CS/HB 743

1	A bill to be entitled
2	An act relating to duties, powers, and liabilities of
3	trustees; amending s. 660.417, F.S.; revising criteria for
4	investments in certain investment instruments; creating s.
5	736.04117, F.S.; providing criteria, requirements, and
6	limitations on a trustee's power to invade the principal
7	of a trust; specifying conditions under which
8	discretionary distributions may be made in further trust;
9	amending s. 736.0802, F.S.; specifying additional trust
10	property transactions not voidable by a beneficiary;
11	revising certain disclosure and applicability
12	requirements; broadening authority for investing in
13	certain investment instruments; revising definitions;
14	excusing trustees from certain compliance requirements
15	under certain circumstances; amending s. 736.0816, F.S.;
16	defining the term "mutual fund" for certain purposes;
17	amending s. 736.1008, F.S.; revising effective dates
18	relating to limitations on proceedings against trustees;
19	amending s. 736.1011, F.S.; providing construction
20	relating to trustee drafts of exculpatory terms in a trust
21	instrument; providing an effective date.
22
23	Be It Enacted by the Legislature of the State of Florida:
24
25	Section 1.  Subsection (3) of section 660.417, Florida
26	Statutes, as amended by section 18 of chapter 2006-217, Laws of
27	Florida, is amended to read:
28	660.417  Investment of fiduciary funds in investment
29	instruments; permissible activity under certain circumstances;
30	limitations.--
31	(3)  The fact that such bank or trust company or an
32	affiliate of the bank or trust company owns or controls
33	investment instruments shall not preclude the bank or trust
34	company acting as a fiduciary from investing or reinvesting in
35	such investment instruments, provided such investment
36	instruments:
37	(a)  Are held for sale by the bank or trust company or by
38	an affiliate of the bank or trust company in the ordinary course
39	of its business of providing investment services to its
40	customers and do not include any such interests held by the bank
41	or trust company or by an affiliate of the bank or trust company
42	for its own account.
43	(b)  When Are sold primarily to accounts for which the bank
44	or trust company is not acting as a trustee of a trust as
45	defined in s. 731.201(35):
46	1.  Are available for sale to accounts of other customers;
47	and
48	2.  If sold to other customers, are not sold to the trust
49	accounts fiduciary upon terms that are less not more favorable
50	to the buyer than the terms upon which they are normally sold to
51	the other customers accounts for which the bank or trust company
52	is acting as a fiduciary.
53	Section 2.  Section 736.04117, Florida Statutes, is created
54	to read:
55	736.04117  Trustee's power to invade principal in trust.--
56	(1)(a)  Unless the trust instrument expressly provides
57	otherwise, a trustee who has absolute power under the terms of a
58	trust to invade the principal of the trust, referred to in this
59	section as the "first trust," to make distributions to or for
60	the benefit of one or more persons may instead exercise the
61	power by appointing all or part of the principal of the trust
62	subject to the power in favor of a trustee of another trust,
63	referred to in this section as the "second trust," for the
64	current benefit of one or more of such persons under the same
65	trust instrument or under a different trust instrument;
66	provided:
67	1.  The beneficiaries of the second trust may include only
68	beneficiaries of the first trust;
69	2.  The second trust may not reduce any fixed income,
70	annuity, or unitrust interest in the assets of the first trust;
71	and
72	3.  If any contribution to the first trust qualified for a
73	marital or charitable deduction for federal income, gift, or
74	estate tax purposes under the Internal Revenue Code of 1986, as
75	amended, the second trust shall not contain any provision which,
76	if included in the first trust, would have prevented the first
77	trust from qualifying for such a deduction or would have reduced
78	the amount of such deduction.
79	(b)  For purposes of this subsection, an absolute power to
80	invade principal shall include a power to invade principal that
81	is not limited to specific or ascertainable purposes, such as
82	health, education, maintenance, and support, whether or not the
83	term "absolute" is used. A power to invade principal for
84	purposes such as best interests, welfare, comfort, or happiness
85	shall constitute an absolute power not limited to specific or
86	ascertainable purposes.
87	(2)  The exercise of a power to invade principal under
88	subsection (1) shall be by an instrument in writing, signed and
89	acknowledged by the trustee, and filed with the records of the
90	first trust.
91	(3)  The exercise of a power to invade principal under
92	subsection (1) shall be considered the exercise of a power of
93	appointment, other than a power to appoint to the trustee, the
94	trustee's creditors, the trustee's estate, or the creditors of
95	the trustee's estate, and shall be subject to the provisions of
96	s. 689.225 covering the time at which the permissible period of
97	the rule against perpetuities begins and the law that determines
98	the permissible period of the rule against perpetuities of the
99	first trust.
100	(4)  The trustee shall notify all qualified beneficiaries
101	of the first trust, in writing, at least 60 days prior to the
102	effective date of the trustee's exercise of the trustee's power
103	to invade principal pursuant to subsection (1), of the manner in
104	which the trustee intends to exercise the power. A copy of the
105	proposed instrument exercising the power shall satisfy the
106	trustee's notice obligation under this subsection. If all
107	qualified beneficiaries waive the notice period by signed
108	written instrument delivered to the trustee, the trustee's power
109	to invade principal shall be exercisable immediately. The
110	trustee's notice under this subsection shall not limit the right
111	of any beneficiary to object to the exercise of the trustee's
112	power to invade principal except as provided in other applicable
113	provisions of this code.
114	(5)  The exercise of the power to invade principal under
115	subsection (1) is not prohibited by a spendthrift clause or by a
116	provision in the trust instrument that prohibits amendment or
117	revocation of the trust.
118	(6)  Nothing in this section is intended to create or imply
119	a duty to exercise a power to invade principal and no inference
120	of impropriety shall be made as a result of a trustee not
121	exercising the power to invade principal conferred under
122	subsection (1).
123	(7)  The provisions of this section shall not be construed
124	to abridge the right of any trustee who has a power of invasion
125	to appoint property in further trust that arises under the terms
126	of the first trust or under any other section of this code or
127	under another provision of law or under common law.
128	Section 3.  Subsections (2) and (5) of section 736.0802,
129	Florida Statutes, are amended to read:
130	736.0802  Duty of loyalty.--
131	(2)  Subject to the rights of persons dealing with or
132	assisting the trustee as provided in s. 736.1016, a sale,
133	encumbrance, or other transaction involving the investment or
134	management of trust property entered into by the trustee for the
135	trustee's own personal account or which is otherwise affected by
136	a conflict between the trustee's fiduciary and personal
137	interests is voidable by a beneficiary affected by the
138	transaction unless:
139	(a)  The transaction was authorized by the terms of the
140	trust;
141	(b)  The transaction was approved by the court;
142	(c)  The beneficiary did not commence a judicial proceeding
143	within the time allowed by s. 736.1008;
144	(d)  The beneficiary consented to the trustee's conduct,
145	ratified the transaction, or released the trustee in compliance
146	with s. 736.1012;
147	(e)  The transaction involves a contract entered into or
148	claim acquired by the trustee when that person had not become or
149	contemplated becoming trustee; or
150	(f)  The transaction was consented to in writing by a
151	settlor of the trust while the trust was revocable; or.
152	(g)  The transaction is one by a corporate trustee that
153	involves a money market mutual fund, mutual fund, or a common
154	trust fund described in s. 736.0816(3).
155	(5)(a)  An investment by a trustee authorized by lawful
156	authority to engage in trust business, as defined in s.
157	658.12(20), in investment instruments, as defined in s.
158	660.25(6), that are owned or controlled by the trustee or its
159	affiliate, or from which the trustee or its affiliate receives
160	compensation for providing services in a capacity other than as
161	trustee, is not presumed to be affected by a conflict between
162	personal and fiduciary interests provided the investment
163	otherwise complies with chapters 518 and 660 and the trustee
164	complies with the disclosure requirements of this subsection.
165	(b)  A trustee who, pursuant to this subsection, invests
166	trust funds in investment instruments that are owned or
167	controlled by the trustee or its affiliate shall disclose the
168	following to all qualified beneficiaries:
169	1.  Notice that the trustee has invested trust funds in
170	investment instruments owned or controlled by the trustee or its
171	affiliate.
172	2.  The identity of the investment instruments.
173	3.  The identity and relationship to the trustee of any
174	affiliate that owns or controls the investment instruments.
175	(c)  A trustee who, pursuant to this subsection, invests
176	trust funds in investment instruments with respect to which the
177	trustee or its affiliate receives compensation for providing
178	services in a capacity other than as trustee shall disclose to
179	all qualified beneficiaries, the nature of the services provided
180	by the trustee or its affiliate, and all compensation,
181	including, but not limited to, fees or commissions paid or to be
182	paid by the account and received or to be received by an
183	affiliate arising from such affiliated investment.
184	(d)  Disclosure required by this subsection shall be made
185	at least annually unless there has been no change in the method
186	or increase in the rate at which such compensation is calculated
187	since the most recent disclosure. The disclosure may be given in
188	a trust disclosure document as defined in s. 736.1008, in a copy
189	of the prospectus for the investment instrument, in any other
190	written disclosure prepared for the investment instrument under
191	applicable federal or state law, or in a written summary that
192	includes all compensation received or to be received by the
193	trustee and any affiliate of the trustee and an explanation of
194	the manner in which such compensation is calculated, either as a
195	percentage of the assets invested or by some other method.
196	(e)  This subsection shall apply as follows:
197	1.  This subsection does not apply to qualified investment
198	instruments or to a trust for which a right of revocation
199	exists.
200	2.  For investment instruments other than qualified
201	investment instruments, paragraphs (a), (b), (c), and (d) shall
202	apply to irrevocable trusts created on or after July 1, 2007,
203	which expressly authorize the trustee, by specific reference to
204	this subsection, to invest in investment instruments owned or
205	controlled by the trustee or its affiliate.
206	3.  For investment instruments other than qualified
207	investment instruments, paragraphs (a), (b), (c), and (d) shall
208	apply to irrevocable trusts created on or after July 1, 2007,
209	that are not described in subparagraph 2. and to irrevocable
210	trusts created prior to July 1, 2007, only as follows:
211	a.  Such paragraphs shall not apply until 60 days after the
212	statement required in paragraph (f) is provided and a majority
213	of the qualified beneficiaries have provided written consent.
214	All consents must be obtained within 90 days after the date of
215	delivery of the written request. Once given, consent shall be
216	valid as to all investment instruments acquired pursuant to the
217	consent prior to the date of any withdrawal of the consent no
218	objection is made or any objection which is made has been
219	terminated.
220	(I)  An objection is made if, within 60 days after the date
221	of the statement required in paragraph (f), a super majority of
222	the eligible beneficiaries deliver to the trustee written
223	objections to the application of this subsection to such trust.
224	An objection shall be deemed to be delivered to the trustee on
225	the date the objection is mailed to the mailing address listed
226	in the notice provided in paragraph (f).
227	(II)  An objection is terminated upon the earlier of the
228	receipt of consent from a super majority of eligible
229	beneficiaries of the class that made the objection or the
230	resolution of the objection pursuant to this subparagraph.
231	(III)  If an objection is delivered to the trustee, the
232	trustee may petition the court for an order overruling the
233	objection and authorizing the trustee to make investments under
234	this subsection. The burden shall be on the trustee to show good
235	cause for the relief sought.
236	(I)(IV)  Any qualified beneficiary may petition the court
237	for an order to prohibit, limit, or restrict a trustee's
238	authority to make investments under this subsection. The burden
239	shall be upon the petitioning beneficiary to show good cause for
240	the relief sought.
241	(II)(V)  The court may award costs and attorney's fees
242	relating to any petition under this subparagraph in the same
243	manner as in chancery actions. When costs and attorney's fees
244	are to be paid out of the trust, the court, in its discretion,
245	may direct from which part of the trust such costs and fees
246	shall be paid.
247	b.  The consent objection of a majority of the qualified
248	super majority of eligible beneficiaries under this subparagraph
249	may thereafter be withdrawn prospectively removed by the written
250	notice consent of a super majority of any one of the class or
251	classes of the qualified those eligible beneficiaries that made
252	the objection.
253	(f)1.  The trustee of a trust described in s. 731.201(35)
254	may request authority to invest in Any time prior to initially
255	investing in any investment instruments instrument described in
256	this subsection other than a qualified investment instrument, by
257	providing the trustee of a trust described in subparagraph (e)3.
258	shall provide to all qualified beneficiaries a written request
259	statement containing the following:
260	a.  The name, telephone number, street address, and mailing
261	address of the trustee and of any individuals who may be
262	contacted for further information.
263	b.  A statement that the investment or investments cannot
264	be made without the consent of a majority of each class of the
265	qualified beneficiaries, unless a super majority of the eligible
266	beneficiaries objects to the application of this subsection to
267	the trust within 60 days after the date the statement pursuant
268	to this subsection was delivered, this subsection shall apply to
269	the trust.
270	c.  A statement that, if a majority of each class of
271	qualified beneficiaries consent this subsection applies to the
272	trust, the trustee will have the right to make investments in
273	investment instruments, as defined in s. 660.25(6), which are
274	owned or controlled by the trustee or its affiliate, or from
275	which the trustee or its affiliate receives compensation for
276	providing services in a capacity other than as trustee, that
277	such investment instruments may include investment instruments
278	sold primarily to trust accounts, and that the trustee or its
279	affiliate may receive fees in addition to the trustee's
280	compensation for administering the trust.
281	d.  A statement that the consent may be withdrawn
282	prospectively at any time by written notice given by a majority
283	of any class of the qualified beneficiaries.
284
285	A statement by the trustee is not delivered if the statement is
286	accompanied by another written communication other than a
287	written communication by the trustee that refers only to the
288	statement.
289	2.  For purposes of paragraph (e) and this paragraph:
290	a.  "Eligible beneficiaries" means:
291	(I)  If at the time the determination is made there are one
292	or more beneficiaries as described in s. 736.0103(14)(c), the
293	beneficiaries described in s. 736.0103(14)(a) and (c); or
294	(II)  If there is no beneficiary described in s.
295	736.0103(14)(c), the beneficiaries described in s.
296	736.0103(14)(a) and (b).
297	a.b.  "Super Majority of the qualified eligible
298	beneficiaries" means:
299	(I)  If at the time the determination is made there are one
300	or more beneficiaries as described in s. 736.0103(14)(c), at
301	least a majority two-thirds in interest of the beneficiaries
302	described in s. 736.0103(14)(a), at least a majority in interest
303	of the beneficiaries described in s. 736.0103(14)(b), and at
304	least a majority or two-thirds in interest of the beneficiaries
305	described in s. 736.0103(14)(c), if the interests of the
306	beneficiaries are reasonably ascertainable; otherwise, a
307	majority two-thirds in number of each either such class; or
308	(II)  If there is no beneficiary as described in s.
309	736.0103(14)(c), at least a majority two-thirds in interest of
310	the beneficiaries described in s. 736.0103(14)(a) and at least a
311	majority or two-thirds in interest of the beneficiaries
312	described in s. 736.0103(14)(b), if the interests of the
313	beneficiaries are reasonably ascertainable; otherwise, a
314	majority two-thirds in number of each either such class.
315	b.c.  "Qualified investment instrument" means a mutual
316	fund, common trust fund, or money market fund described in and
317	governed by s. 736.0816(3).
318	c.d.  An irrevocable trust is created upon execution of the
319	trust instrument. If a trust that was revocable when created
320	thereafter becomes irrevocable, the irrevocable trust is created
321	when the right of revocation terminates.
322	(g)  Nothing in this chapter is intended to create or imply
323	a duty for the trustee to seek the application of this
324	subsection to invest in investment instruments described in
325	paragraph (a), and no inference of impropriety may be made as a
326	result of a trustee electing not to invest trust assets in
327	investment instruments described in paragraph (a).
328	(h)  This subsection is not the exclusive authority under
329	this code for investing in investment instruments described in
330	paragraph (a). A trustee who invests trust funds in investment
331	instruments described in paragraph (a) is not required to comply
332	with paragraph (b), paragraph (c), or paragraph (f) if the
333	trustee is permitted to invest in such investment instruments
334	pursuant to subsection (2).
335	Section 4.  Subsection (3) of section 736.0816, Florida
336	Statutes, is amended to read:
337	736.0816  Specific powers of trustee.--Except as limited or
338	restricted by this code, a trustee may:
339	(3)  Acquire an undivided interest in a trust asset,
340	including, but not limited to, a money market mutual fund,
341	mutual fund, or common trust fund, in which asset the trustee
342	holds an undivided interest in any trust capacity, including any
343	money market or other mutual fund from which the trustee or any
344	affiliate or associate of the trustee is entitled to receive
345	reasonable compensation for providing necessary services as an
346	investment adviser, portfolio manager, or servicing agent. A
347	trustee or affiliate or associate of the trustee may receive
348	compensation for such services in addition to fees received for
349	administering the trust provided such compensation is fully
350	disclosed in writing to all qualified beneficiaries. As used in
351	this subsection, the term "mutual fund" includes an open-end or
352	closed-end management investment company or investment trust
353	registered under the Investment Company Act of 1940, 15 U.S.C.
354	ss. 80a-1 et seq., as amended.
355	Section 5.  Subsection (6) of section 736.1008, Florida
356	Statutes, is amended to read:
357	736.1008  Limitations on proceedings against trustees.--
358	(6)  This section applies to trust accountings for
359	accounting periods beginning on or after July January 1, 2007
360	2008, and to written reports, other than trust accountings,
361	received by a beneficiary on or after July January 1, 2007 2008.
362	Section 6.  Subsection (2) of section 736.1011, Florida
363	Statutes, is amended to read:
364	736.1011  Exculpation of trustee.--
365	(2)  An exculpatory term drafted or caused to be drafted by
366	the trustee is invalid as an abuse of a fiduciary or
367	confidential relationship unless:
368	(a)  The trustee proves that the exculpatory term is fair
369	under the circumstances.
370	(b)  and that The term's existence and contents were
371	adequately communicated directly to the settlor or the
372	independent attorney of the settlor. This paragraph applies only
373	to trusts created on or after July 1, 2007.
374	Section 7.  This act shall take effect July 1, 2007.

CODING: Words stricken are deletions; words underlined are additions.