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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
A bill to be entitled 1
An act relating to the Florida Uniform Fiduciary 2
Income and Principal Act; amending s. 738.101, F.S.; 3
revising a short title; amending s. 738.102, F.S.; 4
revising and providing definitions governing ch. 738, 5
F.S.; amending s. 738.103, F.S.; specifying the s cope 6
of ch. 738, F.S.; amending s. 738.104, F.S.; 7
specifying circumstances under which ch. 738, F.S., 8
applies to a trust; repealing s. 738.1041, F.S., 9
relating to total return unitrusts; repealing s. 10
738.105, F.S., relating to judicial control of 11
discretionary powers; amending s. 738.201, F.S.; 12
specifying the duties of a fiduciary; providing that a 13
fiduciary's allocation, determination, or exercise of 14
discretion is presumed to be fair and reasonable to 15
all beneficiaries; requiring a fiduciary to take 16
specified actions; authorizing a fiduciary to exercise 17
discretionary power of administration under specified 18
circumstances; requiring the fiduciary to consider 19
specified factors before exercising such discretionary 20
power; providing for applicability; amending s. 21
738.202, F.S.; defining the term "fiduciary decision"; 22
prohibiting a court from ordering a fiduciary to 23
change his or her decision unless the decision was an 24
abuse of discretionary power; prohibiting a court from 25
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
determining that a fiduciary abused its di scretion 26
under specified conditions; authorizing a court to 27
order a specified remedy; authorizing a court to 28
determine whether a proposed fiduciary decision will 29
result in an abuse of discretion; providing that a 30
beneficiary who opposes a proposed decision has the 31
burden to establish that such decision is an abuse of 32
discretion; requiring that any attorney fees incurred 33
in defending an action related to the abuse of a 34
fiduciary's discretion be paid from trust assets; 35
creating s. 738.203, F.S.; authorizing a fiduciary to 36
adjust between income and principal if such adjustment 37
assists in administering the trust or estate 38
impartially; providing construction; providing that a 39
fiduciary is not liable to another for an adjustment, 40
or failure to adjust, between inco me and principal 41
made in good faith; requiring a fiduciary to consider 42
certain relevant factors when considering such 43
adjustment; prohibiting a fiduciary from exercising or 44
considering such adjustment if certain conditions 45
exist; revising applicability; au thorizing a fiduciary 46
to release or delegate to a cofiduciary specified 47
powers to adjust under specified conditions; providing 48
requirements and powers for any such releases and 49
delegations; providing applicability; requiring that 50
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
the description of an exer cise of the power to adjust 51
between income and principal contain specified 52
information; amending s. 738.301, F.S.; defining 53
terms; amending s. 738.302, F.S.; specifying 54
applicability of specified provisions; authorizing the 55
conversion of an income trust to a unitrust; 56
restricting provisions to trusts that are 57
beneficiaries of an estate; providing construction; 58
providing that a fiduciary acting in good faith is not 59
liable to a person affected by a certain action or 60
inaction; amending s. 738.303, F.S.; specif ying the 61
authority of a fiduciary with respect to the 62
administration of certain trusts; providing the 63
circumstances under which a fiduciary may perform such 64
actions; authorizing a beneficiary or a fiduciary to 65
request the court to allow the beneficiary or 66
fiduciary to take a specified action; requiring a 67
fiduciary to inform specified persons of a decision to 68
take action; authorizing a beneficiary to request a 69
court to direct the fiduciary to take the requested 70
action under specified circumstances; requiring 71
fiduciaries to consider specified factors before 72
taking a certain action; authorizing a fiduciary to 73
release or delegate the power to take certain actions; 74
creating s. 738.304, F.S.; requiring a certain notice 75
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
to be sent to specified parties; providing 76
applicability; authorizing a person to consent to a 77
specified action in a record; providing that such 78
person does not need to be sent notice of such action; 79
providing requirements for such notices; creating s. 80
738.305, F.S.; requiring a fiduciary of a unitru st to 81
follow a certain policy; providing rules for a 82
unitrust policy; providing additional actions a 83
unitrust policy may contain; creating s. 738.306, 84
F.S.; requiring a unitrust rate to be within a 85
specified range; authorizing a unitrust policy to 86
provide for specified limits within such range; 87
requiring a fiduciary who is a non -independent person 88
to use a specified unitrust rate; creating s. 738.307, 89
F.S.; requiring a unitrust policy to provide a 90
specified method for determining fair market value of 91
an asset in determining a unitrust amount; authorizing 92
specified unitrust policies to provide methods for 93
determining a certain net fair market value; 94
prohibiting certain property from being included in 95
the determination of the value of a trust; creating s. 96
738.308, F.S.; requiring a unitrust policy to provide 97
a specified period; specifying that such period must 98
be a calendar year; authorizing a unitrust policy to 99
provide certain standards for periods; creating s. 100
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
738.309, F.S.; providing applicability; authorizi ng a 101
trustee of an express unitrust to determine the 102
unitrust amount by reference to the net fair market 103
value of the unitrust's assets in a specified 104
timeframe; providing that distribution of a unitrust 105
amount is considered a distribution of all the net 106
income of an express unitrust and is considered an 107
income interest; specifying that the unitrust amount 108
is considered a reasonable apportionment of the total 109
return of the express unitrust; providing that an 110
express unitrust that allows a distribution in ex cess 111
of a specified unitrust rate is considered a 112
distribution of all of the income of the unitrust; 113
authorizing an express unitrust to provide a mechanism 114
for changing the unitrust rate and for conversion from 115
a unitrust to an income trust or from an inco me trust 116
to a unitrust; specifying that unless an express 117
unitrust prohibits the power to change the rate or 118
convert the trust, the trustee has such power; 119
authorizing the governing instrument of an express 120
unitrust to grant the trustee discretion to adopt a 121
certain practice; specifying that unless an express 122
unitrust provides otherwise, the distribution of an 123
amount is considered a distribution from specified 124
sources in a specified order of priority; authorizing 125
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
a governing instrument of an express unitrus t to allow 126
exclusion of specified assets; providing that the use 127
of such assets may be considered equivalent to income 128
or to the unitrust amount; creating s. 738.310, F.S.; 129
requiring a trustee, after the conversion of an income 130
trust to a unitrust, to cons ider the unitrust amount 131
paid from certain sources in a specified order of 132
priority; amending s. 738.401, F.S.; defining terms; 133
specifying that an attribute or action of an entity 134
includes an attribute or action from any other entity 135
in which the initial e ntity has an ownership interest 136
or holds another interest; requiring a fiduciary to 137
allocate certain money and tangible personal property 138
to income; requiring a fiduciary to allocate specified 139
property and money to principal; providing that 140
certain money received in an entity distribution is a 141
capital distribution in specified circumstances; 142
specifying that in cases of capital distribution, the 143
amount received in an entity distribution must be 144
reduced to the extent that cumulative distributions 145
from the entity to the fiduciary are within certain 146
ranges; authorizing a fiduciary to consider additional 147
information before deciding to make or change a 148
decision to make a payment to a beneficiary; providing 149
that if a fiduciary receives specified additional 150
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
information after a distribution to a beneficiary, the 151
fiduciary is not required to change or recover the 152
payment; authorizing a fiduciary in such a situation 153
to exercise other specified powers; revising 154
definitions; requiring a fiduciary to allocate certain 155
money and property to principal; providing the 156
mechanism for such allocation; defining the term 157
"public entity"; conforming provisions to changes made 158
by the act; amending s. 738.402, F.S.; conforming 159
provisions to changes made by the act; amending s. 160
738.403, F.S.; providing applicability; authorizing a 161
fiduciary to make certain determinations separately 162
and differently from the decisions concerning 163
distributions of income or principal; conforming 164
provisions to changes made by the act; making 165
technical changes; creating s. 738.404, F.S.; 166
specifying receipts that a fiduciary must allocate to 167
principal; creating s. 738.405, F.S.; providing for 168
the allocation of income from rental property; 169
creating s. 738.406, F.S.; specifying applicability; 170
requiring a fiduciary to allocate to income certain 171
amounts received as interest; requiring a fiduciary to 172
allocate to income increments in value of certain 173
bonds or other obligations; creating s. 738.407, F.S.; 174
specifying applicability; requiring a fiduciary to 175
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
allocate proceeds from insurance policies or contracts 176
to principal in a specified manner; creating s. 177
738.408, F.S.; specifying circumstances under which a 178
fiduciary may allocate an insubstantial allocation to 179
principal, subject to certain conditions and 180
limitations; creating s. 738.409, F.S.; defining 181
terms; specifying the manner in which a fiduciary may 182
determine incomes of separate funds; providing duties 183
of a fiduciary of a marital trust and other trusts; 184
requiring a fiduciary of a nonseparate fund to 185
calculate internal income in a specified manner; 186
providing construction; transferring, renumbering, and 187
amending s. 738.603, F.S.; revising the definition of 188
the term "liquidating asset"; providing applicability; 189
requiring a fiduciary to allocate to income and 190
principal the receipts produced by liquidating assets 191
in a certain manner; transferring, renumbering, and 192
amending s. 738.604, F.S.; requiring a fiduciary to 193
allocate the receipts from interests in minerals, 194
water, or other natural resources to income, 195
principal, or between income and principal under 196
specified conditions; revising applicability; 197
providing that an allocation between income and 198
principal from a receipt from a natural resource is 199
presumed equitable under a specified condition; 200
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
providing construction; tr ansferring, renumbering, and 201
amending s. 738.605, F.S.; requiring a fiduciary to 202
allocate receipts from timber to income, principal, or 203
between income and principal under specified 204
conditions; revising applicability; transferring, 205
renumbering, and amending s. 738.606, F.S.; 206
authorizing a settlor's spouse to require the trustee 207
of a trust that receives certain property to make such 208
property produce income under specified conditions; 209
authorizing the trustee to take specified actions if 210
directed by such spouse ; providing that the trustee 211
decides whether to take one or a combination of such 212
actions; revising applicability; providing 213
construction; transferring, renumbering, and amending 214
s. 738.607, F.S.; revising the definition of the term 215
"derivative"; requiring a fiduciary to allocate 216
specified percentages of certain receipts and 217
disbursements to income and allocate the balance to 218
principal; providing construction; requiring certain 219
fiduciaries to allocate a specified percentage to 220
income and allocate the balanc e to principal of 221
certain amounts; transferring, renumbering, and 222
amending s. 738.608, F.S.; requiring a fiduciary to 223
allocate to income a receipt from or related to asset -224
backed securities under a specified condition; 225
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
requiring a fiduciary to allocate to income a 226
specified percentage of receipts from the transaction 227
and the disbursement of a payment received as a result 228
of an interest in an asset -backed security; conforming 229
provisions to changes made by the act; creating s. 230
738.416, F.S.; requiring a fiduc iary to make specified 231
allocations from receipts from other financial 232
instruments or arrangements; providing construction; 233
amending s. 738.501, F.S.; specifying the manner by 234
which a fiduciary must make disbursements from income; 235
amending s. 738.502, F.S.; specifying the manner by 236
which a fiduciary must make disbursements from 237
principal; amending s. 738.503, F.S.; defining the 238
term "depreciation"; specifying the manner by which a 239
fiduciary may make transfers from income to principal 240
to account for depreciat ion; amending s. 738.504, 241
F.S.; specifying the manner by which a fiduciary may 242
make transfers from principal to income for 243
reimbursements; transferring, renumbering, and 244
amending s. 738.704, F.S.; providing that a fiduciary 245
that makes or expects to make a certain principal 246
disbursement may transfer an appropriate amount from 247
income to principal in one or more accounting periods; 248
providing applicability; making technical changes; 249
deleting a provision relating to payments necessary to 250
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
avoid defaulting on a mo rtgage or security interest on 251
certain property; transferring, renumbering, and 252
amending s. 738.705, F.S.; revising the sources from 253
which a fiduciary must pay a tax required by a share 254
of an entity's taxable income; requiring a fiduciary 255
to adjust income or principal receipts if the taxes 256
paid are reduced due to a deduction for a payment made 257
to a beneficiary; providing construction; making 258
technical changes; transferring, renumbering, and 259
amending s. 738.706, F.S.; revising the circumstances 260
under which a fiduciary may make adjustments between 261
income and principal to offset shifts in the economic 262
interests or tax benefits of specified beneficiaries; 263
requiring a fiduciary to charge a beneficiary to 264
reimburse the principal if the beneficiary benefits 265
from an applicable tax deduction; requiring the share 266
of reimbursement for each fiduciary or beneficiary to 267
be the same as its share of the decrease in income 268
tax; authorizing such fiduciary to charge a 269
beneficiary to offset the estate tax by obtaining 270
payment from the beneficiary, withholding an amount 271
from future distributions, or adopting another method 272
or combination of methods; creating s. 738.508, F.S.; 273
defining terms; specifying the manner by which 274
property expenses are apportioned between a tenant and 275
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
remainderman; providing applicability and 276
construction; amending s. 738.601, F.S.; providing 277
applicability; specifying the manner by which a 278
fiduciary determines and distributes net income; 279
providing circumstances under which a fiduciary may 280
not reduce certain principal or income receipts; 281
amending s. 738.602, F.S.; providing that certain 282
beneficiaries of non -unitrusts are entitled to receive 283
a specified share of net income; providing that 284
certain requirements apply in determining a 285
beneficiary's share of net i ncome; providing 286
construction; amending s. 738.701, F.S.; providing 287
that an income beneficiary is entitled to net income 288
when an asset is subject to a certain trust or 289
successive interest; providing that an asset becomes 290
subject to a specified trust on cer tain dates; 291
amending s. 738.702, F.S.; specifying the manner by 292
which a fiduciary allocates certain receipts and makes 293
disbursements when a decedent dies or income interest 294
begins; providing construction; amending s. 738.703, 295
F.S.; defining the term "undis tributed income"; 296
specifying the manner by which a fiduciary makes 297
allocations of undistributed income when income 298
interest ends; amending s. 738.801, F.S.; providing 299
for uniform application and construction of the act; 300
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
amending s. 738.802, F.S.; providing construction in 301
relation to federal law; amending s. 738.803, F.S.; 302
making a technical change; amending s. 738.804, F.S.; 303
revising application of ch. 738, F.S., to conform to 304
changes made by the act; providing an effective date. 305
306
Be It Enacted by the Legislature of the State of Florida: 307
308
Section 1. Section 738.101, Florida Statutes, is amended 309
to read: 310
738.101 Short title. —This chapter may be cited as the 311
"Florida Uniform Fiduciary Income and Principal and Income Act." 312
Section 2. Section 73 8.102, Florida Statutes, is amended 313
to read: 314
738.102 Definitions. —As used in this chapter, the term: 315
(1) "Accounting period" means a calendar year unless 316
another 12-month period is selected by a fiduciary selects 317
another period of 12 calendar months or approximately 12 318
calendar months. The term includes a part portion of a calendar 319
year or another period of 12 calendar months or approximately 12 320
calendar months which other 12-month period that begins when an 321
income interest begins or ends when an income interest ends. 322
(2) "Asset-backed security," as provided in s. 738.415, 323
means a security that is serviced primarily by the cash flows of 324
a discrete pool of fixed or revolving receivables or other 325
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
financial assets that by their terms convert to cash withi n a 326
finite time. The term includes rights or other assets that 327
ensure the servicing or timely distribution of proceeds to the 328
holder of the asset-backed security. The term does not include 329
an asset to which s. 738.401, s. 738.409, or s. 738.414 applies. 330
(3) "Beneficiary" includes: 331
(a) For a trust: 332
1. A current beneficiary, including a current income 333
beneficiary and a beneficiary that may receive only principal; 334
2. A remainder beneficiary; and 335
3. Any other successor beneficiary; 336
(b) For an estate, an heir, and a devisee; and 337
(c) For a life estate or term interest, a person who holds 338
a life estate, a term interest, or a remainder or other interest 339
following a life estate or term interest means, in the case of a 340
decedent's estate, an heir or devisee and, in the case of a 341
trust, an income beneficiary or a remainder beneficiary . 342
(4)(3) "Carrying value" means the fair market value at the 343
time the assets are received by the fiduciary. For an estate and 344
for a trust the estates of decedents and tr usts described in s. 345
733.707(3), after the grantor's death, the assets are considered 346
received as of the date of the settlor's death. If there is a 347
change in fiduciaries, a majority of the continuing fiduciaries 348
may elect to adjust the carrying values to r eflect the fair 349
market value of the assets at the beginning of their 350
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
administration. If such election is made, it must be reflected 351
on the first accounting filed after the election. For assets 352
acquired during the administration of the estate or trust, the 353
carrying value is equal to the acquisition costs of the asset. 354
Carrying value of assets should not be arbitrarily "written up" 355
or "written down." In some circumstances, including, but not 356
limited to, those described in ss. 738.410 and 738.602, carrying 357
value may be adjusted with proper disclosure to reflect changes 358
in carrying value applied in a consistent manner. 359
(5) "Court" means a circuit court of this state. 360
(6) "Current income beneficiary" means a beneficiary to 361
which a fiduciary may distribute net income, regardless of 362
whether the fiduciary also distributes principal to the 363
beneficiary. 364
(7) "Distribution," "distribute," "distributed," or 365
"distributee" means a payment or transfer by a fiduciary to a 366
beneficiary in the beneficiary's capacity as a b eneficiary, 367
without consideration other than the beneficiary's right to 368
receive the payment or transfer under the terms of the trust as 369
defined in this section, or in a will, a life estate, or a term 370
interest. 371
(8) "Estate" means a decedent's estate, incl uding the 372
property of the decedent as the estate is originally constituted 373
and the property of the estate as it exists at any time during 374
administration. 375
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
(9)(4) "Fiduciary" includes means a trustee, a trust 376
director as defined in s. 736.0103, or a personal 377
representative, and a person acting under a delegation from a 378
fiduciary or a trustee. The term also includes a person that 379
holds property for a successor beneficiary whose interest may be 380
affected by an allocation of receipts and expenditures between 381
income and principal. If there are two or more cofiduciaries, 382
the term includes all cofiduciaries acting under the terms of 383
the trust and applicable law an executor, administrator, 384
successor personal representative, special administrator, or a 385
person performing substantially the same function . 386
(10)(5) "Income" means money or other property that a 387
fiduciary receives as current return from a principal asset. The 388
term includes a part portion of receipts from a sale, exchange, 389
or liquidation of a principal asset, to the extent provided in 390
ss. 738.401-738.416 ss. 738.401-738.403 and s. 738.503 . 391
(6) "Income beneficiary" means a person to whom net income 392
of a trust is or may be payable. 393
(11)(7) "Income interest" means the right of a current an 394
income beneficiary to receive all or part of net income, whether 395
the terms of the trust require the net income to be distributed 396
or authorize the net income to be distributed in the fiduciary's 397
trustee's discretion. The term includes the right of a current 398
beneficiary to use property held by a fiduciary. 399
(12) "Independent person" means a person who is not: 400
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
(a) For a trust: 401
1. A qualified beneficiary as defined in s. 736.0103; 402
2. A settlor of the t rust; 403
3. An individual whose legal obligation to support a 404
beneficiary may be satisfied by a distribution from the trust; 405
or 406
4. Any trustee whom an interested distributee has the 407
power to remove and replace with a related or subordinate party. 408
(b) For an estate, a beneficiary; 409
(c) A spouse, a parent, a brother, a sister, or an issue 410
of an individual described in paragraph (a) or paragraph (b); 411
(d) A corporation, a partnership, a limited liability 412
company, or another entity in which persons describ ed in 413
paragraphs (a), (b), and (c), in the aggregate, have voting 414
control; or 415
(e) An employee of a person described in paragraph (a), 416
paragraph (b), paragraph (c), or paragraph (d). 417
(13) "Internal Revenue Code" means the Internal Revenue 418
Code of 1986, as amended. 419
(14)(8) "Mandatory income interest" means the right of a 420
current an income beneficiary to receive net income that the 421
terms of the trust require the fiduciary to distribute. 422
(15)(9) "Net income" means the total allocations receipts 423
allocated to income during an accounting period to income under 424
the terms of a trust and this chapter minus the disbursements 425
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
made from income during the period, other than distributions, 426
allocated to income under the terms of the trust and this 427
chapter. To the extent that the trust is a unitrust under ss. 428
738.301-738.310, the term means the unitrust amount determined 429
under ss. 738.301-738.310. The term includes the amount of an 430
adjustment from principal to income under s. 738.203. The term 431
does not include the amo unt of an adjustment plus or minus 432
transfers under this chapter to or from income to principal 433
under s. 738.203 during the period. 434
(16)(10) "Person" means an individual, a business or a 435
nonprofit entity, corporation, business trust, an estate, a 436
trust, partnership, limited liability company, association, 437
joint venture, a public corporation, or any other legal or 438
commercial entity or a government or governmental subdivision, 439
agency, or instrumentality , or other legal entity . 440
(17) "Personal representative" means an executor, an 441
administrator, a successor personal representative, a special 442
administrator, or a person that performs substantially the same 443
function with respect to an estate under the law governing the 444
person's status. 445
(18)(11) "Principal" means property held in trust for 446
distribution to, production of income for, or use by a current 447
or successor a remainder beneficiary when the trust terminates . 448
(19) "Record" means information inscribed on a tangible 449
medium or stored in an elec tronic or other medium and is 450
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
retrievable in perceivable form. 451
(20) "Settlor" means a person, including a testator, who 452
creates or contributes property to a trust. If more than one 453
person creates or contributes property to a trust, the term 454
includes each person, to the extent of the trust property 455
attributable to that person's contribution, except to the extent 456
that another person has the power to revoke or withdraw that 457
portion. 458
(21) "Special tax benefit" means: 459
(a) Exclusion of a transfer to a trust from gifts 460
described in s. 2503(b) of the Internal Revenue Code because of 461
the qualification of an income interest in the trust as a 462
present interest in property; 463
(b) Status as a qualified subchapter S trust described in 464
s. 1361(d)(3) of the Internal Re venue Code at a time the trust 465
holds stock of an S corporation described in s. 1361(a)(1) of 466
the Internal Revenue Code; 467
(c) An estate or gift tax marital deduction for a transfer 468
to a trust under s. 2056 or s. 2523 of the Internal Revenue Code 469
which depends or depended in whole or in part on the right of 470
the settlor's spouse to receive the net income of the trust; 471
(d) Exemption in whole or in part of a trust from the 472
federal generation-skipping transfer tax imposed by s. 2601 of 473
the Internal Revenue Cod e because the trust was irrevocable on 474
September 25, 1985, if there is any possibility that: 475
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
1. A taxable distribution as defined in s. 2612(b) of the 476
Internal Revenue Code could be made from the trust; or 477
2. A taxable termination as defined in s. 2612 (a) of the 478
Internal Revenue Code could occur with respect to the trust; or 479
(e) An inclusion ratio as defined in s. 2642(a) of the 480
Internal Revenue Code of the trust which is less than one, if 481
there is any possibility that: 482
1. A taxable distribution as defined in s. 2612(b) of the 483
Internal Revenue Code could be made from the trust; or 484
2. A taxable termination as defined in s. 2612(a) of the 485
Internal Revenue Code could occur with respect to the trust. 486
(22) "Successive interest" means the interest of a 487
successor beneficiary. 488
(23)(12) "Successor Remainder beneficiary" means a person 489
entitled to receive income or principal or to use property when 490
an income interest or other current interest ends. 491
(24)(13) "Terms of a trust" means : 492
(a) Except as otherwise provided in paragraph (b), the 493
manifestation of the settlor's intent regarding a trust's 494
provisions as: 495
1. Expressed in the will or trust instrument; or 496
2. Established by other evidence that would be admissible 497
in a judicial proceeding. 498
(b) The trust's provisions as established, determined, or 499
amended by: 500
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1. A trustee or trust director in accordance with the 501
applicable law; 502
2. A court order; or 503
3. A nonjudicial settlement agreement under s. 736.0111. 504
(c) For an estate, a will; or 505
(d) For a life estate or term interest, the corresponding 506
manifestation of the rights of the beneficiaries to the extent 507
provided in s. 738.508 the manifestation of the intent of a 508
grantor or decedent with respect to the trust, expressed in a 509
manner that admits of its proof in a judicial proceeding, 510
whether by written or spoken words or by conduct . 511
(25) "Trust" includes an express trust, whether private or 512
charitable, with additions to the trust, wherever and however 513
created; and a trust created or determined by a judgment or 514
decree under which the trust is to be administered. The term 515
does not include a constructive trust; a resulting trust; a 516
conservatorship; a custodial arrangement under the Florida 517
Uniform Transfers to Minors Act; a business trust providing for 518
certificates to be issued to beneficiaries; a common trust fund; 519
a land trust under s. 689.071; a trust created by the form of 520
the account or by the deposit agreement at a financial 521
institution; a voting trust; a security arrangement; a 522
liquidation trust; a trust for the primary purpose of paying 523
debts, dividends, interest, salaries, wages, profits, pensions, 524
retirement benefits, or employee benefits of any kind; or an 525
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arrangement under which a person is a nominee, an escrowee, or 526
an agent for another. 527
(26)(14) "Trustee" means a person, other than a personal 528
representative, that owns or holds property for the benefit of a 529
beneficiary. The term includes an original, additional, or 530
successor trustee, regardless of whether they are or not 531
appointed or confirmed by a court. 532
(27) "Will" means any testamentary instrument recognized 533
under applicable law which makes a legally effective disposition 534
of an individual's property, effective at the individual's 535
death. The term includes a codicil or other amendment to a 536
testamentary instrument. 537
Section 3. Section 738.103, Florida Statutes, is amended 538
to read: 539
(Substantial rewording of section. See 540
s. 738.103, F.S., for present text.) 541
738.103 Scope.—Except as otherwise provided in the terms 542
of a trust or this chapter, this chapter applies to all of the 543
following: 544
(1) A trust or an estate. 545
(2) A life estate or other term interest in which the 546
interest of one or more persons will be succeeded by the 547
interest of one or more other persons to the extent provided in 548
s. 738.508. 549
Section 4. Section 738.104, Florida Statutes, is amended 550
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to read: 551
(Substantial rewording of section. See 552
s. 738.104, F.S., for present text.) 553
738.104 Governing law. —Except as otherwise provided in the 554
terms of a trust or this chapter, this chapter applies when this 555
state is the principal place of administration of a trust or 556
estate or the situs of property that is not held in a trust or 557
estate and is subject to a life estate or other term interest 558
described in s. 738.103(2). By accepting the trusteeship of a 559
trust having its principal place of administration in this state 560
or by moving the principal place of administration of a trust to 561
this state, the trustee submits to the application of this 562
chapter to any matter within the scope of this chapter involving 563
the trust. 564
Section 5. Section 738.1041, Florida Statutes, is 565
repealed. 566
Section 6. Section 738.105, Florida Statutes, is repealed. 567
Section 7. Section 738.201, Florida Statutes, is amended 568
to read: 569
(Substantial rewording of section. See 570
s. 738.201, F.S., for present text.) 571
738.201 Fiduciary duties; general principles. — 572
(1) In making an allocation or determination or exercising 573
discretion under this chapter, a fiduciary shall do all of the 574
following: 575
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(a) Act in good faith, based on what is a fair and 576
reasonable fee to all beneficiaries; 577
(b) Administer a trust or estate impartially, except to 578
the extent that the terms of the trust manifest an intent that 579
the fiduciary favors one or more beneficiari es; 580
(c) Administer the trust or estate in accordance with the 581
terms of the trust, even if there is a different provision in 582
this chapter. 583
(d) Administer the trust or estate in accordance with this 584
chapter, except to the extent that the terms of the tru st 585
provide otherwise or authorize the fiduciary to determine 586
otherwise. 587
(2) A fiduciary's allocation, determination, or exercise 588
of discretion under this chapter is presumed to be fair and 589
reasonable to all beneficiaries. A fiduciary may exercise a 590
discretionary power of administration given to the fiduciary by 591
the terms of the trust, and an exercise of the power that 592
produces a result different from a result required or permitted 593
by this chapter does not create an inference that the fiduciary 594
abused the fiduciary's discretion. 595
(3) A fiduciary shall: 596
(a) Add a receipt to principal, to the extent that the 597
terms of the trust and this chapter do not allocate the receipt 598
between income and principal; 599
(b) Charge a disbursement to principal, to the extent that 600
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the terms of the trust and this chapter do not allocate the 601
disbursement between income and principal; and 602
(c) Within 65 days after the fiscal year ends, add any 603
undistributed income to principal, unless otherwise provided by 604
the terms of the trust. 605
(4) A fiduciary may exercise the power to adjust under s. 606
738.203(1), convert an income trust to a unitrust under ss. 607
738.301-738.310, change the percentage or method used to 608
calculate a unitrust amount under ss. 738.301 -738.310, or 609
convert a unitrust t o an income trust under ss. 738.301 -738.310 610
if the fiduciary determines the exercise of the power will 611
assist the fiduciary to administer the trust or estate 612
impartially. 613
(5) The fiduciary must consider the following factors in 614
making the determination i n subsection (4), including: 615
(a) The terms of the trust. 616
(b) The nature, distribution standards, and expected 617
duration of the trust. 618
(c) The effect of the allocation rules, including specific 619
adjustments between income and principal, under ss. 738.30 1-620
738.416. 621
(d) The desirability of liquidity and regularity of 622
income. 623
(e) The desirability of the preservation and appreciation 624
of principal. 625
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(f) The extent to which an asset is used or may be used by 626
a beneficiary. 627
(g) The increase or decrease in the value of principal 628
assets, reasonably determined by the fiduciary. 629
(h) Whether and to what extent the terms of the trust give 630
the fiduciary power to accumulate income or invade principal or 631
prohibit the fiduciary from accumulating income or invading 632
principal. 633
(i) The extent to which the fiduciary has accumulated 634
income or invaded principal in preceding accounting periods. 635
(j) The effect of current and reasonably expected economic 636
conditions. 637
(k) The reasonably expected tax consequences of the 638
exercise of the power. 639
(l) The identities and circumstances of the beneficiaries. 640
(6) Except as provided in ss. 738.301 -738.310, this 641
chapter pertains to the administration of a trust and is 642
applicable to any trust that is administered in this state or 643
under its law. This chapter also applies to any estate that is 644
administered in this state unless the provision is limited in 645
application to a trustee, rather than a fiduciary. 646
Section 8. Section 738.202, Florida Statutes, is amended 647
to read: 648
(Substantial rewording of section. See 649
s. 738.202, F.S., for present text.) 650
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738.202 Judicial review of exercise of discretionary 651
power; request for instruction. — 652
(1) As used in this section, the term "fiduciary decision" 653
means any of the following: 654
(a) A fiduciary's allocation between income and principal 655
or other determination regarding income and principal required 656
or authorized by the terms of the trust or this chapter. 657
(b) The fiduciary's exercise or nonexercise of a 658
discretionary power regarding inc ome and principal granted by 659
the terms of the trust or this chapter, including the power to 660
adjust under s. 738.203, convert an income trust to a unitrust 661
under ss. 738.301-738.310, change the percentage of method used 662
to calculate a unitrust amount under ss. 738.301-738.310, 663
convert a unitrust to an income trust under ss. 738.301 -738.310, 664
or the method used to make property productive of income under 665
s. 738.413. 666
(c) The fiduciary's implementation of a decision described 667
in paragraph (a) or paragraph (b). 668
(2) The court may not order a fiduciary to change a 669
fiduciary decision unless the court determines that the 670
fiduciary decision was an abuse of the fiduciary's discretion. A 671
court may not determine that a fiduciary abused its discretion 672
merely because the court would have exercised the discretion in 673
a different manner or would not have exercised the discretion. 674
(3) If the court determines that a fiduciary decision was 675
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an abuse of the fiduciary's discretion, the court may order a 676
remedy authorized by law , including those prescribed under ss. 677
736.1001 and 736.1002. Following such a determination by the 678
court, the remedy is to place the beneficiaries in the positions 679
the beneficiaries would have occupied if the fiduciary had not 680
abused its discretion, as fo llows: 681
(a) The court may order the fiduciary to exercise or 682
refrain from exercising the power to adjust under s. 738.203; 683
(b) The court may order the fiduciary to exercise or 684
refrain from exercising the power to convert an income trust to 685
a unitrust under ss. 738.301-738.310, change the percentage or 686
method used to calculate a unitrust amount under ss. 738.301 -687
738.310, or convert a unitrust to an income trust under ss. 688
738.301-738.310; 689
(c) The court may compel the fiduciary to take any of the 690
actions listed under s. 738.413; 691
(d) To the extent that the abuse of discretion has 692
resulted in no distribution to a beneficiary or a distribution 693
that is too small, the court shall require the fiduciary to 694
distribute from the trust to the beneficiary an amount the court 695
determines will restore the beneficiary, in whole or in part, to 696
his or her appropriate position; 697
(e) To the extent that the abuse of discretion has 698
resulted in a distribution to a beneficiary that is too large, 699
the court shall restore the bene ficiaries, the trust, or both, 700
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in whole or in part, to their appropriate positions by requiring 701
the fiduciary to withhold an amount from one or more future 702
distributions to the beneficiary who received the distribution 703
that was too large or requiring that beneficiary to return some 704
or all of the distribution to the trust; or 705
(f) To the extent that the court is unable, after applying 706
paragraphs (a)-(e), to restore the beneficiaries or the trust, 707
or both, to the positions they would have occupied if the 708
fiduciary had not abused its discretion, the court may require 709
the fiduciary to pay an appropriate amount from its own funds to 710
one or more of the beneficiaries or the trust or both. 711
(4) On petition by the fiduciary for instruction, the 712
court may determine whether a proposed fiduciary decision will 713
result in an abuse of the fiduciary's discretion. If the 714
petition describes the proposed decision, contains sufficient 715
information to inform the beneficiary of the reasons for making 716
the proposed decision and the facts on which the fiduciary 717
relies, and explains how the beneficiary will be affected by the 718
proposed decision, a beneficiary who opposes the proposed 719
decision has the burden to establish that it will result in an 720
abuse of the fiduciary's discretion. 721
(5) If an action is instituted alleging an abuse of 722
discretion in the exercise or nonexercise of the fiduciary's 723
discretion under this chapter and the court determines no abuse 724
of discretion has occurred, the fiduciary's costs and attorney 725
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fees incurred in defending the action shall be paid from the 726
trust assets. 727
Section 9. Section 738.203, Florida Statutes, is created 728
to read: 729
738.203 Fiduciary's power to adjust. — 730
(1) Except as otherwise provided in the terms of a trust 731
or this section, a fiduciary, in a record without court 732
approval, may adjust between income and principal if the 733
fiduciary determines that the exercise of the power to adjust 734
will assist the fiduciary in administering the trust or estate 735
impartially. 736
(2) This section does not create a duty to exercise or 737
consider the power to adjust under subsection (1) or to inform a 738
beneficiary about the applicability of this section. 739
(3) A fiduciary that in good faith exercises or fails to 740
exercise the power to adjust under subsection (1) is not liable 741
to a person affected by the exercise or failure to exercise. 742
(4) In deciding whether and to what extent to exercise the 743
power to adjust under subsection (1), a fiduciary shall consider 744
all factors the fiduciary considers relevant, including releva nt 745
factors in s. 738.201(5) and ss. 738.408 and 738.413. 746
(5) A fiduciary may not exercise the power under 747
subsection (1) to make an adjustment or under s. 738.408 to make 748
a determination that an allocation is insubstantial if: 749
(a) The adjustment or det ermination would reduce the 750
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amount payable to a current income beneficiary from a trust that 751
qualifies for a special tax benefit, except to the extent that 752
the adjustment is made to provide for a reasonable apportionment 753
of the total return of the trust be tween the current income 754
beneficiary and successor beneficiaries; 755
(b) The adjustment or determination would change the 756
amount payable to a beneficiary, as a fixed annuity or a fixed 757
fraction of the value of the trust assets, under the terms of 758
the trust; 759
(c) The adjustment or determination would reduce an amount 760
that is permanently set aside for a charitable purpose under the 761
terms of the trust unless both income and principal are set 762
aside for the charitable purpose; 763
(d) Possessing or exercising the power would cause a 764
person to be treated as the owner of all or part of the trust 765
for federal income tax purposes and the person would not be 766
treated as the owner if the fiduciary did not possess the power 767
to adjust; 768
(e) Possessing or exercising the powe r would cause all or 769
part of the value of the trust assets to be included in the 770
gross estate of an individual for federal real estate tax 771
purposes and the assets would not be included in the gross 772
estate of the individual if the fiduciary did not possess the 773
power to adjust; 774
(f) Possessing or exercising the power would cause an 775
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individual to be treated as making a gift for federal gift tax 776
purposes; 777
(g) The fiduciary is not an independent person; 778
(h) The trust is irrevocable and provides for income t o be 779
paid to the settlor, and possessing or exercising the power 780
would cause the adjusted principal or income to be considered an 781
available resource or available income under a public -benefit 782
program; or 783
(i) The trust is a unitrust under ss. 738.301 -738.310. 784
(6) If paragraph (5)(d), paragraph (5)(e), paragraph 785
(5)(f), or paragraph (5)(g) applies to a fiduciary: 786
(a) A cofiduciary to which paragraphs (5)(d) -(g) do not 787
apply may exercise the power to adjust, unless the exercise of 788
the power by the remain ing cofiduciary or cofiduciaries is not 789
permitted by the terms of the trust or law other than this 790
chapter; or 791
(b) If there is no cofiduciary to which paragraphs (5)(d) -792
(g) do not apply, the fiduciary may appoint a cofiduciary to 793
which paragraphs (5)(d) -(g) do not apply which may be a special 794
fiduciary with limited powers, and the appointed cofiduciary may 795
exercise the power to adjust under subsection (1), unless the 796
appointment of a cofiduciary or the exercise of the power by a 797
cofiduciary is not permitt ed by the terms of the trust or law 798
other than this chapter. 799
(7) A fiduciary may release or delegate to a cofiduciary 800
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the power to adjust under subsection (1) if the fiduciary 801
determines that the fiduciary's possession or exercise of the 802
power will or may: 803
(a) Cause a result described in paragraph (5)(a), 804
paragraph (5)(b), paragraph (5)(c), paragraph (5)(d), paragraph 805
(5)(e), paragraph (5)(f), or paragraph (5)(h); or 806
(b) Deprive the trust of a tax benefit or impose a tax 807
burden not described in paragr aph (5)(a), paragraph (5)(b), 808
paragraph (5)(c), paragraph (5)(d), paragraph (5)(e), or 809
paragraph (5)(f). 810
(8) A fiduciary's release or delegation to a cofiduciary 811
under subsection (7) of the power to adjust under subsection 812
(1): 813
(a) Must be in a record; 814
(b) Applies to the entire power, unless the release or 815
delegation provides a limitation, which may be a limitation to 816
the power to adjust: 817
1. From income to principal; 818
2. From principal to income; 819
3. For specified property; or 820
4. In specified circumstances. 821
(c) For a delegation, may be modified by a redelegation 822
under this subsection by the cofiduciary to which the delegation 823
is made; and 824
(d) Subject to paragraph (c), is permanent, unless the 825
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release or delegation provides a specified period, including a 826
period measured by the life of an individual or the lives of 827
more than one individual. 828
(9) Terms of a trust that deny or limit the power to 829
adjust between income and principal do not affect the 830
application of this section, unless the terms of the trust 831
expressly deny or limit the power to adjust under subsection 832
(1). 833
(10) The exercise of the power to adjust under subsection 834
(1) in any accounting period may apply to the current period, 835
the immediately preceding period, and one or more subse quent 836
periods. 837
(11) A description of the exercise of the power to adjust 838
under subsection (1) must be: 839
(a) Included in a report, if any, sent to beneficiaries 840
under s. 736.0813; or 841
(b) Communicated at least annually to the qualified 842
beneficiaries as defined in s. 736.0103 other than the Attorney 843
General. 844
(12) With respect to a trust in existence on January 1, 845
2003: 846
(a) A fiduciary may not have the power to adjust under 847
this section until the statement required in subsection (13) is 848
provided and either no objection is made or any objection which 849
is made has been terminated. 850
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1. An objection is made if, within 60 days after the date 851
of the statement required in subsection (13), a super majority 852
of the eligible beneficiaries deliver to the fiduciary a written 853
objection to the application of this section to such trust. An 854
objection shall be deemed to be delivered to the fiduciary on 855
the date the objection is mailed to the mailing address listed 856
in the notice provided in subsection (13). 857
2. An objection is terminated upon the earlier of the 858
receipt of consent from a super majority of eligible 859
beneficiaries of the class that made the objection, or the 860
resolution of the objection under paragraph (c). 861
(b) An objection or consent under this section may b e 862
executed by a legal representative or natural guardian of a 863
beneficiary without the filing of any proceeding or approval of 864
any court. 865
(c) If an objection is delivered to the fiduciary, then 866
the fiduciary may petition the circuit court for an order 867
quashing the objection and vesting in such fiduciary the power 868
to adjust under this section. The burden will be on the 869
objecting beneficiaries to prove that the power to adjust would 870
be inequitable, illegal, or otherwise in contravention of the 871
grantor's intent. The court may award costs and attorney fees 872
relating to the fiduciary's petition in the same manner as in 873
chancery actions. When costs and attorney fees are to be paid 874
out of the trust, the court may, in its discretion, direct from 875
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which part of the tr ust they shall be paid. 876
(d) If no timely objection is made or if the fiduciary is 877
vested with the power to adjust by court order, the fiduciary 878
may thereafter exercise the power to adjust without providing 879
notice of its intent to do so unless, in vesting the fiduciary 880
with the power to adjust, the court determines that unusual 881
circumstances require otherwise. 882
(e)1. If a fiduciary makes a good faith effort to comply 883
with the notice provisions of subsection (13), but fails to 884
deliver notice to one or more beneficiaries entitled to such 885
notice, neither the validity of the notice required under this 886
subsection nor the fiduciary's power to adjust under this 887
section shall be affected until the fiduciary has actual notice 888
that one or more beneficiaries entitled to notice were not 889
notified. Until the fiduciary has actual notice of the notice 890
deficiency, the fiduciary shall have all of the powers and 891
protections granted a fiduciary with the power to adjust under 892
this chapter. 893
2. When the fiduciary has actual not ice that one or more 894
beneficiaries entitled to notice under subsection (13) were not 895
notified, the fiduciary's power to adjust under this section 896
shall cease until all beneficiaries who are entitled to such 897
notice, including those who were previously provi ded with such 898
notice, are notified and given the opportunity to object as 899
provided for under this subsection. 900
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(f) The objection of a super majority of eligible 901
beneficiaries under this subsection shall be valid for a period 902
of 1 year after the date of th e notice set forth in subsection 903
(13). Upon expiration of the objection, the fiduciary may 904
thereafter give a new notice under subsection (13). 905
(g) This section is not intended to create or imply a duty 906
of the fiduciary of a trust existing on January 1, 2 003, to seek 907
a power to adjust under this subsection or to give the notice 908
described in subsection (13) if the fiduciary does not desire to 909
have a power to adjust under this section, and no inference of 910
impropriety shall be made as the result of a fiduciar y not 911
seeking a power to adjust under this subsection. 912
(13)(a) A fiduciary of a trust in existence on January 1, 913
2003, that is not prohibited under subsection (5) from 914
exercising the power to adjust shall, any time before initially 915
exercising the power, provide to all eligible beneficiaries a 916
statement containing the following: 917
1. The name, telephone number, street address, and mailing 918
address of the fiduciary and of any person who may be contacted 919
for further information; 920
2. A statement that unless a super majority of the 921
eligible beneficiaries objects to the application of this 922
section to the trust within 60 days after the date the statement 923
pursuant to this subsection was served, this section shall apply 924
to the trust; and 925
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3. A statement that, if t his section applies to the trust, 926
the fiduciary will have the power to adjust between income and 927
principal and that such a power may have an effect on the 928
distributions to such beneficiary from the trust. 929
(b) The statement may contain information regardi ng a 930
fiduciary's obligation with respect to the power to adjust 931
between income and principal under this section. 932
(c) The statement shall be served informally, in the 933
manner provided in the Florida Rules of Civil Procedure relating 934
to service of pleadings subsequent to the initial pleading. The 935
statement may be served on a legal representative or natural 936
guardian of a beneficiary without the filing of any proceeding 937
or approval of any court. 938
(14) For purposes of subsections (12) and (13), the term: 939
1. "Eligible beneficiaries" means: 940
a. If at the time the determination is made there are one 941
or more beneficiaries described in s. 736.0103(19)(c), the 942
beneficiaries described in s. 736.0103(19)(a) and (c); or 943
b. If there is no beneficiary described in s. 944
736.0103(19)(c), the beneficiaries described in s. 945
736.0103(19)(a) and (b). 946
2. "Super majority of the eligible beneficiaries" means: 947
a. If at the time the determination is made there are one 948
or more beneficiaries described in s. 736.0103(19)(c), at le ast 949
two-thirds in interest of the beneficiaries described in s. 950
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736.0103(19)(a) or two -thirds in interest of the beneficiaries 951
described in s. 736.0103(19)(c), if the interests of the 952
beneficiaries are reasonably ascertainable; otherwise, it means 953
two-thirds in number of either such class; or 954
b. If there is no beneficiary described in s. 955
736.0103(19)(c), at least two -thirds in interest of the 956
beneficiaries described in s. 736.0103(19)(a) or two -thirds in 957
interest of the beneficiaries described in s. 736.0 103(19)(b), 958
if the interests of the beneficiaries are reasonably 959
ascertainable, otherwise, two -thirds in number of either such 960
class. 961
(15) A trust exists on January 1, 2003, if it is not 962
revocable on January 1, 2003. A trust is revocable if revocable 963
by the grantor alone or in conjunction with any other person. A 964
trust is not revocable for purposes of this section if revocable 965
by the grantor only with the consent of all persons having a 966
beneficial interest in the property. 967
Section 10. Section 738.301, Florida Statutes, is amended 968
to read: 969
(Substantial rewording of section. See 970
s. 738.301, F.S., for present text). 971
738.301 Definitions. —For purposes of this section and ss. 972
738.302-738.310: 973
(1) "Applicable value" means the amount of the net fair 974
market value of a trust taken into account under s. 738.307. 975
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(2) "Express unitrust" means a trust for which, under the 976
terms of the trust without regard to this section and ss. 977
738.302-738.310, net income must be calculated as a unitrust 978
amount. 979
(3) "Income trust" means a trust, created by an inter 980
vivos or testamentary instrument, that directs or permits the 981
trustee to distribute the net income of the trust to one or more 982
persons, in fixed proportions or in amounts or proportions 983
determined by the trus tee and regardless of whether the trust 984
directs or permits the trustee to distribute the principal of 985
the trust to one or more such persons. 986
(4) "Net fair market value of a trust" means the fair 987
market value of the assets of the trust, less the reasonabl y 988
known noncontingent liabilities of the trust. 989
(5) "Unitrust" means a trust for which net income is a 990
unitrust amount. The term includes an express unitrust. 991
(6) "Unitrust amount" means an amount computed by 992
multiplying a determined value of a trust b y a determined 993
percentage. For a unitrust administered under a unitrust policy, 994
the term means the applicable value multiplied by the unitrust 995
rate. 996
(7) "Unitrust policy" means a policy described in ss. 997
738.301-738.310 and adopted under s. 738.303. 998
(8) "Unitrust rate" means the rate used to compute the 999
unitrust amount for a unitrust administered under a unitrust 1000
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policy. 1001
Section 11. Section 738.302, Florida Statutes, is amended 1002
to read: 1003
(Substantial rewording of section. See 1004
s. 738.302, F.S., for p resent text.) 1005
738.302 Applications; duties and remedies. — 1006
(1) Except as otherwise provided in subsection (2), ss. 1007
738.301-738.310 apply to all of the following: 1008
(a) An income trust, unless the terms of the trust 1009
expressly prohibit the use of ss. 738.301-738.310 by a specific 1010
reference to this paragraph or corresponding provision of prior 1011
law, or an explicit expression of intent that net income not be 1012
calculated as a unitrust amount. 1013
(b) An express unitrust, except to the extent that the 1014
terms of the trust explicitly: 1015
1. Prohibit the use of ss. 738.301 -738.310 by a specific 1016
reference to this paragraph or corresponding provision of prior 1017
law; 1018
2. Prohibit conversion to an income trust; or 1019
3. Limit changes to the method of calculating the unitr ust 1020
amount. 1021
(c) A unitrust that had been converted from an income 1022
trust. 1023
(2) The provisions of ss. 738.301 -738.310 do not apply to 1024
a trust described in s. 170(f)(2)(B), s. 642(c)(5), s. 664(d), 1025
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s. 2702(a)(3)(A)(ii) or (iii), or s. 2702(b) of the Intern al 1026
Revenue Code. 1027
(3) An income trust to which ss. 738.301 -738.310 apply 1028
under paragraph (1)(a) may be converted to a unitrust under ss. 1029
738.301-738.310 regardless of the terms of the trust concerning 1030
distributions. Conversion to a unitrust under ss. 738. 301-1031
738.310 does not affect other terms of the trust concerning 1032
distributions of income or principal. 1033
(4) Sections 738.301 -738.310 apply to an estate only to 1034
the extent that a trust is a beneficiary of the estate. To the 1035
extent of the trust's interest in the estate, the estate may be 1036
administered as a unitrust, the administration of the estate as 1037
a unitrust may be discontinued, or the percentage or method used 1038
to calculate the unitrust amount may be changed, in the same 1039
manner as for a trust under those s ections. 1040
(5) The provisions of ss. 738.301 -738.310 do not create a 1041
duty to take or consider action under ss. 738.301 -738.310 or to 1042
inform a beneficiary about the applicability of ss. 738.301 -1043
738.310. 1044
(6) A fiduciary that in good faith takes or fails to take 1045
an action under ss. 738.301 -738.310 is not liable to a person 1046
affected by the action or inaction. 1047
Section 12. Section 738.303, Florida Statutes, is amended 1048
to read: 1049
(Substantial rewording of section. See 1050
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s. 738.303, F.S., for present text.) 1051
738.303 Authority of fiduciary. — 1052
(1) By complying with subsections (2) and (6), and without 1053
court approval, a fiduciary may do any of the following: 1054
(a) Convert an income trust to a unitrust if the fiduciary 1055
adopts in a record a unitrust policy for th e trust which 1056
provides: 1057
1. That in administering the trust, the net income of the 1058
trust will be a unitrust amount rather than net income 1059
determined without regard to ss. 738.301 -738.310; and 1060
2. The percentage and method used to calculate the 1061
unitrust amount. 1062
(b) Change the percentage or method used to calculate a 1063
unitrust amount for a unitrust if the fiduciary adopts in a 1064
record a unitrust policy or an amendment or replacement of a 1065
unitrust policy providing charges in the percentage or method 1066
used to calculate the unitrust amount. 1067
(c) Convert a unitrust to an income trust if the fiduciary 1068
adopts in a record a determination that, in administering the 1069
trust, the net income of the trust will be net income determined 1070
without regard to ss. 738.301 -738.310 rather than a unitrust 1071
amount. 1072
(2) A fiduciary may take an action under subsection (1) if 1073
all of the following apply: 1074
(a) The fiduciary determines that the action will assist 1075
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the fiduciary to administer a trust impartially. 1076
(b) The fiduciary sends a notice in a record to the 1077
qualified beneficiaries determined under ss. 736.0103 and 1078
736.0110 in the manner required by s. 738.304, describing and 1079
proposing to take the action. 1080
(c) The fiduciary sends a copy of the notice under 1081
paragraph (b) to each sett lor of the trust which is: 1082
1. If an individual, living; or 1083
2. If not an individual, in existence. 1084
(d) At least one member of each class of the qualified 1085
beneficiaries determined under ss. 736.0103 and 736.0110, other 1086
than the Attorney General, receiv ing the notice under paragraph 1087
(b) is: 1088
1. If an individual, legally competent; 1089
2. If not an individual, in existence; or 1090
3. Represented in the manner provided in s. 738.304(2). 1091
(e) The fiduciary does not receive, by the date specified 1092
in the notice under s. 738.304(4)(e), an objection in a record 1093
to the action proposed under paragraph (b) from a person to 1094
which the notice under paragraph (b) is sent. 1095
(3) If a fiduciary receives, not later than the date 1096
stated in the notice under s. 738.304(4)(e), an objection in a 1097
record described in s. 738.304(4)(d) to a proposed action, the 1098
fiduciary or a beneficiary may request the court to have the 1099
action taken as proposed, taken with modifications, or 1100
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prevented. A person described in s. 738.304(1) may oppose t he 1101
proposed action in the proceeding under this subsection 1102
regardless of whether the person: 1103
(a) Consented under s. 738.304(3); or 1104
(b) Objected under s. 738.304(4)(d). 1105
(4) If, after sending a notice under paragraph (2)(b), a 1106
fiduciary decides not to take the action proposed in the notice, 1107
the fiduciary must notify in a record each person described in 1108
s. 738.304(1) of the decision not to take the action and the 1109
reasons for the decision. 1110
(5) If a beneficiary requests in a record that a fiduciary 1111
take an action described in subsection (1) and the fiduciary 1112
declines to act or does not act within 60 days after receiving 1113
the request, the beneficiary may request the court to direct the 1114
fiduciary to take the action requested. 1115
(6) In deciding whether and ho w to take an action 1116
authorized in subsection (1), or whether and how to respond to a 1117
request by a beneficiary under subsection (5), a fiduciary must 1118
consider all factors relevant to the trust and beneficiaries, 1119
including the relevant factors listed in s. 7 38.201(5). 1120
(7) A fiduciary may release or delegate the power to 1121
convert an income trust to a unitrust under paragraph (1)(a), 1122
change the percentage or method used to calculate a unitrust 1123
amount under paragraph (1)(b), or convert a unitrust to an 1124
income trust under paragraph (1)(c), for a reason described in 1125
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s. 738.203(7) and in the manner described in s. 738.203(8). 1126
Section 13. Section 738.304, Florida Statutes, is created 1127
to read: 1128
738.304 Notice.— 1129
(1) A notice required by s. 738.303(2)(b) must be sent in 1130
a manner authorized under s. 736.0109 to all of the following: 1131
(a) The qualified beneficiaries as defined in s. 736.0103, 1132
other than the Attorney General. 1133
(b) Each person that is granted a power over the trust by 1134
the terms of the trust, to the extent that the power is 1135
exercisable when the person is not then serving as a trustee: 1136
1. Including all of the following: 1137
a. Power over the investment, management, or distribution 1138
of trust property or other matters of trust administration. 1139
b. Power to appoint or remove a trustee or person 1140
described in this paragraph. 1141
2. Excluding all of the following: 1142
a. Power of appointment. 1143
b. Power of a beneficiary over the trust, to the extent 1144
that the exercise or nonexercise of the power affects the 1145
beneficial interest of the beneficiary or another beneficiary 1146
represented by the beneficiary under ss. 736.0301 -736.0306 with 1147
respect to the exercise or nonexercise of the power. 1148
c. Power over the trust if the terms of the trust provide 1149
that the power is held in a nonfiduciary capacity and the power 1150
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must be held in a nonfiduciary capacity to achieve a tax 1151
objective under the Internal Revenue Code. 1152
(c) Each person that is granted a power by the terms of 1153
the trust to appoint or remove a trustee or person described in 1154
paragraph (b) to the extent that the power is exercisable when 1155
the person that exercises the power is not serving as a trustee 1156
or person described in paragraph (b). 1157
(2) The representation provisions of ss. 736.0301 -736.0306 1158
apply to notice under this section. 1159
(3) A person may consent in a record at any time to action 1160
proposed under s. 738.303(2)(b). A notice required by s. 1161
738.303(2)(b) need not be sent to a person that consents under 1162
this subsection. 1163
(4) A notice required under s. 738.30 3(2)(b) must include 1164
all of the following: 1165
(a) The action proposed under s. 738.303(2)(b). 1166
(b) For a conversion of an income trust to a unitrust, a 1167
copy of the unitrust policy adopted under s. 738.303(1)(a). 1168
(c) For a change in the percentage or meth od used to 1169
calculate the unitrust amount, a copy of the unitrust policy or 1170
amendment or replacement of the unitrust policy adopted under s. 1171
738.303(1)(b). 1172
(d) A statement that the person to which the notice is 1173
sent may object to the proposed action by st ating in a record 1174
the basis for the objection and sending or delivering the record 1175
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to the fiduciary. 1176
(e) The date by which an objection under paragraph (d) 1177
must be received by the fiduciary, which must be at least 30 1178
days after the date the notice is sen t. 1179
(f) The date on which the action is proposed to be taken 1180
and the date on which the action is proposed to take effect. 1181
(g) The name and contact information of the fiduciary. 1182
(h) The name and contact information of a person that may 1183
be contacted for additional information. 1184
Section 14. Section 738.305, Florida Statutes, is created 1185
to read: 1186
738.305 Unitrust policy. — 1187
(1) In administering a unitrust under ss. 738.301 -738.310, 1188
a fiduciary shall follow a unitrust policy adopted under s. 1189
738.303(1)(a) or (b) or amended or replaced under s. 1190
738.303(1)(b). 1191
(2) A unitrust policy must provide all of the following: 1192
(a) The unitrust rate or method for determining the 1193
unitrust rate under s. 738.306. 1194
(b) The method for determining the applicable value under 1195
s. 738.307. 1196
(c) The rules described in ss. 738.306 -738.310 which apply 1197
in the administration of the unitrust, whether the rules are: 1198
1. Mandatory as provided in ss. 738.307(1) and (3), 1199
738.308(1), and 738.310; or 1200
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2. Optional as provided in ss. 738.306, 738.307(2), and 1201
738.308(2), to the extent that the fiduciary elects to adopt 1202
those rules. 1203
(3) A unitrust policy may do any of the following: 1204
(a) Provide methods and standards for: 1205
1. Determining the timing of the distributions; 1206
2. Making distributions in cash or in kind or partly in 1207
cash and partly in kind; or 1208
3. Correcting an underpayment or overpayment to a 1209
beneficiary based on the unitrust amount if there is an error in 1210
calculating the unitrust amount. 1211
(b) Specify sources and the ord er of sources, including 1212
categories of income for federal income tax purposes, from which 1213
distributions of a unitrust amount are paid. 1214
(c) Provide other standards and rules that the fiduciary 1215
determines serve the interests of the beneficiaries. 1216
Section 15. Section 738.306, Florida Statutes, is created 1217
to read: 1218
738.306 Unitrust rate. — 1219
(1) A unitrust rate must be at least 3 percent and not 1220
more than 5 percent. Within those limits, the unitrust rate may 1221
be: 1222
(a) A fixed unitrust rate; or 1223
(b)1. A unitrust rate that is determined for each period 1224
using: 1225
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a. A market index or other published data; or 1226
b. A mathematical blend of market indices or other 1227
published data over a stated number of preceding periods. 1228
2. If the rate calculated under this par agraph would be 1229
less than 3, the rate is 3; and if the rate calculated would be 1230
more than 5, the rate is 5. 1231
(2) Within the limits of subsection (1), a unitrust policy 1232
may provide for any of the following: 1233
(a) A limit on how much the unitrust rate deter mined under 1234
paragraph (1)(b) may increase over the unitrust rate for the 1235
preceding period or a mathematical blend of unitrust rates over 1236
a stated number of preceding periods. 1237
(b) A limit on how much the unitrust rate determined under 1238
paragraph (1)(b) may decrease below the unitrust rate for the 1239
preceding period or a mathematical blend of unitrust rates over 1240
a stated number of preceding periods. 1241
(c) A mathematical blend of any of the unitrust rates 1242
determined under paragraph (1)(b) and paragraphs (a) and (b). 1243
(3) If the fiduciary is not an independent person, the 1244
percentage used to calculate the unitrust amount is the rate 1245
determined under s. 7520(a)(2) of the Internal Revenue Code in 1246
effect for the month the conversion under this section becomes 1247
effective and for each January thereafter; however, if the rate 1248
determined under s. 7520(a)(2) of the Internal Revenue Code 1249
exceeds 5 percent, the unitrust rate is 5 percent, and if the 1250
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rate determined under s. 7520(a)(2) of the Internal Revenue Code 1251
is less than 3 percent, the unitrust rate is 3 percent. 1252
Section 16. Section 738.307, Florida Statutes, is created 1253
to read: 1254
738.307 Applicable value. — 1255
(1) A unitrust policy must provide the method for 1256
determining the fair market value of an asset for the purpose of 1257
determining the unitrust amount, including all of the following: 1258
(a) The frequency of valuing the asset, which need not 1259
require a valuation in every period. 1260
(b) The date for valuing the asset in each period in which 1261
the asset is valued. 1262
(2) Except as otherwise provided in s. 738.309, a unitrust 1263
policy may provide methods for determining the amount of the net 1264
fair market value of the trust to take into account in 1265
determining the applicable value, including any of the 1266
following: 1267
(a) Obtaining an appraisal of an asset for which fair 1268
market value is not readily available. 1269
(b) Excluding specific assets or groups or types of assets 1270
in addition to those described in subsection (3). 1271
(c) Making other exceptions or modifications of the 1272
treatment of specific assets or groups or types of assets. 1273
(d) Including identification and treatment of cash or 1274
property held for distribution. 1275
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(e) Using an average of fair market values over a stated 1276
number of preceding periods, not to exceed 3 calendar years . 1277
(f) Determining the reasonable known liabilities of the 1278
trust, including treatment of liabilities to conform with the 1279
treatment of assets under paragraphs (a) -(e). 1280
(3) The following property may not be included in 1281
determining the value of the trust: 1282
(a) Any residential property or any tangible personal 1283
property that, as of the first business day of the current 1284
valuation year, one or more current beneficiaries of the trust 1285
have or have had the right to occupy or have or have had the 1286
right to possess or control, other than in his or her capacity 1287
as trustee of the trust. Instead, the right of occupancy or the 1288
right to possession and control is the unitrust amount with 1289
respect to such property; however, the unitrust amount must be 1290
adjusted to take into a ccount partial distributions from or 1291
receipt into the trust of such property during the valuation 1292
year; 1293
(b) Any asset specifically given to a beneficiary and the 1294
return on investment on such property, which return on 1295
investment must be distributable to t he beneficiary; and 1296
(c) Any asset while held in an estate. 1297
Section 17. Section 738.308, Florida Statutes, is created 1298
to read: 1299
738.308 Period.— 1300
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(1) A unitrust policy must provide the period used under 1301
ss. 738.306 and 738.307. The period must be th e calendar year. 1302
(2) A unitrust policy may provide standards for: 1303
(a) Using fewer preceding periods under s. 738.306(1)(b)1. 1304
or (2)(a) or (b) if: 1305
1. The trust was not in existence in a preceding period; 1306
or 1307
2. Market indices or other published data are not 1308
available for a preceding period; 1309
(b) Using fewer preceding periods under 738.307(2)(e) if: 1310
1. The trust was not in existence in a preceding period; 1311
or 1312
2. Fair market values are not available for a preceding 1313
period; and 1314
(c) Prorating a unit rust amount on a daily basis for a 1315
part of a period in which the trust or the administration of the 1316
trust as a unitrust or the interest of any beneficiary commences 1317
or terminates. 1318
Section 18. Section 738.309, Florida Statutes, is created 1319
to read: 1320
738.309 Express unitrust. — 1321
(1) This section applies to a trust that, by its governing 1322
instrument, requires or allows income or net income to be 1323
calculated as a unitrust amount. 1324
(2) The trustee of an express unitrust may determine the 1325
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unitrust amount by re ference to the net fair market value of the 1326
unitrust's assets in 1 or more years. 1327
(3) Distribution of a unitrust amount is considered a 1328
distribution of all of the net income of an express unitrust and 1329
is considered to be an income interest. 1330
(4) The unitrust amount is considered to be a reasonable 1331
apportionment of the total return of an express unitrust. 1332
(5) An express unitrust that provides or allows a 1333
distribution based on a unitrust rate in excess of 5 percent per 1334
year of the net fair market value o f the unitrust assets is 1335
considered a distribution of all of the income of the unitrust 1336
to the extent that the distribution exceeds 5 percent per year 1337
and a distribution of principal of the unitrust. 1338
(6) An express unitrust may provide a mechanism for 1339
changing the unitrust rate, similar to the mechanism provided 1340
under s. 738.306, based upon the factors noted in that section, 1341
and may provide for a conversion from a unitrust to an income 1342
trust or a reconversion of an income trust to a unitrust under 1343
s. 738.303. 1344
(7) If an express unitrust does not specifically or by 1345
reference to s. 738.306 prohibit a power to change the unitrust 1346
rate or to convert to an income trust under s. 738.303, the 1347
trustee must have such power. 1348
(8) The governing instrument of an exp ress unitrust may 1349
grant the trustee discretion to adopt a consistent practice of 1350
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treating capital gains as part of the unitrust amount to the 1351
extent that the unitrust amount exceeds the income determined as 1352
if the trust were not an express unitrust, or the governing 1353
instrument may specify the ordering of classes of income. 1354
(9) Unless the terms of the express unitrust specifically 1355
provide otherwise as provided in subsection (8), the 1356
distribution of a unitrust amount is considered a distribution 1357
made from the following sources, which are listed in order of 1358
priority: 1359
(a) Net accounting income determined under this chapter as 1360
if the trust were not a unitrust; 1361
(b) Ordinary income not allocable to net accounting 1362
income; 1363
(c) Net realized short -term capital gains; 1364
(d) Net realized long -term capital gains; and 1365
(e) The principal of the trust. 1366
(10) The governing instrument of an express unitrust may 1367
provide that the trustee may exclude assets used by the 1368
unitrust's beneficiary, including, but not limited to, a 1369
residence property or tangible personal property, from the net 1370
fair market value of the unitrust's assets for the purposes of 1371
computing the unitrust amount. The use of these assets may be 1372
considered equivalent to income or to the unitrust amount. 1373
Section 19. Section 738.310, Florida Statutes, is created 1374
to read: 1375
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738.310 Other rules. —Following the conversion of an income 1376
trust to a unitrust, the trustee shall consider the unitrust 1377
amount as paid from the following sources, which are listed in 1378
order of priority: 1379
(1) Net accounting income determined under this chapter as 1380
if the trust were not a unitrust; 1381
(2) Ordinary income not allocable to net accounting 1382
income; 1383
(3) Net realized short -term capital gains; 1384
(4) Net realized long -term capital gains; and 1385
(5) The principal of the trust. 1386
Section 20. Section 738.401, Florida Statutes, is amended 1387
to read: 1388
738.401 Character of receipts from entity.— 1389
(1) For purposes of this section, the term : 1390
(a) "Capital distribution" means an entity distribution of 1391
money which is a: 1392
1. Return of capital; or 1393
2. Distribution in total or partial liquidation of the 1394
entity. 1395
(b) "Entity": 1396
1. Means a corporation, partnership, limited liability 1397
company, regulated investment company, real estate invest ment 1398
trust, common trust fund, or any other organization or 1399
arrangement in which a fiduciary owns or holds has an interest, 1400
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regardless of whether the entity is a taxpayer for federal 1401
income tax purposes; and 1402
2. Does not include: 1403
a. A trust or estate to which s. 738.402 applies; 1404
b. A business or other activity to which s. 738.403 1405
applies which is not conducted by an entity described in 1406
subparagraph 1.; 1407
c. An asset-backed security; or 1408
d. An instrument or arrangement to which s. 738.416 1409
applies other than a trust or estate to which s. 738.402 1410
applies, a business or activity to which s. 738.403 applies, or 1411
an asset-backed security to which s. 738.608 applies . 1412
(c) "Entity distribution" means a payment or transfer by 1413
an entity to a person in the person 's capacity as an owner or 1414
holder of an interest in the entity. 1415
(d) "Lookback period" means the accounting period and the 1416
preceding two accounting periods or, if less, the number of 1417
accounting periods, or portion of accounting periods, that the 1418
interest in the entity has been held by the fiduciary. 1419
(2) In this section, an attribute or action of an entity 1420
includes an attribute or action of any other entity in which the 1421
initial entity owns or holds an interest, including an interest 1422
owned or held indirectly through another entity. 1423
(3) Except as otherwise provided in paragraphs (4)(b), 1424
(c), and (d) this section, a fiduciary shall allocate to income : 1425
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(a) Money received in an entity distribution; and 1426
(b) Tangible personal property of nominal val ue received 1427
from the money received from an entity. 1428
(4)(3) Except as otherwise provided in this section, A 1429
fiduciary shall allocate the following receipts from an entity 1430
to principal: 1431
(a) Property received in an entity distribution which is 1432
not: 1433
1. other than Money; or 1434
2. Tangible personal property of nominal value . 1435
(b) Money received in an entity one distribution or a 1436
series of related distributions in an exchange for part or all 1437
of the fiduciary's a trust's or estate's interest in the entity 1438
to the extent that the entity distribution reduces the 1439
fiduciary's interest in the entity relative to the interest of 1440
other persons that own or hold interests in the entity . 1441
(c) Money received in an entity distribution that is a 1442
capital distribution, to the extent not allocated to income 1443
total or partial liquidation of the entity . 1444
(d) Money received in an entity distribution from an 1445
entity that is a regulated investment company or a real estate 1446
investment trust if the money received represents short -term or 1447
long-term capital gain realized within the entity. 1448
(e) Money received from an entity listed on a public stock 1449
exchange during any year of the trust or estate which exceeds 10 1450
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percent of the fair market value of the trust's or estate's 1451
interest in the entity on the first day of that year. The amount 1452
to be allocated to principal must be reduced to the extent that 1453
the cumulative distributions from the entity to the trust or 1454
estate allocated to income do not exceed a cumulative annual 1455
return of 3 percent of the fair market value of the interest in 1456
the entity at the beginning of each year or portion of a year 1457
for the number of years or portion of years in the period that 1458
the interest in the entity has been held by the trust or estate. 1459
If a trustee has exercis ed a power to adjust under s. 738.104 1460
during any period the interest in the entity has been held by 1461
the trust, the trustee, in determining the total income 1462
distributions from that entity, must take into account the 1463
extent to which the exercise of that powe r resulted in income to 1464
the trust from that entity for that period. If the income of the 1465
trust for any period has been computed under s. 738.1041, the 1466
trustee, in determining the total income distributions from that 1467
entity for that period, must take into a ccount the portion of 1468
the unitrust amount paid as a result of the ownership of the 1469
trust's interest in the entity for that period. 1470
(5)(4) If a fiduciary elects, or continues an election 1471
made by its predecessor, to reinvest dividends in shares of 1472
stock of a distributing corporation or fund, whether evidenced 1473
by new certificates or entries on the books of the distributing 1474
entity, the new shares retain their character as income. 1475
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(6)(5) Except as otherwise provided in subsections (10) 1476
and (11), money receiv ed in an entity distribution is a capital 1477
distribution Money is received in partial liquidation : 1478
(a) To the extent that the entity, at or near the time of 1479
the entity a distribution, indicates that such money is a 1480
capital distribution in partial liquidati on; or 1481
(b) To the extent that the total amount of money and 1482
property received by the fiduciary in the entity in a 1483
distribution or a series of related entity distributions is or 1484
will be greater than from an entity that is not listed on a 1485
public stock exchange exceeds 20 percent of the fiduciary's 1486
trust's or estate's pro rata share of the entity's gross assets, 1487
as shown by the entity's year -end financial statements 1488
immediately preceding the initial receipt. 1489
1490
This subsection does not apply to an entity to wh ich subsection 1491
(7) applies. 1492
(7)(6) In the case of a capital distribution, the amount 1493
received in an entity distribution allocated to principal must 1494
be reduced to the extent that the cumulative distributions from 1495
the entity to the fiduciary Money may not be taken into account 1496
in determining any excess under paragraph (5)(b), to the extent 1497
that the cumulative distributions from the entity to the trust 1498
or the estate allocated to income do not exceed the greater of: 1499
(a) A cumulative annual return of 3 perce nt of the 1500
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entity's carrying value computed at the beginning of each 1501
accounting period, or portion of an accounting period, during 1502
the lookback period for the number of years or portion of years 1503
that the entity was held by the fiduciary . If a fiduciary 1504
trustee has exercised a power to adjust under s. 738.203 during 1505
the lookback period, the fiduciary s. 738.104 during any period 1506
the interest in the entity has been held by the trust, the 1507
trustee, in determining the total income distributions from that 1508
entity, must take into account the extent to which the exercise 1509
of the power resulted in income to the fiduciary trust from that 1510
entity for that period. If the income of a fiduciary during the 1511
lookback trust for any period has been computed under ss. 1512
738.301-738.310, the fiduciary pursuant to s. 738.1041, the 1513
trustee, in determining the total income distributions from the 1514
entity for that period, must take into account the portion of 1515
the unitrust amount paid as a result of the ownership of the 1516
trust's interest in th e entity for that period; or 1517
(b) In If the case of an entity is treated as a 1518
partnership, subchapter S corporation, or a disregarded entity 1519
under pursuant to the Internal Revenue Code of 1986, as amended, 1520
the amount of income tax attributable to the fiduciary's trust's 1521
or estate's ownership share of the entity, based on its pro rata 1522
share of the taxable income of the entity that distributes the 1523
money, during the lookback period for the number of years or 1524
portion of years that the interest in the entit y was held by the 1525
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fiduciary, calculated as if all of the that tax was incurred by 1526
the fiduciary. 1527
(8) If a fiduciary receives additional information about 1528
the application of this section to an entity distribution before 1529
the fiduciary has paid part of the entity distribution to a 1530
beneficiary, the fiduciary may consider the additional 1531
information before making the payment to the beneficiary and may 1532
change a decision to make the payment to the beneficiary. 1533
(9) If a fiduciary receives additional information about 1534
the application of this section to an entity distribution after 1535
the fiduciary has paid part of the entity distribution to a 1536
beneficiary, the fiduciary is not required to change or recover 1537
the payment to the beneficiary but may consider that informati on 1538
in determining whether to exercise its other powers, including 1539
but not limited to the power to adjust under s. 738.203. 1540
(10)(7) The following applies to money or property 1541
received by a private trustee as a distribution from an 1542
investment entity descri bed in this subsection: 1543
(a) The trustee shall first treat as income of the trust 1544
all of the money or property received from the investment entity 1545
in the current accounting period year which would be considered 1546
income under this chapter if the trustee had directly held the 1547
trust's pro rata share of the assets of the investment entity. 1548
For this purpose, all distributions received in the current 1549
accounting period year must be aggregated. 1550
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(b) The trustee shall next treat as income of the trust 1551
any additional money or property received in the current 1552
accounting period year which would have been considered income 1553
in the prior 2 accounting periods years under paragraph (a) if 1554
additional money or property had been received from the 1555
investment entity in any of th ose prior 2 accounting periods 1556
years. The amount to be treated as income must shall be reduced 1557
by any distributions of money or property made by the investment 1558
entity to the trust during the current and the prior 2 1559
accounting periods years which were treated as income under this 1560
paragraph. 1561
(c) The remainder of the distribution, if any, is treated 1562
as principal. 1563
(d) As used in this subsection, the term: 1564
1. "Investment entity" means an entity, other than a 1565
business activity conducted by the trustee descr ibed in s. 1566
738.403 or an entity that is listed on a public stock exchange, 1567
which is treated as a partnership, subchapter S corporation, or 1568
disregarded entity under pursuant to the Internal Revenue Code 1569
of 1986, as amended, and which normally derives 50 per cent or 1570
more of its annual cumulative net income from interest, 1571
dividends, annuities, royalties, rental activity, or other 1572
passive investments, including income from the sale or exchange 1573
of such passive investments. 1574
2. "Private trustee" means a trustee who is a natural 1575
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person, but is not an independent person as set forth in s. 1576
738.102 only if the trustee is unable to use the power to adjust 1577
between income and principal with respect to receipts from 1578
entities described in this subsection pursuant to s. 738.104 . A 1579
bank, trust company, or other commercial trustee is not 1580
considered a private trustee. 1581
(11) A fiduciary shall allocate to principal any money and 1582
property the fiduciary receives in a distribution or series of 1583
related distributions from a public entity which are greater 1584
than 10 percent of the fair market value of the fiduciary's 1585
interest in the public entity on the first day of the accounting 1586
period. The amount to be allocated to principal must be reduced 1587
to the extent that the cumulative distributions from the entity 1588
to the fiduciary allocated to income do not exceed a cumulative 1589
annual return of 3 percent of the fair market value of the 1590
interest in the entity at the beginning of each accounting 1591
period, or portion of an accounting period, during the lookback 1592
period. If a fiduciary has exercised a power to adjust under s. 1593
738.203 during the lookback period, the fiduciary, in 1594
determining the total income distributions from that entity, 1595
must take into account the e xtent to which the exercise of that 1596
power resulted in income to the fiduciary from that entity for 1597
that period. If the income of the fiduciary during the lookback 1598
period has been computed under ss. 738.301 -738.310, the 1599
fiduciary, in determining the total i ncome distribution from 1600
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that entity for that period, must take into account the portion 1601
of the unitrust amount paid as a result of the ownership of the 1602
trust's interest in the entity for that period. As used in this 1603
subsection, the term "public entity" mea ns an entity listed on a 1604
public stock exchange. 1605
(12)(8) This section must shall be applied before ss. 1606
738.506 and 738.507 ss. 738.705 and 738.706 and does not modify 1607
or change any of the provisions of those sections. 1608
Section 21. Section 738.402, Flor ida Statutes, is amended 1609
to read: 1610
738.402 Distribution from trust or estate. —A fiduciary 1611
shall allocate to income an amount received as a distribution of 1612
income, including a unitrust distribution under ss. 738.301 -1613
738.310, from a trust or an estate in wh ich the fiduciary trust 1614
has an interest, other than an interest a purchased in a trust 1615
that is an investment entity, and shall interest and allocate to 1616
principal an amount received as a distribution of principal from 1617
the such a trust or estate. If a fiduciary purchases , or 1618
receives from a settlor, an interest in a trust that is an 1619
investment entity, or a decedent or donor transfers an interest 1620
in such a trust to a fiduciary, s. 738.401, s. 738.415, or s. 1621
738.416 or s. 738.608 applies to a receipt from the trust. 1622
Section 22. Section 738.403, Florida Statutes, is amended 1623
to read: 1624
738.403 Business and other activity activities conducted 1625
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by fiduciary.— 1626
(1) This section applies to If a fiduciary who conducts a 1627
business or other activity conducted by a fiduciary if the 1628
fiduciary determines that it is in the best interests of 1629
interest of all the beneficiaries to account separately for the 1630
business or other activity instead of: 1631
(a) Accounting for the business or other activity as part 1632
of the fiduciary's trust's or estate's general accounting 1633
records; or 1634
(b) Conducting the business or other activity through an 1635
entity described in s. 738.401(1)(b). , the 1636
(2) A fiduciary may account separately under this section 1637
maintain separate accounting records for the transactions of a 1638
the business or another other activity, regardless of whether or 1639
not the assets of the such business or other activity are 1640
segregated from other trust or estate assets held by the 1641
fiduciary. 1642
(3)(2) A fiduciary who accounts separately under this 1643
section for a business or other activity : 1644
(a) May determine: 1645
1. The extent to which the net cash receipts of the 1646
business or other activity must be retained for : 1647
a. Working capital; 1648
b. The acquisition or replacement of fixed assets; and 1649
c. Other reasonably foreseeable needs of the business or 1650
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other activity; and working capital, the acquisition or 1651
replacement of fixed assets, and other reasonably foreseeable 1652
needs of the business or activity, and 1653
2. The extent to which the remaining net cash receipts are 1654
accounted for as principal or income in the fiduciary's trust's 1655
or estate's general accounting records for the trust. 1656
(b) May make a determination under paragraph (a) 1657
separately and differently from t he fiduciary's decisions 1658
concerning distributions of income or principal; and 1659
(c) Shall account for the net amount received from the 1660
sale of an asset of If a fiduciary sells assets of the business 1661
or other activity, other than a sale in the ordinary cour se of 1662
the business or other activity, the fiduciary must account for 1663
the net amount received as principal in the fiduciary's trust's 1664
or estate's general accounting records for the trust, to the 1665
extent the fiduciary determines that the net amount received is 1666
no longer required in the conduct of the business or other 1667
activity. 1668
(4)(3) Activities for which a fiduciary may account 1669
separately under this section maintain separate accounting 1670
records include: 1671
(a) Retail, manufacturing, service, and other traditi onal 1672
business activities. 1673
(b) Farming. 1674
(c) Raising and selling livestock and other animals. 1675
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(d) Managing Management of rental properties. 1676
(e) Extracting Extraction of minerals and other natural 1677
resources. 1678
(f) Growing and cutting timber operations. 1679
(g) An activity Activities to which s. 738.414, s. 1680
738.415, or s. 738.416 s. 738.607 applies. 1681
(h) Any other business conducted by the fiduciary. 1682
Section 23. Section 738.404, Florida Statutes, is created 1683
to read: 1684
738.404 Principal receipts. —A fiduciary shall allocate to 1685
principal: 1686
(1) To the extent not allocated to income under this 1687
chapter, an asset received from any of the following: 1688
(a) An individual during the individual's lifetime. 1689
(b) An estate. 1690
(c) A trust on termination of an income interest. 1691
(d) A payor under a contract naming the fiduciary as 1692
beneficiary. 1693
(2) Except as otherwise provided in ss. 738.401 -738.416, 1694
money or other property received from the sale, exchange, 1695
liquidation, or change in the form of a principal asse t. 1696
(3) An amount recovered from a third party to reimburse 1697
the fiduciary because of a disbursement described in s. 1698
738.502(1) or for another reason to the extent not based on the 1699
loss of income. 1700
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(4) Proceeds of property taken by eminent domain except 1701
that proceeds awarded for loss of income in an accounting period 1702
are income if a current income beneficiary had a mandatory 1703
income interest during the period. 1704
(5) Net income received in an accounting period during 1705
which there is no beneficiary to which a fiduciary may or must 1706
distribute income. 1707
(6) Other receipts as provided in ss. 738.408 -738.416. 1708
Section 24. Section 738.405, Florida Statutes, is created 1709
to read: 1710
738.405 Rental property. —To the extent that a fiduciary 1711
does not account for the mana gement of rental property as a 1712
business under s. 738.403, the fiduciary shall allocate to 1713
income an amount received as rent of real or personal property, 1714
including an amount received for cancellation or renewal of a 1715
lease. An amount received as a refundabl e deposit, including a 1716
security deposit or a deposit that is to be applied as rent for 1717
future periods: 1718
(1) Must be added to principal and held subject to the 1719
terms of the lease, except as otherwise provided by law other 1720
than this chapter; and 1721
(2) Is not allocated to income or available for 1722
distribution to a beneficiary until the fiduciary's contractual 1723
obligations have been satisfied with respect to that amount. 1724
Section 25. Section 738.406, Florida Statutes, is created 1725
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to read: 1726
738.406 Receipt on obligation to be paid in money. — 1727
(1) This section does not apply to an obligation to which 1728
s. 738.409, s. 738.410, s. 738.411, s. 738.412, s. 738.414, s. 1729
738.415, or s. 738.416 applies. 1730
(2) A fiduciary shall allocate to income, without 1731
provision for amortization of premium, an amount received as 1732
interest on an obligation to pay money to the fiduciary, 1733
including an amount received as consideration for prepaying 1734
principal. 1735
(3) A fiduciary shall allocate to principal an amount 1736
received from the sale, red emption, or other disposition of an 1737
obligation to pay money to the fiduciary. 1738
(4) A fiduciary shall allocate to income the increment in 1739
value of a bond or other obligation for the payment of money 1740
bearing no stated interest but payable or redeemable, at 1741
maturity or another future time, in an amount that exceeds the 1742
amount in consideration of which it was issued. If the increment 1743
in value accrues and becomes payable pursuant to a fixed 1744
schedule of appreciation, it may be distributed to the 1745
beneficiary who was the income beneficiary at the time of 1746
increment from the first principal cash available or, if none is 1747
available, when the increment is realized by sale, redemption, 1748
or other disposition. If unrealized increment is distributed as 1749
income but out of prin cipal, the principal must be reimbursed 1750
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for the increment when realized. If, in the reasonable judgment 1751
of the fiduciary, exercised in good faith, the ultimate payment 1752
of the bond principal is in doubt, the fiduciary may withhold 1753
the payment of incremental interest to the income beneficiary. 1754
Section 26. Section 738.407, Florida Statutes, is created 1755
to read: 1756
738.407 Insurance policy or contract. — 1757
(1) This section does not apply to a contract to which s. 1758
738.409 applies. 1759
(2) Except as otherwise prov ided in subsection (3), a 1760
fiduciary shall allocate to principal the proceeds of a life 1761
insurance policy or other contract received by the fiduciary as 1762
beneficiary, including a contract that insures against damage 1763
to, destruction of, or loss of title to an asset. The fiduciary 1764
shall allocate dividends on an insurance policy to income to the 1765
extent that premiums on the policy are paid from income and to 1766
principal to the extent premiums on the policy are paid from 1767
principal. 1768
(3) A fiduciary shall allocate to income proceeds of a 1769
contract that insures the fiduciary against loss of: 1770
(a) Occupancy or other use by a current income 1771
beneficiary; 1772
(b) Income; or 1773
(c) Subject to s. 738.403, profits from a business. 1774
Section 27. Section 738.408, Florida Statutes, is created 1775
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to read: 1776
738.408 Insubstantial allocation not required. — 1777
(1) If a fiduciary determines that an allocation between 1778
income and principal required by s. 738.409, s. 738.410, s. 1779
738.411, s. 738.412, or s. 738.415 is insubstantial, the 1780
fiduciary may allocate the entire amount to principal, unless s. 1781
738.203(5) applies to the allocation. 1782
(2) A fiduciary may presume an allocation is insubstantial 1783
under subsection (1) if: 1784
(a) The amount of the alloc ation would increase or 1785
decrease net income in an accounting period, as determined 1786
before the allocation, by less than 10 percent; and 1787
(b) The asset producing the receipt to be allocated has a 1788
carrying value less than 10 percent of the total carrying val ue 1789
of the assets owned or held by the fiduciary at the beginning of 1790
the accounting period. 1791
(3) The power to make a determination under subsection (1) 1792
may be: 1793
(a) Exercised by a cofiduciary in the manner described in 1794
s. 738.203(6); or 1795
(b) Released or delegated for a reason described in s. 1796
738.203(7) and in the manner described in s. 738.203(8). 1797
Section 28. Section 738.409, Florida Statutes, is created 1798
to read: 1799
738.409 Deferred compensation, annuity, or similar 1800
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payment.— 1801
(1) As used in this sect ion, the term: 1802
(a) "Internal income of the separate fund" means the 1803
amount determined under subsection (2). 1804
(b) "Marital trust" means a trust: 1805
1. Of which the settlor's surviving spouse is the only 1806
current income beneficiary and is entitled to a dist ribution of 1807
all the current net income of the trust; and 1808
2. That qualifies for a marital deduction with respect to 1809
the settlor's estate under the Internal Revenue Code or 1810
comparable law of any state because: 1811
a. An election to qualify for a marital dedu ction under s. 1812
2056(b)(7) of the Internal Revenue Code has been made; 1813
b. The trust qualified for a marital deduction under s. 1814
2056(b)(5) of the Internal Revenue Code; or 1815
c. The trust otherwise qualifies for a marital deduction. 1816
(c) "Nonseparate fund" means an annuity, a deferred 1817
compensation plan, a pension plan, or other fund for which the 1818
value of the participant's or account owner's right to receive 1819
benefits can be determined only by the occurrence of a date or 1820
event as defined in the instrument go verning the fund. 1821
(d) "Payment" means an amount a fiduciary may receive over 1822
a fixed number of years or during the life of one or more 1823
individuals because of services rendered or property transferred 1824
to the payor in exchange for future amounts the fiduci ary may 1825
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receive. The term includes an amount received in money or 1826
property from the payor's general assets or from a separate fund 1827
created by the payor. 1828
(e) "Percent calculated" means a percent equal to the rate 1829
determined under s. 7520 of the Internal R evenue Code in effect 1830
for the month preceding the beginning of the accounting period; 1831
however, if the percent calculated exceeds 5 percent, it must be 1832
reduced to 5 percent, and if the percent calculated is less than 1833
3 percent, it must be increased to 3 per cent. Notwithstanding 1834
the preceding sentence, a fiduciary who is an independent person 1835
as defined in s. 738.102 may set the percent calculated at a 1836
percentage no less than 3 percent and no greater than 5 percent. 1837
(f) "Separate fund" includes a private or commercial 1838
annuity, an individual retirement account, and a pension, 1839
profit-sharing, stock-bonus, stock ownership plan, or other 1840
deferred compensation fund holding assets exclusively for the 1841
benefit of a participant or account owner. 1842
(2) For each accoun ting period, the following rules apply 1843
to a separate fund: 1844
(a) The fiduciary may determine the internal income of the 1845
separate fund as if the separate fund were a trust subject to 1846
this chapter. 1847
(b) Alternatively, the fiduciary may deem the internal 1848
income of the separate fund to equal the percent calculated of 1849
the value of the separate fund according to the most recent 1850
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statement of value preceding the beginning of the accounting 1851
period. The fiduciary is not liable for good faith reliance upon 1852
any valuation supplied by the person or persons in possession of 1853
the fund. If the fiduciary makes or terminates an election under 1854
this paragraph, the fiduciary must make such disclosure in a 1855
trust disclosure document that satisfies the requirements of s. 1856
736.1008(4)(c). 1857
(c) If the fiduciary cannot determine the value of the 1858
separate fund under paragraph (b), the value of the separate 1859
fund is deemed to equal the present value of s. 7520 of the 1860
Internal Revenue Code for the month preceding the beginning of 1861
the accounting period for which the computation is made. 1862
(d) The fiduciary may elect the method of determining the 1863
income of the fund pursuant to this subsection and may change 1864
the method of determining in come of the fund for any future 1865
accounting period. 1866
(3) A fiduciary shall allocate a payment received from a 1867
separate fund during an accounting period to income, to the 1868
extent of the internal income of the separate fund during the 1869
period, and allocate the balance to principal. 1870
(4) The fiduciary of a marital trust shall: 1871
(a) Withdraw from a separate fund the amount the current 1872
income beneficiary of the trust requests the fiduciary to 1873
withdraw, not greater than the amount by which the internal 1874
income of the separate fund during the accounting period exceeds 1875
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the amount the fiduciary otherwise receives from the separate 1876
fund during the period. 1877
(b) Transfer from principal to income the amount the 1878
current income beneficiary requests the fiduciary to transfe r, 1879
but not greater than the amount by which the internal income of 1880
the separate fund during the period exceeds the amount the 1881
fiduciary receives from the separate fund during the period 1882
after the application of paragraph (a). 1883
(c) Distribute to the curren t income beneficiary as 1884
income: 1885
1. The amount of the internal income of the separate fund 1886
received or withdrawn during the period; and 1887
2. The amount transferred from principal to income under 1888
paragraph (b). 1889
(5) For a trust, other than a marital trust , of which one 1890
or more current income beneficiaries are entitled to a 1891
distribution of all the current net income, the fiduciary shall 1892
transfer from principal to income the amount by which the 1893
internal income of the separate fund during the accounting 1894
period exceeds the amount the fiduciary receives from the 1895
separate fund during the period. 1896
(6) The fiduciary of a nonseparate fund shall calculate 1897
internal income of the fund as the percent calculated of the 1898
present value of the right to receive the remaining payments as 1899
determined under s. 7520(a)(2) of the Internal Revenue Code for 1900
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the month preceding the beginning of the accounting period. 1901
(7) If a fiduciary owns a separate fund or a nonseparate 1902
fund before January 1, 2025, the fiduciary may determine 1903
internal income, allocate payments, and account for unwithdrawn 1904
internal income as provided in this section or in the manner 1905
used by the fiduciary before January 1, 2025. Such fiduciary is 1906
not required to consider subsection (5). If the fiduciary 1907
acquires a separate fund or a nonseparate fund on or after 1908
January 1, 2025, the fiduciary must calculate internal income, 1909
allocate payments, and account for unwithdrawn internal income 1910
as provided in this section. 1911
Section 29. Section 738.603, Florida Statutes, is 1912
transferred, renumbered as section 738.410, Florida Statutes, 1913
and amended to read: 1914
738.410 738.603 Liquidating asset.— 1915
(1) As used in For purposes of this section, the term 1916
"liquidating asset" means an asset whose value the value of 1917
which will diminish or terminate because the asset is expected 1918
to produce receipts for a period of limited time duration. The 1919
term includes a leasehold, patent, copyright, royalty right, and 1920
right to receive payments during a period of for more than 1 1921
year under an arrangeme nt that does not provide for the payment 1922
of interest on the unpaid balance. The term does not include a 1923
payment subject to s. 738.602, resources subject to s. 738.604, 1924
timber subject to s. 738.605, an activity subject to s. 738.607, 1925
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an asset subject to s. 738.608, or any asset for which the 1926
fiduciary establishes a reserve for depreciation under s. 1927
738.703. 1928
(2) This section does not apply to a receipt that is 1929
subject to s. 738.401, s. 738.409, s. 738.411, s. 738.412, s. 1930
738.414, s. 738.415, s. 738.416, or s. 738.503. 1931
(3) A fiduciary shall allocate to income a receipt 1932
produced by a liquidating asset to the extent that the receipt 1933
does not exceed 5 percent of the receipts from the carrying 1934
value of the asset at the beginning of the accounting period and 1935
allocate a liquidating asset and the balance to principal the 1936
balance of the receipt . 1937
(4) The amount Amounts allocated to principal shall reduce 1938
the carrying value of the liquidating asset, but not below zero. 1939
Amounts received in excess of the remaining car rying value must 1940
be allocated to principal. 1941
Section 30. Section 738.604, Florida Statutes, is 1942
transferred, renumbered as section 738.411, Florida Statutes, 1943
and amended to read: 1944
738.411 738.604 Minerals, water, and other natural 1945
resources.— 1946
(1) To the extent that If a fiduciary does not account for 1947
a receipt accounts for receipts from an interest in minerals , 1948
water, or other natural resources as a business under s. 738.403 1949
pursuant to this section , the fiduciary shall allocate the 1950
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receipt such receipts as follows: 1951
(a) To income, to the extent received: 1952
1. If received As nominal delay rental or nominal annual 1953
rent on a lease; 1954
2. As a factor for interest or the equivalent of interest 1955
under an agreement creating a production payment; or 1956
3. On account of an interest in renewable water; , a 1957
receipt shall be allocated to income. 1958
(b) To principal, if received from a production payment, a 1959
receipt shall be allocated to income if and to the extent that 1960
subparagraph (a)2. does not apply; or the agreement creating the 1961
production payment provides a factor for interest or its 1962
equivalent. The balance shall be allocated to principal. 1963
(c) Between income and principal equitably, to the extent 1964
received: 1965
1. On account of an interest in nonrenewable water ; 1966
2. If an amount received As a royalty, shut-in-well 1967
payment, take-or-pay payment, or bonus; or, or delay rental is 1968
more than nominal, 90 percent shall be allocated to principal 1969
and the balance to income. 1970
3.(d) If an amount is received From a working interest or 1971
any other interest not provided for in paragraph (a) or, 1972
paragraph (b) or subparagraph 1. or subparagraph 2. , or 1973
paragraph (c), 90 percent of the net amount received shall be 1974
allocated to principal and the balance to income. 1975
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(2) An amount received on account of an interest in water 1976
that is renewable shall be allocated to income. If the water is 1977
not renewable, 90 percent of the amount shall be allocated to 1978
principal and the balance to income. 1979
(3) This section chapter applies to an interest owned or 1980
held by a fiduciary regardless of whether or not a settlor 1981
decedent or donor was extracting minerals, water, or other 1982
natural resources before the fiduciary owned or held the 1983
interest became subject to the trust or estate . 1984
(3) An allocation of a receipt under paragraph (1)(c) is 1985
presumed to be equitable if the amount allocated to principal is 1986
equal to the amount allowed by the Internal Revenue Code as a 1987
deduction for depletion of the interest. 1988
(4) If a fiduciary trust or estate owns or holds an 1989
interest in minerals, water, or other natural resources before 1990
January 1, 2025 on January 1, 2003, the fiduciary may allocate 1991
receipts from the interest as provided in this section chapter 1992
or in the manner used by the fiduciary before January 1, 2025 1993
January 1, 2003. If the fiduciary trust or estate acquires an 1994
interest in minerals, water, or other natural resources on or 1995
after January 1, 2025 January 1, 2003, the fiduciary must shall 1996
allocate receipts from the interest as provided in this section 1997
chapter. 1998
Section 31. Section 738.605, Florida Statutes, is 1999
transferred, renumbered as section 738.412, Florida Statutes, 2000
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and amended to read: 2001
738.412 738.605 Timber.— 2002
(1) To the extent that If a fiduciary does not account 2003
accounts for receipts from the sale of timber and related 2004
products as a business under s. 738.403 pursuant to this 2005
section, the fiduciary shall allocate the such net receipts as 2006
follows: 2007
(a) To income, to the extent that the amount of timber cut 2008
removed from the land does not exceed the rate of growth of the 2009
timber during the accounting periods in which a beneficiary has 2010
a mandatory income interest ; 2011
(b) To principal, to the extent that the amount of timber 2012
cut removed from the land exceeds the rate of growth of the 2013
timber or the net receipts are from the sale of standing timber; 2014
(c) To or Between income and principal if the net receipts 2015
are from the lease of land used for growing and cutting timber 2016
timberland or from a contract to cut timber from land owned by a 2017
trust or estate by determining the amount of timber cut removed 2018
from the land under the lease or contract and applying the rules 2019
in paragraphs (a) and (b); or 2020
(d) To principal, to the extent that advance payments, 2021
bonuses, and other payments are not allocated under pursuant to 2022
paragraph (a), paragraph (b), or paragraph (c). 2023
(2) In determining net receipts to be allocated under 2024
pursuant to subsection (1), a fiduciary shall deduct and 2025
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transfer to principal a reasonable amount for depletion. 2026
(3) This section chapter applies to land owned or held by 2027
a fiduciary regardless of whether or not a settlor decedent or 2028
donor was cutting harvesting timber from the land property 2029
before the fiduciary owned or held the property became subject 2030
to the trust or estate . 2031
(4) If a fiduciary trust or estate owns or holds an 2032
interest in land used for growing and cutting timber before 2033
January 1, 2025 timberland on January 1, 2003 , the fiduciary may 2034
allocate net receipts from the sale of timber and related 2035
products as provided in this section chapter or in the manner 2036
used by the fiduciary before January 1, 2025 January 1, 2003. If 2037
the fiduciary trust or estate acquires an interest in land used 2038
for growing and cutting timber on or after January 1, 2025 2039
timberland after January 1, 2003 , the fiduciary must shall 2040
allocate net receipts from the sale of timber and related 2041
products as provided in this section chapter. 2042
Section 32. Section 738.606, Florida Statutes, is 2043
transferred, renumbered as section 738.413, Florida Statutes, 2044
and amended to read: 2045
738.413 738.606 Marital deduction property not productive 2046
of income.— 2047
(1) If a trust received property for which a gift or 2048
estate tax marital deduction was under the Internal Revenue Code 2049
or comparable law of any state is allowed, for all or if part of 2050
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a trust received property satisfying , or if assets are 2051
transferred to a trust that satisfies the requirements of s. 2052
732.2025(2)(a) and (c), and such property has assets have been 2053
used in whole or in part to satisfy an election by a surviving 2054
spouse under s. 732.2125 , and the settlor's spouse holds a 2055
mandatory income interest in the trust, the spouse may require 2056
the trustee, to the extent that the trust assets otherwise do 2057
consist of property that, in the aggregate, does not provide the 2058
spouse with sufficient income from or use of the trust assets to 2059
qualify for the deduction, or to satisfy an election by a 2060
surviving spouse under s. 732.2125, to make the property 2061
productive of income within a reasonable time. The trustee may: 2062
(a) Convert property to property productive of income 2063
within a reasonable time; 2064
(b) Exercise the power to adjust under s. 738.203; 2065
(c) Exercise the power to convert to or from a unitrust 2066
under s. 738.303; or 2067
(d) Exercise the fiduciary's authority under the terms of 2068
the trust to otherwise provide the surviving spouse with 2069
sufficient income from the trust assets, or the use of the trust 2070
assets, to qualify for the marital deduction, or to satisfy an 2071
election by a surviving spouse under s. 732.2125. 2072
(2) The trustee may decide which action or combination of 2073
actions listed in subsection (1) to take. 2074
(3) Subsection (1) shall apply , and if amounts the trustee 2075
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transfers from principal to income under s. 73 8.104 and 2076
distributes to the spouse from principal pursuant to the terms 2077
of the trust are insufficient to provide the spouse with the 2078
beneficial enjoyment required to obtain the marital deduction, 2079
even though, in the case of an elective share trust under s. 2080
732.2025(2), a marital deduction is not made or is only 2081
partially made, the spouse may require the trustee of such 2082
marital trust or elective share trust to make property 2083
productive of income, convert property within a reasonable time, 2084
or exercise the power conferred by ss. 738.104 and 738.1041 . 2085
(4) The terms of a trust as defined in s. 738.102 may not 2086
supersede this section unless such terms explicitly reference 2087
this section The trustee may decide which action or combination 2088
of actions to take. 2089
(2) In cases not governed by subsection (1), proceeds from 2090
the sale or other disposition of an asset are principal without 2091
regard to the amount of income the asset produces during any 2092
accounting period. 2093
Section 33. Section 738.607, Florida Statutes, is 2094
transferred, renumbered as section 738.414, Florida Statutes, 2095
and amended to read: 2096
738.414 738.607 Derivatives or and options.— 2097
(1) As used in For purposes of this section, the term 2098
"derivative" means a contract , an or financial instrument, or 2099
other arrangement, or a combination of contracts , and financial 2100
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instruments, or other arrangements, of which the value, rights, 2101
and obligations are, in whole or in part, dependent on or 2102
derived from an underlying which gives a trust the right or 2103
obligation to participa te in some or all changes in the price of 2104
a tangible or intangible asset , a or group of tangible or 2105
intangible assets, an index, or an occurrence of an event. The 2106
term includes stocks, fixed income securities, and financial 2107
instruments and arrangements bas ed on indices, commodities, 2108
interest rates, weather -related events, and credit -default 2109
events assets, or changes in a rate, an index of prices or 2110
rates, or other market indicator for an asset or a group of 2111
assets. 2112
(2) To the extent that a fiduciary does not account for a 2113
transaction in derivatives as a business under s. 738.403 for 2114
transactions in derivatives , the fiduciary shall allocate 10 2115
percent of to principal receipts from the transaction and 10 2116
percent of and disbursements made in connection with the 2117
transaction to income and allocate the balance to principal 2118
those transactions. 2119
(3) Subsection (4) applies if: 2120
(a) A fiduciary: 2121
1. If a fiduciary Grants an option to buy property from a 2122
the trust, regardless of or estate whether or not the trust or 2123
estate owns the property when the option is granted ;, 2124
2. Grants an option that permits another person to sell 2125
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property to the trust ; or 2126
3. estate, or Acquires an option to buy property for the 2127
trust or estate or an option to sell an asset owned by t he trust 2128
or estate;, and 2129
(b) The fiduciary or other owner of the asset is required 2130
to deliver the asset if the option is exercised , an amount 2131
received for granting the option shall be allocated to 2132
principal. An amount paid to acquire the option shall be paid 2133
from principal. 2134
(4) If this subsection applies, the fiduciary must 2135
allocate 10 percent to income and allocate the balance to 2136
principal of the following amounts: 2137
(a) An amount received for granting the option; 2138
(b) An amount paid to acquire the op tion; and 2139
(c) A Gain or loss realized on upon the exercise, 2140
exchange, settlement, offset, closing, or expiration of the 2141
option of an option, including an option granted to a grantor of 2142
the trust or estate for services rendered, shall be allocated to 2143
principal. 2144
Section 34. Section 738.608, Florida Statutes, is 2145
transferred, renumbered as section 738.415, Florida Statutes, 2146
and amended to read: 2147
738.415 738.608 Asset-backed securities.— 2148
(1) Except as otherwise provided in subsection (2), a 2149
fiduciary shall allocate to income a receipt from or related to 2150
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an asset-backed security, as defined in s. 738.102, to the 2151
extent that the payor identifies the payment as being from For 2152
purposes of this section, "asset -backed security" means an asset 2153
the value of which is based upon the right given the owner to 2154
receive distributions from the proceeds of financial assets that 2155
provide collateral for the security. The term includes an asset 2156
that gives the owner the right to receive from the collateral 2157
financial assets onl y the interest or other current return and 2158
allocate to principal the balance of the receipt or only the 2159
proceeds other than interest or current return . The term does 2160
not include an asset to which s. 738.401 or s. 738.602 applies. 2161
(2) If a fiduciary receives one or more payments in 2162
exchange for part or all of the fiduciary's interest in an 2163
asset-backed security, including a liquidation or redemption of 2164
the fiduciary's interest in the security trust or estate 2165
receives a payment from interest or other curren t return and 2166
from other proceeds of the collateral financial assets , the 2167
fiduciary must shall allocate to income 10 percent of receipts 2168
from the transaction and 10 percent of disbursements made in 2169
connection with the transaction, and allocate to principal the 2170
portion of the payment which the payor identifies as being from 2171
interest or other current return and allocate the balance of the 2172
receipts and disbursements payment to principal . 2173
(3) If a trust or estate receives one or more payments in 2174
exchange for the trust's or estate's entire interest in an 2175
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asset-backed security during a single accounting period, the 2176
fiduciary shall allocate the payments to principal. If a payment 2177
is one of a series of payments that will result in the 2178
liquidation of the trust's or estate's interest in the security 2179
over more than a single accounting period, the fiduciary shall 2180
allocate 10 percent of the payment to income and the balance to 2181
principal. 2182
Section 35. Section 738.416, Florida Statutes, is created 2183
to read: 2184
738.416 Other financial instrument or arrangement. —A 2185
fiduciary shall allocate receipts from or related to a financial 2186
instrument or arrangement not otherwise addressed by this 2187
chapter. The allocation must be consistent with ss. 738.414 and 2188
738.415. 2189
Section 36. Section 738.501, Florida Statutes, is amended 2190
to read: 2191
(Substantial rewording of section. See 2192
s. 738.501, F.S., for present text.) 2193
738.501 Disbursement from income. —Subject to s. 738.504, 2194
and except as otherwise provided in s. 738.601(3)(b) or (c), a 2195
fiduciary shall disburse from income: 2196
(1) One-half of: 2197
(a) The regular compensation of the fiduciary and of any 2198
person providing investment advisory, custodial, or other 2199
services to the fiduciary to the extent that income is 2200
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sufficient; and 2201
(b) An expense for an accounting, judicial or nonjudicial 2202
proceeding, or other matter that involves both income and 2203
successive interests to the extent income is sufficient. 2204
(2) The balance of t he disbursements described in 2205
subsection (1), to the extent that a fiduciary who is an 2206
independent person determines that making those disbursements 2207
from income would be in the interests of the beneficiaries. 2208
(3) Any other ordinary expense incurred in co nnection with 2209
administration, management, or preservation of property and 2210
distribution of income, including interest, an ordinary repair, 2211
a regularly recurring tax assessed against principal, and an 2212
expense of an accounting, judicial or nonjudicial proceed ing, or 2213
other matter that involves primarily an income interest, to the 2214
extent that income is sufficient. 2215
(4) A premium on insurance covering loss of a principal 2216
asset or income from or use of the asset. 2217
Section 37. Section 738.502, Florida Statutes, is amended 2218
to read: 2219
(Substantial rewording of section. See 2220
s. 738.502, F.S., for present text.) 2221
738.502 Disbursement from principal. — 2222
(1) Subject to s. 738.505, and except as otherwise 2223
provided in s. 738.601(3)(b), a fiduciary shall disburse all of 2224
the following from principal: 2225
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(a) The balance of the disbursements described in s. 2226
738.501(1) and (3), after application of s. 738.501(2). 2227
(b) The fiduciary's compensation calculated on principal 2228
as a fee for acceptance, distribution, or termination. 2229
(c) A payment of an expense to prepare for or execute a 2230
sale or other disposition of property. 2231
(d) A payment on the principal of a trust debt. 2232
(e) A payment of an expense of an accounting, judicial or 2233
nonjudicial proceeding, or other matter that invol ves primarily 2234
principal, including a proceeding to construe the terms of the 2235
trust or protect property. 2236
(f) A payment of a premium for insurance, including title 2237
insurance, not described in s. 738.501(4) of which the fiduciary 2238
is the owner and beneficiar y. 2239
(g) A payment of estate, inheritance, and other transfer 2240
taxes, including penalties, apportioned to the trust. 2241
(h) A payment related to environmental matters including: 2242
1. Reclamation; 2243
2. Assessing environmental conditions; 2244
3. Remedying and re moving environmental contamination; 2245
4. Monitoring remedial activities and the release of 2246
substances; 2247
5. Preventing future releases of substances; 2248
6. Collecting amounts from persons liable or potentially 2249
liable for the costs of the activities describe d in 2250
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subparagraphs 1.-5.; 2251
7. Penalties imposed under environmental laws or 2252
regulations; 2253
8. Other actions to comply with environmental laws or 2254
regulations; 2255
9. Statutory or common law claims by third parties; and 2256
10 Defending claims based on environm ental matters. 2257
(i) A payment of a premium for insurance for matters 2258
described in paragraph (h). 2259
(2) If a principal asset is encumbered with an obligation 2260
that requires income from the asset to be paid directly to a 2261
creditor, the fiduciary must transfer from principal to income 2262
an amount equal to the income paid to the creditor in reduction 2263
of the principal balance of the obligation. 2264
Section 38. Section 738.503, Florida Statutes, is amended 2265
to read: 2266
(Substantial rewording of section. See 2267
s. 738.503, F.S., for present text.) 2268
738.503 Transfers from income to principal for 2269
depreciation.— 2270
(1) For purposes of this section, "depreciation" means a 2271
reduction in value due to wear, tear, decay, corrosion, or 2272
gradual obsolescence of a tangible asset having a useful life of 2273
more than 1 year. 2274
(2) A fiduciary may transfer to principal a reasonable 2275
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amount of the net cash receipts from a principal asset that is 2276
subject to depreciation but may not transfer any amount for 2277
depreciation: 2278
(a) Of the part of real property used or available for use 2279
by a beneficiary as a residence; 2280
(b) Of tangible personal property held or made available 2281
for the personal use or enjoyment of a beneficiary; or 2282
(c) Under this section, to the extent that the fiduciary 2283
accounts: 2284
1. Under s. 738.410 for the asset; or 2285
2. Under s. 738.403 for the business or other activity in 2286
which the asset is used. 2287
(3) An amount transferred to principal under this section 2288
need not be separately held. 2289
Section 39. Section 738.504, Florida Statut es, is amended 2290
to read: 2291
(Substantial rewording of section. See 2292
s. 738.504, F.S., for present text.) 2293
738.504 Reimbursement of income from principal. — 2294
(1) If a fiduciary makes or expects to make an income 2295
disbursement described in subsection (2), the f iduciary may 2296
transfer an appropriate amount from principal to income in one 2297
or more accounting periods to reimburse income. 2298
(2) To the extent that the fiduciary has not been and does 2299
not expect to be reimbursed by a third party, income 2300
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disbursements to which subsection (1) applies include: 2301
(a) An amount chargeable to principal but paid from income 2302
because principal is illiquid; 2303
(b) A disbursement made to prepare property for sale, 2304
including improvements and commissions; and 2305
(c) A disbursement descri bed in s. 738.502(1). 2306
(3) If an asset whose ownership gives rise to an income 2307
disbursement becomes subject to a successive interest after an 2308
income interest ends, the fiduciary may continue to make 2309
transfers under subsection (1). 2310
Section 40. Section 738.704, is transferred, renumbered as 2311
section 738.505, Florida Statutes, and amended to read: 2312
738.505 738.704 Reimbursement of principal from income 2313
Transfers from income to reimburse principal .— 2314
(1) If a fiduciary makes or expects to make a principal a 2315
principal disbursement described in subsection (2) this section, 2316
the fiduciary may transfer an appropriate amount from income to 2317
principal in one or more accounting periods to reimburse 2318
principal or to provide a reserve for future principal 2319
disbursements. 2320
(2) Principal disbursements to which subsection (1) 2321
applies include the following, but only To the extent that a the 2322
fiduciary has not been and does not expect to be reimbursed by a 2323
third party, principal disbursements to which subsection (1) 2324
applies include: 2325
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(a) An amount chargeable to income but paid from principal 2326
because income is not sufficient; the amount is unusually large. 2327
(b) The cost of an improvement to principal, whether a 2328
change to an existing asset or the construction of a new asset, 2329
including a special assessment; Disbursements made to prepare 2330
property for rental, including tenant allowances, leasehold 2331
improvements, and broker's commissions. 2332
(c) A disbursement made to prepare property for rental, 2333
including tenant allowances, leaseho ld improvements, and 2334
commissions; Disbursements described in s. 738.702(1)(g) . 2335
(d) A periodic payment on an obligation secured by a 2336
principal asset, to the extent the amount transferred from 2337
income to principal for depreciation is less than the periodic 2338
payment; and 2339
(e) A disbursement described in s. 738.502(1). 2340
(3) If an the asset whose the ownership of which gives 2341
rise to a principal disbursement the disbursements becomes 2342
subject to a successive income interest after an income interest 2343
ends, the a fiduciary may continue to make transfers under 2344
transfer amounts from income to principal as provided in 2345
subsection (1). 2346
(4) To the extent principal cash is not sufficient to pay 2347
the principal balance of payments due on mortgaged property, 2348
income may be applied to such payment in order to avoid a 2349
default on any mortgage or security interest securing the 2350
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property. Income shall be reimbursed for such payments out of 2351
the first available principal cash. If the asset the ownership 2352
of which gives rise to the di sbursements described in this 2353
subsection becomes subject to a successive income interest after 2354
an income interest ends, all rights of the initial income 2355
interest shall lapse, and amounts remaining due from principal 2356
shall not be a lien on the assets of the trust. 2357
Section 41. Section 738.705, Florida Statutes, is 2358
transferred, renumbered as section 738.506, Florida Statutes, 2359
and amended to read: 2360
738.506 738.705 Income taxes.— 2361
(1) A tax required to be paid by a fiduciary which is 2362
based on receipts allo cated to income must shall be paid from 2363
income. 2364
(2) A tax required to be paid by a fiduciary which is 2365
based on receipts allocated to principal must shall be paid from 2366
principal, even if the tax is called an income tax by the taxing 2367
authority. 2368
(3) Subject to subsection (4) and ss. 738.504, 738.505, 2369
and 738.507, a tax required to be paid by a fiduciary on a the 2370
trust's or estate's share of an entity's taxable income in an 2371
accounting period must shall be paid from proportionately: 2372
(a) From Income and principal proportionately to the 2373
allocation between income and principal of to the extent 2374
receipts from the entity in the period are allocated to income . 2375
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(b) From principal to the extent receipts from the entity 2376
are allocated to principal. 2377
(c) From Principal to the extent that the tax exceeds the 2378
income taxes payable by the trust or estate exceed the total 2379
receipts from the entity in the period. 2380
(4) After applying subsections (1), (2), and (3), a 2381
fiduciary shall adjust income or principal receipts, to the 2382
extent the taxes that the fiduciary pays are reduced because of 2383
a deduction for a payment made to a beneficiary. 2384
(5) Subject to the limitations and excluded assets 2385
provided under s. 736.08145, a reimbursement of state or federal 2386
income tax elected to be made by a fiduciary pursuant to s. 2387
736.08145 must be allocated and paid under paragraphs (3)(a) and 2388
(b) After applying subsections (1) -(3), the fiduciary shall 2389
adjust income or principal receipts to the extent that the 2390
trust's or estate's income tax es are reduced, but not 2391
eliminated, because the trust or estate receives a deduction for 2392
payments made to a beneficiary . The amount distributable to that 2393
beneficiary as income as a result of this adjustment shall be 2394
equal to the cash received by the trust or estate, reduced, but 2395
not below zero, by the entity's taxable income allocable to the 2396
trust or estate multiplied by the trust's or estate's income tax 2397
rate. The reduced amount shall be divided by the difference 2398
between 1 and the trust's or estate's incom e tax rate in order 2399
to determine the amount distributable to that beneficiary as 2400
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income before giving effect to other receipts or disbursements 2401
allocable to that beneficiary's interest. 2402
Section 42. Section 738.706, Florida Statutes, is 2403
transferred, renumbered as section 738.507, Florida Statutes, 2404
and amended to read: 2405
738.507 738.706 Adjustment Adjustments between principal 2406
and income because of taxes. — 2407
(1) A fiduciary may make an adjustment adjustments between 2408
principal and income and principal to offset the shifting of 2409
economic interests or tax benefits between current income 2410
beneficiaries and successor remainder beneficiaries which arises 2411
arise from: 2412
(a) An election or decision Elections and decisions, other 2413
than those described in paragraph (b), that the fiduciary makes 2414
from time to time regarding a tax matter, other than a decision 2415
to claim an income tax deduction to which subsection (2) applies 2416
matters; 2417
(b) An income tax or any other tax that is imposed on upon 2418
the fiduciary or a beneficiary as a result of a transaction 2419
involving the fiduciary or a distribution by from the fiduciary 2420
estate or trust; or 2421
(c) The Ownership by the fiduciary an estate or trust of 2422
an interest in an entity a part of whose taxable income, 2423
regardless of whether or not distributed, is includable in the 2424
taxable income of the fiduciary estate, trust, or a beneficiary; 2425
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or 2426
(d) An election or decision a fiduciary makes to reimburse 2427
any tax under s. 736.08145 . 2428
(2) If the amount of an estate tax marital deduction or 2429
charitable contribution deduction is reduced because a fiduciary 2430
deducts an amount paid from principal for income tax purposes 2431
instead of deducting it such amount for estate tax purposes , 2432
and, as a result, estate taxes paid from principal are increased 2433
and income taxes paid by a fiduciary or a an estate, trust, or 2434
beneficiary are decreased, the fiduciary shall charge each 2435
estate, trust, or beneficiary that benefits from the decrease in 2436
income tax to shall reimburse the principal from which the 2437
increase in estate tax is paid. The total reimbursement must 2438
shall equal the increase in the estate tax , to the extent that 2439
the principal used to pay the increase would have qualified for 2440
a marital deduction or charitable contribution deduction but for 2441
the payment. The proportionate share of the reimbursement for 2442
each fiduciary estate, trust, or beneficiary whose income taxes 2443
are reduced must shall be the same as its such estate's, 2444
trust's, or beneficiary's proportionate share of the total 2445
decrease in income tax. An estate or trust shall reimburse 2446
principal from income. 2447
(3) A fiduciary that charges a beneficiary under 2448
subsection (2) may offset the charge by obtaining payment from 2449
the beneficiary, withholding an amount from future distributions 2450
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to the beneficiary, or ado pting another method or combination of 2451
methods. 2452
Section 43. Section 738.508, Florida Statutes, is created 2453
to read: 2454
738.508 Apportionment of property expenses between tenant 2455
and remainderman.— 2456
(1) For purposes of this section, the term: 2457
(a) "Remainderman" means the holder of the remainder 2458
interests after the expiration of a tenant's estate in property. 2459
(b) "Tenant" means the holder of an estate for life or 2460
term of years in real property or personal property, or both. 2461
(2) If a trust has not been created, expenses shall be 2462
apportioned between the tenant and remainderman as follows: 2463
(a) The following expenses are allocated to and shall be 2464
paid by the tenant: 2465
1. All ordinary expenses incurred in connection with the 2466
administration, management, or preservation of the property, 2467
including interest, ordinary repairs, regularly recurring taxes 2468
assessed against the property, and expenses of a proceeding or 2469
other matter that concerns primarily the tenant's estate or use 2470
of the property. 2471
2. Recurring premiums on insurance covering the loss of 2472
the property or the loss of income from or use of the property. 2473
3. Any of the expenses described in subparagraph (b)3. 2474
which are attributable to the use of the property by the tenant. 2475
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(b) The following expenses are allocated to and shall be 2476
paid by the remainderman: 2477
1. Payments on the principal of a debt secured by the 2478
property, except to the extent that the debt is for expenses 2479
allocated to the tenant. 2480
2. Expenses of a proceeding or other matter that concern s 2481
primarily the title to the property, other than title to the 2482
tenant's estate. 2483
3. Except as provided in subparagraph (a)3., expenses 2484
related to environmental matters, including reclamation, 2485
assessing environmental conditions, remedying and removing 2486
environmental contamination, monitoring remedial activities and 2487
the release of substances, preventing future releases of 2488
substances, collecting amounts from persons liable or 2489
potentially liable for the costs of such activities, penalties 2490
imposed under environmental laws or regulations and other 2491
payments made to comply with those laws or regulations, 2492
statutory or common law claims by third parties, and defending 2493
claims based on environmental matters. 2494
4. Extraordinary repairs. 2495
(c) If the tenant or remaind erman incurred an expense for 2496
the benefit of his or her own estate without consent or 2497
agreement of the other, he or she must pay such expense in full. 2498
(d) Except as provided in paragraph (c), the cost of, or 2499
special taxes or assessments for, an improveme nt representing an 2500
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addition of value to property forming part of the principal 2501
shall be paid by the tenant if the improvement is not reasonably 2502
expected to outlast the estate of the tenant. In all other 2503
cases, only a part shall be paid by the tenant while the 2504
remainder shall be paid by the remainderman. The part payable by 2505
the tenant is ascertainable by taking that percentage of the 2506
total that is found by dividing the present value of the 2507
tenant's estate by the present value of an estate of the same 2508
form as that of the tenant, except that it is limited for a 2509
period corresponding to the reasonably expected duration of the 2510
improvement. The computation of present values of the estates 2511
shall be made by using the rate determined under s. 7520(a)(2) 2512
of the Internal Revenue Code then in effect and, in the case of 2513
an estate for life, the official mortality tables then in effect 2514
under s. 7520 of the Internal Revenue Code. Other evidence of 2515
duration or expectancy may not be considered. 2516
(3) This section does not apply to the extent that it is 2517
inconsistent with the instrument creating the estates, the 2518
agreement of the parties, or the specific direction of the 2519
Internal Revenue Code taxing or other applicable law. 2520
(4) The common law applicable to tenants and remainderme n 2521
supplements this section, except as modified by this section or 2522
other laws. 2523
Section 44. Section 738.601, Florida Statutes, is amended 2524
to read: 2525
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(Substantial rewording of section. See 2526
s. 738.601, F.S., for present text.) 2527
738.601 Determination and d istribution of net income. — 2528
(1) This section applies when: 2529
(a) The death of an individual results in the creation of 2530
an estate or trust; or 2531
(b) An income interest in a trust terminates, whether the 2532
trust continues or is distributed. 2533
(2) A fiduciary of an estate or trust with an income 2534
interest that terminates shall determine, under subsection (6) 2535
and ss. 738.401-738.508 and 738.701-738.703, the amount of net 2536
income and net principal receipts received from property 2537
specifically given to a beneficiary . The fiduciary shall 2538
distribute the net income and net principal receipts to the 2539
beneficiary who is to receive the specific property. 2540
(3) A fiduciary shall determine the income and net income 2541
of an estate or income interest in a trust which terminates, 2542
other than the amount of net income determined under subsection 2543
(2), under ss. 738.401 -738.508 and 738.701-738.703, and by: 2544
(a) Including in net income all income from property used 2545
or sold to discharge liabilities. 2546
(b) Paying from income or principal, in the fiduciary's 2547
discretion, fees of attorneys, accountants, and fiduciaries; 2548
court costs and other expenses of administration; and interest 2549
on estate and inheritance taxes and other taxes imposed because 2550
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of the decedent's death, but the fiduciary may p ay the expenses 2551
from income of property passing to a trust for which the 2552
fiduciary claims an estate tax marital or charitable deduction 2553
under the Internal Revenue Code or comparable law of any state 2554
only to the extent that: 2555
1. The payment of the those ex penses from income will not 2556
cause the reduction or loss of the deduction; or 2557
2. The fiduciary makes an adjustment under s. 738.507(2); 2558
and 2559
(c) Paying from principal other disbursements made or 2560
incurred in connection with the settlement of the estate or the 2561
winding up of an income interest that terminates, including: 2562
1. To the extent authorized by the decedent's will, the 2563
terms of the trust, or applicable law, debts, funeral expenses, 2564
disposition of remains, family allowances, estate and 2565
inheritance taxes, and other taxes imposed because of the 2566
decedent's death; and 2567
2. Related penalties apportioned by the decedent's will, 2568
the terms of the trust, or applicable law to the estate or 2569
income interest that terminates. 2570
(4) If a decedent's will or the terms of a trust provide 2571
for the payment of interest or the equivalent of interest to a 2572
beneficiary who receives a pecuniary amount outright, the 2573
fiduciary shall make the payment from net income determined 2574
under subsection (3) or from principal to the extent that net 2575
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income is insufficient. 2576
(5) A fiduciary shall distribute net income remaining 2577
after payments required by subsection (4) in the manner 2578
described in s. 738.602 to all other beneficiaries, including a 2579
beneficiary who receives a pecuniary amount in trust, even if 2580
the beneficiary holds an unqualified power to withdraw assets 2581
from the trust or other presently exercisable general power of 2582
appointment over the trust. 2583
(6) A fiduciary may not reduce principal or income 2584
receipts from property described in subsection (2) because of a 2585
payment described in s. 738.501 or s. 738.502 to the extent that 2586
the decedent's will, the terms of the trust, or applicable law 2587
requires the fiduciary to make the payment from assets other 2588
than the property or that the fiduciary recovers or expects to 2589
recover the payment from a third party. The net income and 2590
principal receipts from the property must be determined by 2591
including the amount the fiduciary receives or pays regarding 2592
the property, whether the amount accrued or became due before, 2593
on, or after the date of the decedent's death or an income 2594
interest's terminating event, and making a reasonable provision 2595
for an amount the estate or income interest may become obligated 2596
to pay after the pro perty is distributed. 2597
Section 45. Section 738.602, Florida Statutes, is amended 2598
to read: 2599
(Substantial rewording of section. See 2600
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s. 738.602, F.S., for present text.) 2601
738.602 Distribution to successor beneficiary. — 2602
(1) Except to the extent that ss. 738.301-738.310 apply 2603
for a beneficiary that is a trust, each beneficiary described in 2604
s. 738.601(5) is entitled to receive a share of the net income 2605
equal to the beneficiary's fractional interest in undistributed 2606
principal assets, using carrying values a s of the distribution 2607
date. If a fiduciary makes more than one distribution of assets 2608
to beneficiaries to which this section applies, each 2609
beneficiary, including a beneficiary who does not receive part 2610
of the distribution, is entitled, as of each distribut ion date, 2611
to a share of the net income the fiduciary received after the 2612
decedent's death, an income interest's other terminating event, 2613
or the preceding distribution by the fiduciary. 2614
(2) In determining a beneficiary's share of net income 2615
under subsection (1), the following rules apply: 2616
(a) The beneficiary is entitled to receive a share of the 2617
net income equal to the beneficiary's fractional interest in the 2618
undistributed principal assets immediately before the 2619
distribution date. 2620
(b) The beneficiary's fractional interest under paragraph 2621
(a) must be calculated: 2622
1. On the aggregate carrying value of the assets as of the 2623
distribution date; and 2624
2. Reduced by: 2625
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a. Any liabilities of the estate or trust; 2626
b. Property specifically given to a beneficiary under the 2627
decedent's will or the terms of the trust; and 2628
c. Property required to pay pecuniary amounts not in 2629
trust. 2630
(c) If a disproportionate distribution of principal is 2631
made to any beneficiary, the respective fractional interests of 2632
all beneficiaries in the undistributed principal assets must be 2633
recomputed by: 2634
1. Adjusting the carrying value of the principal assets to 2635
their fair market value before the distribution; 2636
2. Reducing the fractional interest of the recipient of 2637
the disproportionate dist ribution in the remaining principal 2638
assets by the fair market value of the principal distribution; 2639
and 2640
3. Recomputing the fractional interests of all 2641
beneficiaries in the remaining principal assets based upon the 2642
now restated carrying values. 2643
(d) The distribution date under paragraph (a) may be the 2644
date as of which the fiduciary calculates the value of the 2645
assets if that date is reasonably near the date on which the 2646
assets are distributed. All distributions to a beneficiary must 2647
be valued based on the a ssets' fair market value on the date of 2648
the distribution. 2649
(3) To the extent that a fiduciary does not distribute 2650
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under this section all the collected but undistributed net 2651
income to each beneficiary as of a distribution date, the 2652
fiduciary shall maintain records showing the interest of each 2653
beneficiary in the net income. 2654
(4) If this section applies to income from an asset, a 2655
fiduciary may apply the requirements in this section to net gain 2656
or loss realized from the disposition of the asset after the 2657
decedent's date of death, an income interest's terminating 2658
event, or the preceding distribution by the fiduciary. 2659
(5) The carrying value or fair market value of trust 2660
assets shall be determined on an asset -by-asset basis and is 2661
conclusive if reasonable and d etermined in good faith. 2662
Determinations of fair market value based on appraisals 2663
performed within 2 years before or after the valuation date are 2664
presumed reasonable. The values of trust assets are conclusively 2665
presumed to be reasonable and determined in go od faith unless 2666
proven otherwise in a proceeding commenced by or on behalf of a 2667
person interested in the trust within the time provided in s. 2668
736.1008. 2669
Section 46. Section 738.701, Florida Statutes, is amended 2670
to read: 2671
(Substantial rewording of sectio n. See 2672
s. 738.701, F.S., for present text.) 2673
738.701 When right to income begins and ends. — 2674
(1) An income beneficiary is entitled to net income in 2675
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accordance with the terms of the trust from the date an income 2676
interest begins. The income interest begin s on the date 2677
specified in the terms of the trust or, if no date is specified, 2678
on the date an asset becomes subject to: 2679
(a) The trust for the current income beneficiary; or 2680
(b) A successive interest for a successor beneficiary. 2681
(2) An asset becomes s ubject to a trust under paragraph 2682
(1)(a): 2683
(a) For an asset that is transferred to the trust during 2684
the settlor's life, on the date the asset is transferred; 2685
(b) For an asset that becomes subject to the trust because 2686
of a decedent's death, on the date o f the decedent's death, even 2687
if there is an intervening period of administration of the 2688
decedent's estate; or 2689
(c) For an asset that is transferred to a fiduciary by a 2690
third party because of a decedent's death, on the date of the 2691
decedent's death. 2692
(3) An asset becomes subject to a successive interest 2693
under paragraph (1)(b) on the day after the preceding income 2694
interest ends, as determined under subsection (4), even if there 2695
is an intervening period of administration to wind up the 2696
preceding income intere st. 2697
(4) An income interest ends on the day before an income 2698
beneficiary dies or another terminating event occurs, or on the 2699
last day of a period during which there is no beneficiary to 2700
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which a fiduciary may or must distribute income. 2701
Section 47. Section 738.702, Florida Statutes, is amended 2702
to read: 2703
(Substantial rewording of section. See 2704
s. 738.702, F.S., for present text.) 2705
738.702 Apportionment of receipts and disbursements when 2706
decedent dies or income interest begins. — 2707
(1) A fiduciary shal l allocate an income receipt or 2708
disbursement, other than a receipt to which s. 738.601(2) 2709
applies, to principal if its due date occurs before the date on 2710
which: 2711
(a) For an estate, the decedent died; or 2712
(b) For a trust or successive interest, an income interest 2713
begins. 2714
(2) If the due date of a periodic income receipt or 2715
disbursement occurs on or after the date on which a decedent 2716
died or an income interest begins, a fiduciary must allocate the 2717
receipt or disbursement to income. 2718
(3) If an income recei pt or disbursement is not periodic 2719
or has no due date, a fiduciary must treat the receipt or 2720
disbursement under this section as accruing from day to day. The 2721
fiduciary shall allocate to principal the portion of the receipt 2722
or disbursement accruing before t he date on which a decedent 2723
died or an income interest begins, and shall allocate to income 2724
the balance. 2725
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(4) A receipt or disbursement is periodic under 2726
subsections (2) and (3) if: 2727
(a) The receipt or disbursement must be paid at regular 2728
intervals under an obligation to make payments; or 2729
(b) The payor customarily makes payments at regular 2730
intervals. 2731
(5) An item of income or an obligation is due under this 2732
section on the date the payor is required to make a payment. If 2733
a payment date is not stated, th ere is no due date. 2734
(6) Distributions to shareholders or other owners from an 2735
entity to which s. 738.401 applies are due: 2736
(a) On the date fixed by or on behalf of the entity for 2737
determining the persons entitled to receive the distribution; 2738
(b) If no date is fixed, on the date of the decision by or 2739
on behalf of the entity to make the distribution; or 2740
(c) If no date is fixed and the fiduciary does not know 2741
the date of the decision by or on behalf of the entity to make 2742
the distribution, on the date the fiduciary learns of the 2743
decision. 2744
(7) Section 733.817 controls over any provision of this 2745
chapter to the contrary. 2746
Section 48. Section 738.703, Florida Statutes, is amended 2747
to read: 2748
(Substantial rewording of section. See 2749
s. 738.703, F.S., for pres ent text.) 2750
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738.703 Apportionment when income interest ends. — 2751
(1) As used in this section, the term "undistributed 2752
income" means net income received on or before the date on which 2753
an income interest ends. The term does not include an item of 2754
income or expense which is due or accrued or net income that has 2755
been added or is required to be added to principal under the 2756
terms of the trust. 2757
(2) Except as otherwise provided in subsection (3), when a 2758
mandatory income interest of a beneficiary ends, the fiducia ry 2759
shall pay the beneficiary's share of the undistributed income 2760
that is not disposed of under the terms of the trust to the 2761
beneficiary or, if the beneficiary does not survive the date the 2762
interest ends, to the beneficiary's estate. 2763
(3) If a beneficiary has an unqualified power to withdraw 2764
more than 5 percent of the value of a trust immediately before 2765
an income interest ends: 2766
(a) The fiduciary shall allocate to principal the 2767
undistributed income from the portion of the trust which may be 2768
withdrawn; and 2769
(b) Subsection (2) applies only to the balance of the 2770
undistributed income. 2771
(4) When a fiduciary's obligation to pay a fixed annuity 2772
or a fixed fraction of the value of assets ends, the fiduciary 2773
shall prorate the final payment as required to preserve income 2774
tax, gift tax, estate tax, or other tax benefits. 2775
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Section 49. Section 738.801, Florida Statutes, is amended 2776
to read: 2777
(Substantial rewording of section. See 2778
s. 738.801, F.S., for present text.) 2779
738.801 Uniformity of application and construction.—In 2780
applying and construing this act, consideration shall be given 2781
to the need to promote uniformity of the law with respect to its 2782
subject matter among states that enact it. 2783
Section 50. Section 738.802, Florida Statutes, is amended 2784
to read: 2785
(Substantial rewording of section. See 2786
s. 738.802, F.S., for present text.) 2787
738.802 Relation to Electronic Signatures in Global and 2788
National Commerce Act. —This chapter modifies, limits, or 2789
supersedes the Electronic Signatures in Global and National 2790
Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not modify, 2791
limit, or supersede section 101(c) of that act, 15 U.S.C. s. 2792
7001(c), or authorize electronic delivery of any of the notices 2793
described in s. 103(b) of that act, 15 U.S.C. s. 7003(b). This 2794
chapter does not modify, limit, or supersede s. 117.285. 2795
Section 51. Section 738.803, Florida Statutes, is amended 2796
to read: 2797
738.803 Severability. —If any provision of this chapter or 2798
its application to any person or circumstance is held invalid, 2799
the invalidity does shall not affect other provisions or 2800
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applications of this chapter which can be given effect without 2801
the invalid provision or application, and to this end the 2802
provisions of this chapter are severable. 2803
Section 52. Section 738.804, Florida Statu tes, is amended 2804
to read: 2805
738.804 Application. —Except as provided in the terms of 2806
the trust instrument, the will, or this chapter, this chapter 2807
shall apply to any receipt or expense received or incurred and 2808
any disbursement made after January 1, 2025 January 1, 2003, by 2809
any trust or decedent's estate, whether established before or 2810
after January 1, 2025 January 1, 2003, and whether the asset 2811
involved was acquired by the trustee or personal representative 2812
before or after January 1, 2025 January 1, 2003. Receipts or 2813
expenses received or incurred and disbursements made before 2814
January 1, 2025, must January 1, 2003, shall be governed by the 2815
law of this state in effect at the time of the event, except as 2816
otherwise expressly provided in the will or terms of the trust 2817
or in this chapter. 2818
Section 53. This act shall take effect January 1, 2025. 2819