compensation for acting as trustee is based upon the value of
2 trust assets, an adjustment that affects the value of trust
3 assets shall not be deemed to benefit the trustee.
4 (4) If paragraph (3)(d), paragraph (3)(e), paragraph
5 (3)(f), or paragraph (3)(g), or paragraph (3)(h) applies to a
6 trustee and there is more than one trustee, a cotrustee to
7 whom the provision does not apply may make the adjustment
8 unless the exercise of the power by the remaining trustee is
9 not permitted by the terms of the trust.
10 (5)
11 (b) A trustee may release the entire power to adjust
12 conferred by subsection (1) or may release only the power to
13 adjust from income to principal or the power to adjust from
14 principal to income if the trustee is uncertain about whether
15 possessing or exercising the power will cause a result
16 described in paragraphs (3)(a)-(e) (3)(a)-(f) or paragraph
17 (3)(g) (3)(h) or if the trustee determines that possessing or
18 exercising the power will or may deprive the trust of a tax
19 benefit or impose a tax burden not described in subsection
20 (3).
21 (11) This section shall be construed as pertaining to
22 the administration of a trust and is applicable to any trust
23 that is administered either in this state or under Florida
24 law.
25 Section 5. Section 738.1041, Florida Statutes, is
26 amended to read:
27 738.1041 Total return unitrust.--
28 (1) For purposes of this section, the term:
29 (a) "Disinterested person" means a person who is not a
30 "related or subordinate party" as defined in s. 672(c) of the
31 United States Internal Revenue Code, 26 U.S.C. ss. 1 et seq.,
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1 or any successor provision thereof, with respect to the person
2 then acting as trustee of the trust and excludes the grantor
3 and any interested trustee.
4 (b) "Fair market value" means the fair market value of
5 assets held by the trust as otherwise determined under this
6 chapter, reduced by all known noncontingent liabilities.
7 (c)(b) "Income trust" means a trust, created by either
8 an inter vivos or a testamentary instrument, which directs or
9 permits the trustee to distribute the net income of the trust
10 to one or more persons, either in fixed proportions or in
11 amounts or proportions determined by the trustee and
12 regardless of whether the trust directs or permits the trustee
13 to distribute the principal of the trust to one or more such
14 persons. Notwithstanding the foregoing, no trust that
15 otherwise is an "income trust" shall qualify hereunder, if it
16 may be subject to taxation under the Internal Revenue Code, 26
17 U.S.C. s. 2001 or s. 2501, until the expiration of the period
18 for filing the return therefor, including extensions.
19 (d)(c) "Interested distributee" means a person to whom
20 distributions of income or principal can currently be made who
21 has the power to remove the existing trustee and designate as
22 successor a person who may be a "related or subordinate
23 party," as defined in the Internal Revenue Code, 26 U.S.C. s.
24 672(c), with respect to such distributee.
25 (e)(d) "Interested trustee" means an individual
26 trustee to whom the net income or principal of the trust can
27 currently be distributed or would be distributed if the trust
28 were then to terminate and be distributed, any trustee whom an
29 interested distributee has the power to remove and replace
30 with a related or subordinate party as defined in paragraph
31 (c), or an individual trustee whose legal obligation to
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1 support a beneficiary may be satisfied by distributions of
2 income and principal of the trust.
3 (f) "Unitrust amount" means the amount determined by
4 multiplying the fair market value of the assets as defined in
5 paragraph (b) by the percentage calculated under paragraph
6 (2)(b).
7 (2) A trustee may, without court approval, convert an
8 income trust to a total return unitrust, reconvert a total
9 return unitrust to an income trust, or change the percentage
10 used to calculate the unitrust amount or the method used to
11 determine the fair market value of the trust if:
12 (a) The trustee adopts a written statement regarding
13 trust distributions that provides:
14 1. In the case of a trust being administered as an
15 income trust, that future distributions from the trust will be
16 unitrust amounts rather than net income, and indicates the
17 manner in which the unitrust amount will be calculated and the
18 method in which the fair market value of the trust will be
19 determined.
20 2. In the case of a trust being administered as a
21 total return unitrust, that:
22 a. Future distributions from the trust will be net
23 income rather than unitrust amounts; or
24 b. The percentage used to calculate the unitrust
25 amount or the method used to determine the fair market value
26 of the trust will be changed, and indicates the manner in
27 which the new unitrust amount will be calculated and the
28 method in which the new fair market value of the trust will be
29 determined;
30 (b)1. The trustee determines the terms of the unitrust
31 under one of the following methods:
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1 1. A trustee who is a disinterested trustee
2 determines, or if there is no trustee other than an interested
3 trustee, the interested trustee appoints a disinterested
4 person who, in its sole discretion but acting in a fiduciary
5 capacity, determines for the interested trustee:
6 a. The percentage to be used to calculate the unitrust
7 amount, provided the percentage used is not greater than 5
8 percent nor less than 3 percent;
9 b. The method to be used in determining the fair
10 market value of the trust; and
11 c. Which assets, if any, are to be excluded in
12 determining the unitrust amount; or
13 2. The interested trustee or disinterested trustee
14 administers the trust such that:
15 a. The percentage used to calculate the unitrust
16 amount is 50 percent of the applicable federal rate as defined
17 in the Internal Revenue Code, 26 U.S.C. s. 7520, in effect for
18 the month the conversion under this section becomes effective
19 and for each January thereafter; however, if the percentage
20 calculated exceeds 5 percent, the unitrust percentage shall be
21 5 percent and if the percentage calculated is less than 3
22 percent, the unitrust percentage shall be 3 percent; and
23 b. The fair market value of the trust shall be
24 determined at least annually on an asset-by-asset basis,
25 reasonably and in good faith, in accordance with the
26 provisions of s. 738.202(5), except the following property
27 shall not be included in determining the value of the trust:
28 (I) Any residential property or any tangible personal
29 property that, as of the first business day of the current
30 valuation year, one or more current beneficiaries of the trust
31 have or have had the right to occupy, or have or have had the
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1 right to possess or control (other than in his or her capacity
2 as trustee of the trust), and instead the right of occupancy
3 or the right to possession and control shall be deemed to be
4 the unitrust amount with respect to such property; however,
5 the unitrust amount shall be adjusted to take into account
6 partial distributions from or receipt into the trust of such
7 property during the valuation year.
8 (II) Any asset specifically given to a beneficiary and
9 the return on investment on such property, which return on
10 investment shall be distributable to such beneficiary.
11 (III) Any asset while held in a testator's estate;
12 (c) The trustee sends written notice of its intention
13 to take such action, along with copies of such written
14 statement and this section, and, if applicable, the
15 determinations of either the trustee or the disinterested
16 person to:
17 1. The grantor of the trust, if living.
18 2. All living persons who are currently receiving or
19 eligible to receive distributions of income of the trust.
20 3. All living persons who would receive distributions
21 of principal of the trust if the trust were to terminate at
22 the time of the giving of such notice (without regard to the
23 exercise of any power of appointment) or, if the trust does
24 not provide for its termination, all living persons who would
25 receive or be eligible to receive distributions of income or
26 principal of the trust if the persons identified in
27 subparagraph 2. were deceased.
28 4. All persons acting as advisers or protectors of the
29 trust.
30
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1 Notice under this paragraph shall be served informally, in the
2 manner provided in the Florida Rules of Civil Procedure
3 relating to service of pleadings subsequent to the initial
4 pleading. Notice may be served on a legal representative or
5 natural guardian of a person without the filing of any
6 proceeding or approval of any court;
7 (d) At least one person receiving notice under each of
8 subparagraphs (c)2. and 3. is legally competent; and
9 (e) No person receiving such notice objects, by
10 written instrument delivered to the trustee, to the proposed
11 action of the trustee or the determinations of the
12 disinterested person within 60 days after service receipt of
13 such notice. An objection under this section may be executed
14 by a legal representative or natural guardian of a person
15 without the filing of any proceeding or approval of any court.
16 (3) If a trustee desires to convert an income trust to
17 a total return unitrust, reconvert a total return unitrust to
18 an income trust, or change the percentage used to calculate
19 the unitrust amount or the method used to determine a fair
20 market value of the trust but does not have the ability to or
21 elects not to do it under subsection (2), the trustee may
22 petition the circuit court for such order as the trustee deems
23 appropriate. In that event, the court, in its own discretion
24 or on the petition of such trustee or any person having an
25 income or remainder interest in the trust, may appoint a
26 disinterested person who, acting in a fiduciary capacity,
27 shall present such information to the court as shall be
28 necessary for the court to make a determination hereunder.
29 (4) All determinations made pursuant to
30 sub-subparagraph (2)(b)2.b. shall be conclusive if reasonable
31 and made in good faith. Such determination shall be
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1 conclusively presumed to have been made reasonably and in good
2 faith unless proven otherwise in a proceeding commenced by or
3 on behalf of a person interested in the trust within the time
4 provided in s. 737.307. The burden will be on the objecting
5 interested party to prove that the determinations were not
6 made reasonably and in good faith.
7 (5) The unitrust amount shall not be less than the net
8 income of the trust, determined without regard to the
9 provisions of subsection (6), for:
10 (a) A trust for which a marital deduction has been
11 taken for federal tax purposes under the Internal Revenue
12 Code, 26 U.S.C. s. 2056 or s. 2523, during the lifetime of the
13 spouse for whom the trust was created; or
14 (b) A trust to which the generation-skipping transfer
15 tax due under the Internal Revenue Code, 26 U.S.C. s. 2601
16 does not apply by reason of any effective date or transition
17 rule.
18
19 Paragraph (a) will not apply to any trust to the extent that
20 the use of a total return unitrust is recognized for federal
21 tax purposes under the Internal Revenue Code, 26 U.S.C. s.
22 2056 or s. 2523. Paragraph (b) will not apply to any trust to
23 the extent that the use of a total return unitrust is
24 recognized for federal tax purposes under the Internal Revenue
25 Code, 26 U.S.C. s. 2601.
26 (5)(6) Following the conversion of an income trust to
27 a total return unitrust, the trustee:
28 (a) Shall treat the unitrust amount as if it were net
29 income of the trust for purposes of determining the amount
30 available, from time to time, for distribution from the trust.
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1 (b) May allocate to trust income for each taxable year
2 of the trust, or portion thereof:
3 1. Net short-term capital gain described in the
4 Internal Revenue Code, 26 U.S.C. s. 1222(5), for such year, or
5 portion thereof, but only to the extent that the amount so
6 allocated together with all other amounts allocated to trust
7 income, as determined under the provisions of this chapter
8 without regard to this section and s. 738.104, for such year,
9 or portion thereof, does not exceed the unitrust amount for
10 such year, or portion thereof.
11 2. Net long-term capital gain described in the
12 Internal Revenue Code, 26 U.S.C. s. 1222(7), for such year, or
13 portion thereof, but only to the extent that the amount so
14 allocated together with all other amounts, including amounts
15 described in subparagraph 1., allocated to trust income for
16 such year, or portion thereof, does not exceed the unitrust
17 amount for such year, or portion thereof.
18 (6)(7) In administering a total return unitrust, the
19 trustee may, in its sole discretion but subject to the
20 provisions of the governing instrument, determine:
21 (a) The effective date of the conversion.
22 (b) The timing of distributions, including provisions
23 for prorating a distribution for a short year in which a
24 beneficiary's right to payments commences or ceases.
25 (c) Whether distributions are to be made in cash or in
26 kind or partly in cash and partly in kind.
27 (d) If the trust is reconverted to an income trust,
28 the effective date of such reconversion.
29 (e) Such other administrative issues as may be
30 necessary or appropriate to carry out the purposes of this
31 section.
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1 (7)(8) Conversion to a total return unitrust under the
2 provisions of this section shall not affect any other
3 provision of the governing instrument, if any, regarding
4 distributions of principal.
5 (9) In the case of a trust for which a marital
6 deduction has been taken for federal tax purposes under the
7 Internal Revenue Code, 26 U.S.C. s. 2056 or s. 2523, the
8 spouse otherwise entitled to receive the net income of the
9 trust shall have the right, by written instrument delivered to
10 the trustee, to compel the reconversion during his or her
11 lifetime of the trust from a total return unitrust to an
12 income trust, notwithstanding anything in this section to the
13 contrary, unless the use of a total return unitrust is
14 recognized for federal tax purposes under the Internal Revenue
15 Code, 26 U.S.C. s. 2056 or s. 2523.
16 (8)(10) Any trustee or disinterested person who in
17 good faith takes or fails to take any action under this
18 section shall not be liable to any person affected by such
19 action or inaction, regardless of whether such person received
20 written notice as provided in this section and regardless of
21 whether such person was under a legal disability at the time
22 of the delivery of such notice. Such person's exclusive remedy
23 shall be to obtain, under subsection (9) (11), an order of the
24 court directing the trustee to convert an income trust to a
25 total return unitrust, to reconvert from a total return
26 unitrust to an income trust, or to change the percentage used
27 to calculate the unitrust amount. If a court determines that
28 the trustee or disinterested person has not acted in good
29 faith in taking or failing to take any action under this
30 section, s. 738.105(3) applies.
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1 (9)(11) If a majority in interest of either the income
2 or remainder beneficiaries of an income trust has delivered to
3 the trustee a written objection to the amount of the income
4 distributions of the trust, and, if the trustee has failed to
5 resolve the objection to the satisfaction of the objecting
6 beneficiaries within 6 months from the receipt of such written
7 objection, then the objecting beneficiaries may petition the
8 court in accordance with subsection (3).
9 (10)(12) This section shall be construed as pertaining
10 to the administration of a trust and shall be available to any
11 trust that is administered either in this state or under
12 Florida law unless:
13 (a) The governing instrument reflects an intention
14 that the current beneficiary or beneficiaries are to receive
15 an amount other than a reasonable current return from the
16 trust;
17 (b) The trust is a trust described in the Internal
18 Revenue Code, 26 U.S.C. s. 170(f)(2)(B), s. 642(c)(5), s.
19 664(d), s. 1361(d), s. 2702(a)(3), or s. 2702(b);
20 (c) One or more persons to whom the trustee could
21 distribute income have a power of withdrawal over the trust:
22 1. That is not subject to an ascertainable standard
23 under the Internal Revenue Code, 26 U.S.C. s. 2041 or s. 2514,
24 and exceeds in any calendar year the amount set forth in the
25 Internal Revenue Code, 26 U.S.C. s. 2041(b)(2) or s. 2514(e);
26 or
27 2. A power of withdrawal over the trust that can be
28 exercised to discharge a duty of support he or she possesses;
29 (d) The governing instrument expressly prohibits use
30 of this section by specific reference to the section. A
31 provision in the governing instrument that, "The provisions of
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1 section 738.1041, Florida Statutes, as amended, or any
2 corresponding provision of future law, shall not be used in
3 the administration of this trust," or similar words reflecting
4 such intent shall be sufficient to preclude the use of this
5 section; or
6 (e) The trust is a trust with respect to which a
7 trustee currently possesses the power to adjust under s.
8 738.104.
9 (11) The grantor of a trust may create an express
10 total return unitrust that will become effective as provided
11 in the trust document without requiring a conversion under
12 this section. An express total return unitrust created by the
13 grantor of the trust shall be treated as a unitrust under this
14 section only if the terms of the trust document contain all of
15 the following provisions:
16 (a) That distributions from the trust will be unitrust
17 amounts and the trust documents indicate the manner in which
18 the unitrust amount will be calculated and the method in which
19 the fair market value of the trust will be determined;
20 (b) The percentage to be used to calculate the
21 unitrust amount, provided the percentage used is not greater
22 than 5 percent or less than 3 percent;
23 (c) The method to be used in determining the fair
24 market value of the trust; and
25 (d) Which assets, if any, are to be excluded in
26 determining the unitrust amount.
27 Section 6. Subsection (1) of section 738.303, Florida
28 Statutes, is amended to read:
29 738.303 Apportionment when income interest ends.--
30 (1) For purposes of this section, the term
31 "undistributed income" means net income received on or before
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1 the date on which an income interest ends. The term does not
2 include an item of income or expense that is due or accrued or
3 net income that has been added or is required to be added to
4 principal under the terms of the trust. In the case of a trust
5 being administered as a unitrust under s. 738.1041, the term
6 "undistributed income" means the prorated unitrust amount
7 computed on a daily basis through the date on which the income
8 interest ends.
9 Section 7. Section 738.401, Florida Statutes, is
10 amended to read:
11 738.401 Character of receipts.--
12 (1) For purposes of this section, "entity" means a
13 corporation, partnership, limited liability company, regulated
14 investment company, real estate investment trust, common trust
15 fund, or any other organization in which a trustee has an
16 interest other than a trust or estate to which s. 738.402
17 applies, a business or activity to which s. 738.403 applies,
18 or an asset-backed security to which s. 738.608 applies.
19 (2) Except as otherwise provided in this section, a
20 trustee shall allocate to income money received from an
21 entity.
22 (3) Except as otherwise provided in this section, a
23 trustee shall allocate the following receipts from an entity
24 to principal:
25 (a) Property other than money.
26 (b) Money received in one distribution or a series of
27 related distributions in exchange for part or all of a trust's
28 interest in the entity.
29 (c) Money received in total or partial liquidation of
30 the entity.
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1 (d) Money received from an entity that is a regulated
2 investment company or a real estate investment trust if the
3 money distributed represents short-term or long-term capital
4 gain realized within the entity.
5 (4) If a trustee elects, or continues an election made
6 by its predecessor, to reinvest dividends in shares of stock
7 of a distributing corporation or fund, whether evidenced by
8 new certificates or entries on the books of the distributing
9 entity, the new shares shall retain their character as income.
10 (5) Money is received in partial liquidation:
11 (a) To the extent the entity, at or near the time of a
12 distribution, indicates that such money is a distribution in
13 partial liquidation; or
14 (b) If the total amount of money and property received
15 in a distribution or series of related distributions is
16 greater than 20 percent of the entity's gross assets, as shown
17 by the entity's year-end financial statements immediately
18 preceding the initial receipt.
19 (6) Money is not received in partial liquidation, nor
20 may money be taken into account under paragraph (5)(b), to the
21 extent such money does not exceed the amount of income tax a
22 trustee or beneficiary must pay on taxable income of the
23 entity that distributes the money.
24 (7) The following special rules apply to moneys or
25 property received by a private trustee from entities described
26 in this subsection:
27 (a) Moneys or property received from a targeted entity
28 that is not an investment entity which do not exceed the
29 trust's pro rata share of the undistributed cumulative net
30 income of the targeted entity during the time an ownership
31 interest in the targeted entity was held by the trust shall be
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1 allocated to income. The balance of moneys or property
2 received from a targeted entity shall be allocated to
3 principal.
4 (b) If trust assets include any interest in an
5 investment entity, the designated amount of money or property
6 received from the investment entity shall be treated by the
7 trustee in the same manner as if the trustee had directly held
8 the trust's pro rata share of the assets of the investment
9 entity attributable to the distribution of such designated
10 amount. Thereafter, distributions shall be treated as
11 principal.
12 (c) For purposes of this subsection and subsection
13 (8), the following definitions apply:
14 1. "Cumulative net income" means the targeted entity's
15 net income as determined using the method of accounting
16 regularly used by the targeted entity in preparing its
17 financial statements or, if no financial statements are
18 prepared, the net book income computed for federal income tax
19 purposes, for every year an ownership interest in the entity
20 is held by the trust. The trust's pro rata share shall be the
21 cumulative net income, multiplied by the percentage ownership
22 of the trust.
23 2. "Undistributed cumulative net income" means the
24 trust's pro rata share of cumulative net income less all prior
25 distributions from the targeted entity to the trust which have
26 been allocated to income.
27 3. A "targeted entity" includes any entity that is
28 treated as a partnership, subchapter S corporation, or
29 disregarded entity pursuant to the Internal Revenue Code of
30 1986, as amended, other than an entity described in s.
31 738.403.
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1 4. An "investment entity" is a targeted entity that
2 normally derives 50 percent or more of its annual cumulative
3 net income from interest, dividends, annuities, royalties,
4 rental activity, or other passive investments, including
5 income from the sale or exchange of such passive investments.
6 5. The "designated amount" of moneys or property
7 received from an investment entity during any year shall be
8 equal to the amount of the distribution which does not exceed
9 the greater of:
10 a. The amount of income of the investment entity for
11 the current year, as reported to the trustee by the investment
12 entity for federal income tax purposes; or
13 b. The amount of income of the investment entity for
14 the current year and the prior 2 years, as reported to the
15 trustee by the investment entity for federal income tax
16 purposes, less any distributions of money or property made by
17 the investment entity to the trustee during the prior 2 years.
18 6. A "private trustee" is a trustee who is an
19 individual, but only if the trustee is unable to use the power
20 to adjust between income and principal with respect to
21 receipts from entities described in this subsection pursuant
22 to s. 738.104. A bank, trust company, or other commercial
23 trustee is not a private trustee.
24 (d) This subsection does not modify or change any
25 provisions of ss. 738.705 and 738.706 relating to income
26 taxes.
27 (8)(7) A trustee may rely upon a statement made by an
28 entity about the source or character of a distribution, about
29 the amount of profits of a targeted entity, or absent the
30 nature and value of assets of an investment entity if the
31 statement is made at or near the time of distribution by the
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1 entity's board of directors or other person or group of
2 persons authorized to exercise powers to pay money or transfer
3 property comparable to those of a corporation's board of
4 directors.
5 Section 8. Section 737.309, Florida Statutes, is
6 created to read:
7 737.309 Resignation of trustee.--
8 (1) A trustee may resign:
9 (a) Upon at least 30 days' written notice to the
10 settlor, if living, all cotrustees, and all persons entitled
11 to a trust accounting pursuant to s. 737.303, as qualified by
12 s. 731.303; or
13 (b) With approval of the court. In approving a
14 resignation, the court may issue orders and impose conditions
15 reasonably necessary for the protection of the trust property.
16 (2) Any liability of a resigning trustee or of any
17 sureties on the trustee's bond for acts or omissions of the
18 trustee is not discharged or affected by the trustee's
19 resignation.
20 (3) If the resignation of a trustee would require the
21 vacancy to be filled by a successor trustee, a trustee that
22 resigns shall continue to serve until the successor assumes
23 the trusteeship. The resigning trustee shall deliver copies of
24 all notices and other records pertaining to the resignation to
25 the successor trustee or, if none, to a cotrustee.
26 (4) Notice of resignation shall be served in the
27 manner provided in the Florida Rules of Civil Procedure
28 relating to service of pleadings subsequent to the initial
29 pleading. The notice may be served on a legal representative
30 or natural guardian of a beneficiary without the filing of any
31 proceeding or approval of any court.
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1 Section 9. This act shall take effect upon becoming a
2 law.
3
4 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
5 Senate Bill 1688
6
7 The committee substitute establishes the means by which a
trustee may resign his or her post by creating s. 737.309,
8 F.S. The trustee may resign upon giving at least 30-days
written notice to the settler (if living), all co-trustees,
9 and all persons entitled to a trust accounting
(beneficiaries), or with approval of the court.
10
-- The resignation of a trustee does not affect or discharge
11 any liability the trustee or surety on the trustee's bond
may have for acts or omissions. If the resignation
12 requires a successor trustee, the resigning trustee must
continue to serve until the successor assumes the
13 trusteeship. Notice of the resignation must be provided
to beneficiaries, and notice and all records pertaining
14 to the resignation must be provided to a co-trustee or
the successor trustee.
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