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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 settlor's grantor's death, the assets are 346
considered received as of the date of the settlor's death. If 347
there is a change in fiduciaries, a majority of the continuing 348
fiduciaries may elect to adjust the carrying v alues to reflect 349
the fair 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 t rust, 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, ca rrying 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 or m ust distribute net income, regardless 362
of whether the fiduciary also distributes principal to the 363
beneficiary. 364
(7) "Distribution" means a payment or transfer by a 365
fiduciary to a beneficiary in the beneficiary's capacity as a 366
beneficiary, without considera tion other than the beneficiary's 367
right to receive the payment or transfer under the terms of the 368
trust as defined in this section, will, life estate, or term 369
interest. "Distribute," "distributed," and "distributee" have 370
corresponding meanings. 371
(8) "Estate" means a decedent's estate, including 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 r eceipts 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 righ t 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 trust; 403
3. An individual whose lega l 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 described 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 pe riod 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 u nder 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 amount 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 electronic 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 Revenue 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 Code because the trust was irrevocable on 474
September 25, 1985, if there is any possibility that: 475
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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 occu r 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, determi ned, or 499
amended by: 500
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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 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 corr esponding 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 tru st is to be administered in the manner 515
of an express trust. The term does not include a constructive 516
trust; a resulting trust; a conservatorship; a custodial 517
arrangement under the Florida Uniform Transfers to Minors Act; a 518
business trust providing for cert ificates to be issued to 519
beneficiaries; a common trust fund; a land trust under s. 520
689.071; a trust created by the form of the account or by the 521
deposit agreement at a financial institution; a voting trust; a 522
security arrangement; a liquidation trust; a tr ust for the 523
primary purpose of paying debts, dividends, interest, salaries, 524
wages, profits, pensions, retirement benefits, or employee 525
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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
benefits of any kind; or an arrangement under which a person is 526
a nominee, an escrowee, or 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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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 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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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) 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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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 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 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
(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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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
738.202 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 regardi ng income 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 or 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 paragrap h (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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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
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 follows: 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 a mount 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 th e beneficiaries, the trust, or both, 700
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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
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 t he 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 an d 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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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
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 fiduc iary, 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 c reate 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 relevant 745
factors in s. 738.201(5) and the application of ss. 738.401(9), 746
738.408, and 738.413. 747
(5) A fiduciary may not exercise the power under 748
subsection (1) to make an adjustment or under s. 738.408 to make 749
a determination that an allocation is insubs tantial if: 750
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(a) The adjustment or determination would reduce the 751
amount payable to a current income beneficiary from a trust that 752
qualifies for a special tax benefit, except to the extent that 753
the adjustment is made to provide for a reasonable apportionm ent 754
of the total return of the trust between the current income 755
beneficiary and successor beneficiaries; 756
(b) The adjustment or determination would change the 757
amount payable to a beneficiary, as a fixed annuity or a fixed 758
fraction of the value of the trus t assets, under the terms of 759
the trust; 760
(c) The adjustment or determination would reduce an amount 761
that is permanently set aside for a charitable purpose under the 762
terms of the trust unless both income and principal are set 763
aside for the charitable purpo se; 764
(d) Possessing or exercising the power would cause a 765
person to be treated as the owner of all or part of the trust 766
for federal income tax purposes and the person would not be 767
treated as the owner if the fiduciary did not possess the power 768
to adjust; 769
(e) Possessing or exercising the power would cause all or 770
part of the value of the trust assets to be included in the 771
gross estate of an individual for federal real estate tax 772
purposes and the assets would not be included in the gross 773
estate of the individual if the fiduciary did not possess the 774
power to adjust; 775
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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
(f) Possessing or exercising the power would cause an 776
individual to be treated as making a gift for federal gift tax 777
purposes; 778
(g) The fiduciary is not an independent person; 779
(h) The trust is irrevocable and provides for income to be 780
paid to the settlor, and possessing or exercising the power 781
would cause the adjusted principal or income to be considered an 782
available resource or available income under a public -benefit 783
program; or 784
(i) The trust is a unitrust under ss. 738.301 -738.310. 785
(6) If paragraph (5)(d), paragraph (5)(e), paragraph 786
(5)(f), or paragraph (5)(g) applies to a fiduciary: 787
(a) A cofiduciary to which paragraphs (5)(d) -(g) do not 788
apply may exercise the power to adjust, unless the exercise of 789
the power by the remaining cofiduciary or cofiduciaries is not 790
permitted by the terms of the trust or law other than this 791
chapter; or 792
(b) If there is no cofiduciary to which paragraphs (5)(d) -793
(g) do not apply, the fiduciary may appoint a cofiduciary to 794
which paragraphs (5)(d) -(g) do not apply which may be a special 795
fiduciary with limited powers, and the appointed cofiduciary may 796
exercise the power to adjust under subsection (1), unless the 797
appointment of a cofiduciary or the exercise of th e power by a 798
cofiduciary is not permitted by the terms of the trust or law 799
other than this chapter. 800
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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
(7) A fiduciary may release or delegate to a cofiduciary 801
the power to adjust under subsection (1) if the fiduciary 802
determines that the fiduciary's possess ion or exercise of the 803
power will or may: 804
(a) Cause a result described in paragraph (5)(a), 805
paragraph (5)(b), paragraph (5)(c), paragraph (5)(d), paragraph 806
(5)(e), paragraph (5)(f), or paragraph (5)(h); or 807
(b) Deprive the trust of a tax benefit or impo se a tax 808
burden not described in paragraph (5)(a), paragraph (5)(b), 809
paragraph (5)(c), paragraph (5)(d), paragraph (5)(e), or 810
paragraph (5)(f). 811
(8) A fiduciary's release or delegation to a cofiduciary 812
under subsection (7) of the power to adjust under sub section 813
(1): 814
(a) Must be in a record; 815
(b) Applies to the entire power, unless the release or 816
delegation provides a limitation, which may be a limitation to 817
the power to adjust: 818
1. From income to principal; 819
2. From principal to income; 820
3. For specified property; or 821
4. In specified circumstances. 822
(c) For a delegation, may be modified by a redelegation 823
under this subsection by the cofiduciary to which the delegation 824
is made; and 825
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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
(d) Subject to paragraph (c), is permanent, unless the 826
release or delegation provides a specified period, including a 827
period measured by the life of an individual or the lives of 828
more than one individual. 829
(9) Terms of a trust that deny or limit the power to 830
adjust between income and principal do not affect the 831
application of this section, unless the terms of the trust 832
expressly deny or limit the power to adjust under subsection 833
(1). 834
(10) The exercise of the power to adjust under subsection 835
(1) in any accounting period may apply to the current period, 836
the immediately preceding period, and one or more subsequent 837
periods. 838
(11) A description of the exercise of the power to adjust 839
under subsection (1) must be: 840
(a) Included in a report, if any, sent to beneficiaries 841
under s. 736.0813; or 842
(b) Communicated at least annually to the qualified 843
beneficiaries as defined in s. 736.0103 other than the Attorney 844
General. 845
(12) With respect to a trust in existence on January 1, 846
2003: 847
(a) A fiduciary may not have the power to adjust under 848
this section until the statement req uired in subsection (13) is 849
provided and either no objection is made or any objection which 850
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is made has been terminated. 851
1. An objection is made if, within 60 days after the date 852
of the statement required in subsection (13), a super majority 853
of the eligible beneficiaries deliver to the fiduciary a written 854
objection to the application of this section to such trust. An 855
objection shall be deemed to be delivered to the fiduciary on 856
the date the objection is mailed to the mailing address listed 857
in the notice provided in subsection (13). 858
2. An objection is terminated upon the earlier of the 859
receipt of consent from a super majority of eligible 860
beneficiaries of the class that made the objection, or the 861
resolution of the objection under paragraph (c). 862
(b) An objection or consent under this section may be 863
executed by a legal representative or natural guardian of a 864
beneficiary without the filing of any proceeding or approval of 865
any court. 866
(c) If an objection is delivered to the fiduciary, then 867
the fiduciary may petition the circuit court for an order 868
quashing the objection and vesting in such fiduciary the power 869
to adjust under this section. The burden will be on the 870
objecting beneficiaries to prove that the power to adjust would 871
be inequitable, illegal, or other wise in contravention of the 872
settlor's intent. The court may award costs and attorney fees 873
relating to the fiduciary's petition in the same manner as in 874
chancery actions. When costs and attorney fees are to be paid 875
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out of the trust, the court may, in its d iscretion, direct from 876
which part of the trust they shall be paid. 877
(d) If no timely objection is made or if the fiduciary is 878
vested with the power to adjust by court order, the fiduciary 879
may thereafter exercise the power to adjust without providing 880
notice of its intent to do so unless, in vesting the fiduciary 881
with the power to adjust, the court determines that unusual 882
circumstances require otherwise. 883
(e)1. If a fiduciary makes a good faith effort to comply 884
with the notice provisions of subsection (13), but fails to 885
deliver notice to one or more beneficiaries entitled to such 886
notice, neither the validity of the notice required under this 887
subsection nor the fiduciary's power to adjust under this 888
section shall be affected until the fiduciary has actual not ice 889
that one or more beneficiaries entitled to notice were not 890
notified. Until the fiduciary has actual notice of the notice 891
deficiency, the fiduciary shall have all of the powers and 892
protections granted a fiduciary with the power to adjust under 893
this chapter. 894
2. When the fiduciary has actual notice that one or more 895
beneficiaries entitled to notice under subsection (13) were not 896
notified, the fiduciary's power to adjust under this section 897
shall cease until all beneficiaries who are entitled to such 898
notice, including those who were previously provided with such 899
notice, are notified and given the opportunity to object as 900
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provided for under this subsection. 901
(f) The objection of a super majority of eligible 902
beneficiaries under this subsection shall be valid for a period 903
of 1 year after the date of the notice set forth in subsection 904
(13). Upon expiration of the objection, the fiduciary may 905
thereafter give a new notice under subsection (13). 906
(g) This section is not intended to create or imply a duty 907
of the fiduciary of a trust existing on January 1, 2003, to seek 908
a power to adjust under this subsection or to give the notice 909
described in subsection (13) if the fiduciary does not desire to 910
have a power to adjust under this section, and no inference of 911
impropriety shall be made as the result of a fiduciary not 912
seeking a power to adjust under this subsection. 913
(13)(a) A fiduciary of a trust in existence on January 1, 914
2003, that is not prohibited under subsection (5) from 915
exercising the power to adjust shall, any t ime before initially 916
exercising the power, provide to all eligible beneficiaries a 917
statement containing the following: 918
1. The name, telephone number, street address, and mailing 919
address of the fiduciary and of any person who may be contacted 920
for further information; 921
2. A statement that unless a super majority of the 922
eligible beneficiaries objects to the application of this 923
section to the trust within 60 days after the date the statement 924
pursuant to this subsection was served, this section shall apply 925
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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 the trust; and 926
3. A statement that, if this section applies to the trust, 927
the fiduciary will have the power to adjust between income and 928
principal and that such a power may have an effect on the 929
distributions to such beneficiary from the trust. 930
(b) The statement may contain information regarding a 931
fiduciary's obligation with respect to the power to adjust 932
between income and principal under this section. 933
(c) The statement shall be served informally, in the 934
manner provided in the Florida Rules of Civil Procedure relating 935
to service of pleadings subsequent to the initial pleading. The 936
statement may be served on a legal representative or natural 937
guardian of a beneficiary without the filing of any proceeding 938
or approval of any court. 939
(14) For purposes of subsections (12) and (13), the term: 940
(a) "Eligible beneficiaries" means: 941
1. If at the time the determination is made there are one 942
or more beneficiaries described in s. 736.0103(19)(c), the 943
beneficiaries described in s. 736.0103(19)(a) and (c); or 944
2. If there is no beneficiary described in s. 945
736.0103(19)(c), the beneficiaries described in s. 946
736.0103(19)(a) and (b). 947
(b) "Super majority of the eligible beneficiaries" means: 948
1. If at the time the determination is made there are one 949
or more beneficiaries described in s. 736.0103(19)(c), at least 950
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two-thirds in interest of the beneficiaries described in s. 951
736.0103(19)(a) or two -thirds in interest of the beneficiaries 952
described in s. 736.0103(19)(c), if the interests of the 953
beneficiaries are reasonabl y ascertainable; otherwise, it means 954
two-thirds in number of either such class; or 955
2. If there is no beneficiary described in s. 956
736.0103(19)(c), at least two -thirds in interest of the 957
beneficiaries described in s. 736.0103(19)(a) or two -thirds in 958
interest of the beneficiaries described in s. 736.0103(19)(b), 959
if the interests of the beneficiaries are reasonably 960
ascertainable, otherwise, two -thirds in number of either such 961
class. 962
(15) A trust exists on January 1, 2003, if it is not 963
revocable on January 1 , 2003. A trust is revocable if revocable 964
by the settlor alone or in conjunction with any other person. A 965
trust is not revocable for purposes of this section if revocable 966
by the settlor only with the consent of all persons having a 967
beneficial interest in t he property. 968
Section 10. Section 738.301, Florida Statutes, is amended 969
to read: 970
(Substantial rewording of section. See 971
s. 738.301, F.S., for present text). 972
738.301 Definitions. —For purposes of this section and ss. 973
738.302-738.310: 974
(1) "Applicable value" means the amount of the net fair 975
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market value of a trust taken into account under s. 738.307. 976
(2) "Express unitrust" means a trust for which, under the 977
terms of the trust without regard to this section and ss. 978
738.302-738.310, net income must be calculated as a unitrust 979
amount. 980
(3) "Income trust" means a trust, created by an inter 981
vivos or testamentary instrument, that directs or permits the 982
trustee to distribute the net income of the trust to one or more 983
persons, in fixed propor tions or in amounts or proportions 984
determined by the trustee and regardless of whether the trust 985
directs or permits the trustee to distribute the principal of 986
the trust to one or more such persons. 987
(4) "Net fair market value of a trust" means the fair 988
market value of the assets of the trust, less the reasonably 989
known noncontingent liabilities of the trust. 990
(5) "Unitrust" means a trust for which net income is a 991
unitrust amount. The term includes an express unitrust. 992
(6) "Unitrust amount" means an amoun t computed by 993
multiplying a determined value of a trust by a determined 994
percentage. For a unitrust administered under a unitrust policy, 995
the term means the applicable value multiplied by the unitrust 996
rate. 997
(7) "Unitrust policy" means a policy described i n ss. 998
738.301-738.310 and adopted under s. 738.303. 999
(8) "Unitrust rate" means the rate used to compute the 1000
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unitrust amount for a unitrust administered under a unitrust 1001
policy. 1002
Section 11. Section 738.302, Florida Statutes, is amended 1003
to read: 1004
(Substantial rewording of section. See 1005
s. 738.302, F.S., for present text.) 1006
738.302 Applications; duties and remedies. — 1007
(1) Except as otherwise provided in subsection (2), ss. 1008
738.301-738.310 apply to all of the following: 1009
(a) An income trust, unless the terms of the trust 1010
expressly prohibit the use of ss. 738.301 -738.310 by a specific 1011
reference to this paragraph or corresponding provision of prior 1012
law, or an explicit expression of intent that net income not be 1013
calculated as a unitrust amount. 1014
(b) An express unitrust, except to the extent that the 1015
terms of the trust explicitly: 1016
1. Prohibit the use of ss. 738.301 -738.310 by a specific 1017
reference to this paragraph or corresponding provision of prior 1018
law; 1019
2. Prohibit conversion to an income trust; or 1020
3. Limit changes to the method of calculating the unitrust 1021
amount. 1022
(c) A unitrust that had been converted from an income 1023
trust. 1024
(2) The provisions of ss. 738.301 -738.310 do not apply to 1025
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a trust described in s. 170(f)(2)(B), s. 642(c)(5), s. 664(d), 1026
s. 2702(a)(3)(A)(ii) or (iii), or s. 2702(b) of the Internal 1027
Revenue Code. 1028
(3) An income trust to which ss. 738.301 -738.310 apply 1029
under paragraph (1)(a) may be converted to a unitrust under ss. 1030
738.301-738.310 regardless of the terms of the trust concerning 1031
distributions. Conversion to a unitrust under ss. 738.301 -1032
738.310 does not affect other terms of the trust concerning 1033
distributions of income or principal. 1034
(4) Sections 738.301 -738.310 apply to an estate only to 1035
the extent that a trust is a beneficiary of the estate. To the 1036
extent of the trust's interest in the estate, the estate may be 1037
administered as a unitrust, the administration of the estate as 1038
a unitrust may be discontinued, or the percentage or method used 1039
to calculate the unitrust amount may be cha nged, in the same 1040
manner as for a trust under those sections. 1041
(5) The provisions of ss. 738.301 -738.310 do not create a 1042
duty to take or consider action under ss. 738.301 -738.310 or to 1043
inform a beneficiary about the applicability of ss. 738.301 -1044
738.310. 1045
(6) A fiduciary that in good faith takes or fails to take 1046
an action under ss. 738.301 -738.310 is not liable to a person 1047
affected by the action or inaction. 1048
Section 12. Section 738.303, Florida Statutes, is amended 1049
to read: 1050
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(Substantial rewording of s ection. See 1051
s. 738.303, F.S., for present text.) 1052
738.303 Authority of fiduciary. — 1053
(1) By complying with subsections (2) and (6), and without 1054
court approval, a fiduciary may do any of the following: 1055
(a) Convert an income trust to a unitrust if the fiduciary 1056
adopts in a record a unitrust policy for the trust which 1057
provides: 1058
1. That in administering the trust, the net income of the 1059
trust will be a unitrust amount rather than net income 1060
determined without regard to ss. 738.301 -738.310; and 1061
2. The percentage and method used to calculate the 1062
unitrust amount. 1063
(b) Change the percentage or method used to calculate a 1064
unitrust amount for a unitrust if the fiduciary adopts in a 1065
record a unitrust policy or an amendment or replacement of a 1066
unitrust policy providing charges in the percentage or method 1067
used to calculate the unitrust amount. 1068
(c) Convert a unitrust to an income trust if the fiduciary 1069
adopts in a record a determination that, in administering the 1070
trust, the net income of the trust will be net in come determined 1071
without regard to ss. 738.301 -738.310 rather than a unitrust 1072
amount. 1073
(2) A fiduciary may take an action under subsection (1) if 1074
all of the following apply: 1075
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(a) The fiduciary determines that the action will assist 1076
the fiduciary to admini ster a trust impartially. 1077
(b) The fiduciary sends a notice in a record to the 1078
qualified beneficiaries determined under ss. 736.0103 and 1079
736.0110 in the manner required by s. 738.304, describing and 1080
proposing to take the action. 1081
(c) The fiduciary sends a copy of the notice under 1082
paragraph (b) to each settlor of the trust which is: 1083
1. If an individual, living; or 1084
2. If not an individual, in existence. 1085
(d) At least one member of each class of the qualified 1086
beneficiaries determined under ss. 736.0103 and 736.0110, other 1087
than the Attorney General, receiving the notice under paragraph 1088
(b) is: 1089
1. If an individual, legally competent; 1090
2. If not an individual, in existence; or 1091
3. Represented in the manner provided in s. 738.304(2). 1092
(e) The fiduciary does not receive, by the date specified 1093
in the notice under s. 738.304(4)(e), an objection in a record 1094
to the action proposed under paragraph (b) from a person to 1095
which the notice under paragraph (b) is sent. 1096
(3) If a fiduciary receives, not later than t he date 1097
stated in the notice under s. 738.304(4)(e), an objection in a 1098
record described in s. 738.304(4)(d) to a proposed action, the 1099
fiduciary or a beneficiary may request the court to have the 1100
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action taken as proposed, taken with modifications, or 1101
prevented. A person described in s. 738.304(1) may oppose the 1102
proposed action in the proceeding under this subsection 1103
regardless of whether the person: 1104
(a) Consented under s. 738.304(3); or 1105
(b) Objected under s. 738.304(4)(d). 1106
(4) If, after sending a notic e under paragraph (2)(b), a 1107
fiduciary decides not to take the action proposed in the notice, 1108
the fiduciary must notify in a record each person described in 1109
s. 738.304(1) of the decision not to take the action and the 1110
reasons for the decision. 1111
(5) If a beneficiary requests in a record that a fiduciary 1112
take an action described in subsection (1) and the fiduciary 1113
declines to act or does not act within 60 days after receiving 1114
the request, the beneficiary may request the court to direct the 1115
fiduciary to take the action requested. 1116
(6) In deciding whether and how to take an action 1117
authorized in subsection (1), or whether and how to respond to a 1118
request by a beneficiary under subsection (5), a fiduciary must 1119
consider all factors relevant to the trust and benefic iaries, 1120
including the relevant factors listed in s. 738.201(5). 1121
(7) A fiduciary may release or delegate the power to 1122
convert an income trust to a unitrust under paragraph (1)(a), 1123
change the percentage or method used to calculate a unitrust 1124
amount under paragraph (1)(b), or convert a unitrust to an 1125
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income trust under paragraph (1)(c), for a reason described in 1126
s. 738.203(7) and in the manner described in s. 738.203(8). 1127
Section 13. Section 738.304, Florida Statutes, is created 1128
to read: 1129
738.304 Notice.— 1130
(1) A notice required by s. 738.303(2)(b) must be sent in 1131
a manner authorized under s. 736.0109 to all of the following: 1132
(a) The qualified beneficiaries determined under s. 1133
736.0103, other than the Attorney General. 1134
(b) Each person that is granted a power over the trust by 1135
the terms of the trust, to the extent that the power is 1136
exercisable when the person is not then serving as a trustee: 1137
1. Including all of the following: 1138
a. Power over the investment, management, or distribution 1139
of trust property or other matters of trust administration. 1140
b. Power to appoint or remove a trustee or person 1141
described in this paragraph. 1142
2. Excluding all of the following: 1143
a. Power of appointment. 1144
b. Power of a beneficiary over the trust, to the extent 1145
that the exercise or nonexercise of the power affects the 1146
beneficial interest of the beneficiary or another beneficiary 1147
represented by the beneficiary under ss. 736.0301 -736.0306 with 1148
respect to the exercise or nonexercise of the power. 1149
c. Power over the t rust if the terms of the trust provide 1150
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that the power is held in a nonfiduciary capacity and the power 1151
must be held in a nonfiduciary capacity to achieve a tax 1152
objective under the Internal Revenue Code. 1153
(c) Each person that is granted a power by the term s of 1154
the trust to appoint or remove a trustee or person described in 1155
paragraph (b) to the extent the power is exercisable when the 1156
person that exercises the power is not then serving as a trustee 1157
or person described in paragraph (b). 1158
(2) The representati on provisions of ss. 736.0301 -736.0306 1159
apply to notice under this section. 1160
(3) A person may consent in a record at any time to action 1161
proposed under s. 738.303(2)(b). A notice required by s. 1162
738.303(2)(b) need not be sent to a person that consents under 1163
this subsection. 1164
(4) A notice required under s. 738.303(2)(b) must include 1165
all of the following: 1166
(a) The action proposed under s. 738.303(2)(b). 1167
(b) For a conversion of an income trust to a unitrust, a 1168
copy of the unitrust policy adopted under s. 738 .303(1)(a). 1169
(c) For a change in the percentage or method used to 1170
calculate the unitrust amount, a copy of the unitrust policy or 1171
amendment or replacement of the unitrust policy adopted under s. 1172
738.303(1)(b). 1173
(d) A statement that the person to which th e notice is 1174
sent may object to the proposed action by stating in a record 1175
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the basis for the objection and sending or delivering the record 1176
to the fiduciary. 1177
(e) The date by which an objection under paragraph (d) 1178
must be received by the fiduciary, which m ust be at least 30 1179
days after the date the notice is sent. 1180
(f) The date on which the action is proposed to be taken 1181
and the date on which the action is proposed to take effect. 1182
(g) The name and contact information of the fiduciary. 1183
(h) The name and contact information of a person that may 1184
be contacted for additional information. 1185
Section 14. Section 738.305, Florida Statutes, is created 1186
to read: 1187
738.305 Unitrust policy. — 1188
(1) In administering a unitrust under ss. 738.301 -738.310, 1189
a fiduciary shall follow a unitrust policy adopted under s. 1190
738.303(1)(a) or (b) or amended or replaced under s. 1191
738.303(1)(b). 1192
(2) A unitrust policy must provide all of the following: 1193
(a) The unitrust rate or method for determining the 1194
unitrust rate under s. 738.306 . 1195
(b) The method for determining the applicable value under 1196
s. 738.307. 1197
(c) The rules described in ss. 738.306 -738.310 which apply 1198
in the administration of the unitrust, whether the rules are: 1199
1. Mandatory as provided in ss. 738.307(1) and (3), 1200
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738.308(1), and 738.310; or 1201
2. Optional as provided in ss. 738.306, 738.307(2), and 1202
738.308(2), to the extent that the fiduciary elects to adopt 1203
those rules. 1204
(3) A unitrust policy may do any of the following: 1205
(a) Provide methods and standards for: 1206
1. Determining the timing of the distributions; 1207
2. Making distributions in cash or in kind or partly in 1208
cash and partly in kind; or 1209
3. Correcting an underpayment or overpayment to a 1210
beneficiary based on the unitrust amount if there is an error in 1211
calculating the unitrust amount. 1212
(b) Specify sources and the order of sources, including 1213
categories of income for federal income tax purposes, from which 1214
distributions of a unitrust amount are paid. 1215
(c) Provide other standards and rules that the fiduciary 1216
determines serve the interests of the beneficiaries. 1217
Section 15. Section 738.306, Florida Statutes, is created 1218
to read: 1219
738.306 Unitrust rate. — 1220
(1) A unitrust rate must be at least 3 percent and not 1221
more than 5 percent. Within those limits, the unitrus t rate may 1222
be: 1223
(a) A fixed unitrust rate; or 1224
(b)1. A unitrust rate that is determined for each period 1225
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using: 1226
a. A market index or other published data; or 1227
b. A mathematical blend of market indices or other 1228
published data over a stated number of pre ceding periods. 1229
2. If the rate calculated under this paragraph would be 1230
less than 3, the rate is 3; and if the rate calculated would be 1231
more than 5, the rate is 5. 1232
(2) Within the limits of subsection (1), a unitrust policy 1233
may provide for any of the fo llowing: 1234
(a) A limit on how much the unitrust rate determined under 1235
paragraph (1)(b) may increase over the unitrust rate for the 1236
preceding period or a mathematical blend of unitrust rates over 1237
a stated number of preceding periods. 1238
(b) A limit on how mu ch the unitrust rate determined under 1239
paragraph (1)(b) may decrease below the unitrust rate for the 1240
preceding period or a mathematical blend of unitrust rates over 1241
a stated number of preceding periods. 1242
(c) A mathematical blend of any of the unitrust rate s 1243
determined under paragraph (1)(b) and paragraphs (a) and (b). 1244
(3) If the fiduciary is not an independent person, the 1245
percentage used to calculate the unitrust amount is the rate 1246
determined under s. 7520(a)(2) of the Internal Revenue Code in 1247
effect for the month the conversion under this section becomes 1248
effective and for each January thereafter; however, if the rate 1249
determined under s. 7520(a)(2) of the Internal Revenue Code 1250
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exceeds 5 percent, the unitrust rate is 5 percent, and if the 1251
rate determined under s. 7520(a)(2) of the Internal Revenue Code 1252
is less than 3 percent, the unitrust rate is 3 percent. 1253
Section 16. Section 738.307, Florida Statutes, is created 1254
to read: 1255
738.307 Applicable value. — 1256
(1) A unitrust policy must provide the method for 1257
determining the fair market value of an asset for the purpose of 1258
determining the unitrust amount, including all of the following: 1259
(a) The frequency of valuing the asset, which need not 1260
require a valuation in every period. 1261
(b) The date for valuing the a sset in each period in which 1262
the asset is valued. 1263
(2) Except as otherwise provided in s. 738.309, a unitrust 1264
policy may provide methods for determining the amount of the net 1265
fair market value of the trust to take into account in 1266
determining the applicabl e value, including any of the 1267
following: 1268
(a) Obtaining an appraisal of an asset for which fair 1269
market value is not readily available. 1270
(b) Excluding specific assets or groups or types of assets 1271
in addition to those described in subsection (3). 1272
(c) Making other exceptions or modifications of the 1273
treatment of specific assets or groups or types of assets. 1274
(d) Including identification and treatment of cash or 1275
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property held for distribution. 1276
(e) Using an average of fair market values over a stated 1277
number of preceding periods, not to exceed 3 calendar years. 1278
(f) Determining the reasonable known liabilities of the 1279
trust, including treatment of liabilities to conform with the 1280
treatment of assets under paragraphs (a) -(e). 1281
(3) The following property ma y not be included in 1282
determining the value of the trust: 1283
(a) Any residential property or any tangible personal 1284
property that, as of the first business day of the current 1285
valuation year, one or more current beneficiaries of the trust 1286
have or have had the right to occupy or have or have had the 1287
right to possess or control, other than in his or her capacity 1288
as trustee of the trust. Instead, the right of occupancy or the 1289
right to possession and control is the unitrust amount with 1290
respect to such property; how ever, the unitrust amount must be 1291
adjusted to take into account partial distributions from or 1292
receipt into the trust of such property during the valuation 1293
year; 1294
(b) Any asset specifically given to a beneficiary and the 1295
return on investment on such proper ty, which return on 1296
investment must be distributable to the beneficiary; and 1297
(c) Any asset while held in an estate. 1298
Section 17. Section 738.308, Florida Statutes, is created 1299
to read: 1300
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738.308 Period.— 1301
(1) A unitrust policy must provide the period used under 1302
ss. 738.306 and 738.307. The period must be the calendar year. 1303
(2) A unitrust policy may provide standards for: 1304
(a) Using fewer preceding periods under s. 738.306(1)(b)1. 1305
or (2)(a) or (b) if: 1306
1. The trust was not in existence in a precedin g period; 1307
or 1308
2. Market indices or other published data are not 1309
available for a preceding period; 1310
(b) Using fewer preceding periods under 738.307(2)(e) if: 1311
1. The trust was not in existence in a preceding period; 1312
or 1313
2. Fair market values are not ava ilable for a preceding 1314
period; and 1315
(c) Prorating a unitrust amount on a daily basis for a 1316
part of a period in which the trust or the administration of the 1317
trust as a unitrust or the interest of any beneficiary commences 1318
or terminates. 1319
Section 18. Section 738.309, Florida Statutes, is created 1320
to read: 1321
738.309 Express unitrust. — 1322
(1) This section applies to a trust that, by its governing 1323
instrument, requires or allows income or net income to be 1324
calculated as a unitrust amount. 1325
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(2) The trustee of an express unitrust may determine the 1326
unitrust amount by reference to the net fair market value of the 1327
unitrust's assets in 1 or more years. 1328
(3) Distribution of a unitrust amount is considered a 1329
distribution of all of the net income of an express unitrust and 1330
is considered to be an income interest. 1331
(4) The unitrust amount is considered to be a reasonable 1332
apportionment of the total return of an express unitrust. 1333
(5) An express unitrust that provides or allows a 1334
distribution based on a unitrust rate in ex cess of 5 percent per 1335
year of the net fair market value of the unitrust assets is 1336
considered a distribution of all of the income of the unitrust 1337
and a distribution of principal of the unitrust to the extent 1338
that the distribution exceeds 5 percent per year. 1339
(6) An express unitrust may provide a mechanism for 1340
changing the unitrust rate, similar to the mechanism provided 1341
under s. 738.306, based upon the factors noted in that section, 1342
and may provide for a conversion from a unitrust to an income 1343
trust or a reconversion of an income trust to a unitrust under 1344
s. 738.303. 1345
(7) If an express unitrust does not specifically or by 1346
reference to s. 738.306 prohibit a power to change the unitrust 1347
rate or to convert to an income trust under s. 738.303, the 1348
trustee must have such power. 1349
(8) The governing instrument of an express unitrust may 1350
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grant the trustee discretion to adopt a consistent practice of 1351
treating capital gains as part of the unitrust amount to the 1352
extent that the unitrust amount exceeds the income determ ined as 1353
if the trust were not an express unitrust, or the governing 1354
instrument may specify the ordering of classes of income. 1355
(9) Unless the terms of the express unitrust specifically 1356
provide otherwise as provided in subsection (8), the 1357
distribution of a unitrust amount is considered a distribution 1358
made from the following sources, which are listed in order of 1359
priority: 1360
(a) Net accounting income determined under this chapter as 1361
if the trust were not a unitrust; 1362
(b) Ordinary income not allocable to net accounting 1363
income; 1364
(c) Net realized short -term capital gains; 1365
(d) Net realized long -term capital gains; and 1366
(e) The principal of the trust. 1367
(10) The governing instrument of an express unitrust may 1368
provide that the trustee may exclude assets used by the 1369
unitrust's beneficiary, including, but not limited to, a 1370
residence property or tangible personal property, from the net 1371
fair market value of the unitrust's assets for the purposes of 1372
computing the unitrust amount. The use of these assets may be 1373
considered equivalent to income or to the unitrust amount. 1374
Section 19. Section 738.310, Florida Statutes, is created 1375
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to read: 1376
738.310 Other rules. —Following the conversion of an income 1377
trust to a unitrust, the trustee shall consider the unitrust 1378
amount as paid from the following sources, which are listed in 1379
order of priority: 1380
(1) Net accounting income determined under this chapter as 1381
if the trust were not a unitrust; 1382
(2) Ordinary income not allocable to net accounting 1383
income; 1384
(3) Net realized short-term capital gains; 1385
(4) Net realized long -term capital gains; and 1386
(5) The principal of the trust. 1387
Section 20. Section 738.401, Florida Statutes, is amended 1388
to read: 1389
738.401 Character of receipts from entity.— 1390
(1) For purposes of this sect ion, the term: 1391
(a) "Capital distribution" means an entity distribution of 1392
money which is a: 1393
1. Return of capital; or 1394
2. Distribution in total or partial liquidation of the 1395
entity. 1396
(b) "Entity": 1397
1. Means a corporation, partnership, limited liabili ty 1398
company, regulated investment company, real estate investment 1399
trust, common trust fund, or any other organization or 1400
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arrangement in which a fiduciary owns or holds has an interest, 1401
regardless of whether the entity is a taxpayer for federal 1402
income tax purposes; and 1403
2. Does not include: 1404
a. A trust or estate to which s. 738.402 applies; 1405
b. A business or other activity to which s. 738.403 1406
applies which is not conducted by an entity described in 1407
subparagraph 1.; 1408
c. An asset-backed security; or 1409
d. An instrument or arrangement to which s. 738.416 1410
applies other than a trust or estate to which s. 738.402 1411
applies, a business or activity to which s. 738.403 applies, or 1412
an asset-backed security to which s. 738.608 applies . 1413
(c) "Entity distribution" means a payment or transfer by 1414
an entity to a person in the person's capacity as an owner or 1415
holder of an interest in the entity. 1416
(d) "Lookback period" means the accounting period and the 1417
preceding two accounting periods or, if less, the number of 1418
accounting periods, or portion of accounting periods, that the 1419
interest in the entity has been held by the fiduciary. 1420
(2) In this section, an attribute or action of an entity 1421
includes an attribute or action of any other entity in which the 1422
initial entity owns or holds an interest, including an interest 1423
owned or held indirectly through another entity. 1424
(3) Except as otherwise provided in paragraphs (4)(b), 1425
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(c), and (d) this section, a fiduciary shall allocate to income : 1426
(a) Money received in an entity distributi on; and 1427
(b) Tangible personal property of nominal value received 1428
from the money received from an entity. 1429
(4)(3) Except as otherwise provided in this section, A 1430
fiduciary shall allocate the following receipts from an entity 1431
to principal: 1432
(a) Property received in an entity distribution which is 1433
not: 1434
1. other than Money; or 1435
2. Tangible personal property of nominal value . 1436
(b) Money received in an entity one distribution or a 1437
series of related distributions in an exchange for part or all 1438
of the fiduciary's a trust's or estate's interest in the entity 1439
to the extent that the entity distribution reduces the 1440
fiduciary's interest in the entity relative to the interest of 1441
other persons that own or hold interests in the entity . 1442
(c) Money received in an entity distribution that is a 1443
capital distribution, to the extent not allocated to income 1444
total or partial liquidation of the entity . 1445
(d) Money received in an entity distribution from an 1446
entity that is a regulated investment company or a real estate 1447
investment trust if the money received represents short -term or 1448
long-term capital gain realized within the entity. 1449
(e) Money received from an entity listed on a public stock 1450
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exchange during any year of the trust or estate which exceeds 10 1451
percent of the fair market value of the trust's or estate's 1452
interest in the entity on the first day of that year. The amount 1453
to be allocated to principal must be reduced to the extent that 1454
the cumulative distributions from the entity to the trust or 1455
estate allocated to inc ome do not exceed a cumulative annual 1456
return of 3 percent of the fair market value of the interest in 1457
the entity at the beginning of each year or portion of a year 1458
for the number of years or portion of years in the period that 1459
the interest in the entity ha s been held by the trust or estate. 1460
If a trustee has exercised a power to adjust under s. 738.104 1461
during any period the interest in the entity has been held by 1462
the trust, the trustee, in determining the total income 1463
distributions from that entity, must tak e into account the 1464
extent to which the exercise of that power resulted in income to 1465
the trust from that entity for that period. If the income of the 1466
trust for any period has been computed under s. 738.1041, the 1467
trustee, in determining the total income dist ributions from that 1468
entity for that period, must take into account the portion of 1469
the unitrust amount paid as a result of the ownership of the 1470
trust's interest in the entity for that period. 1471
(5)(4) If a fiduciary elects, or continues an election 1472
made by its predecessor, to reinvest dividends in shares of 1473
stock of a distributing corporation or fund, whether evidenced 1474
by new certificates or entries on the books of the distributing 1475
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entity, the new shares retain their character as income. 1476
(6)(5) Except as otherwise provided in subsections (10) 1477
and (11), money received in an entity distribution is a capital 1478
distribution Money is received in partial liquidation : 1479
(a) To the extent that the entity, at or near the time of 1480
the entity a distribution, indicates th at such money is a 1481
capital distribution in partial liquidation ; or 1482
(b) To the extent that the total amount of money and 1483
property received by the fiduciary in the entity in a 1484
distribution or a series of related entity distributions is or 1485
will be greater than from an entity that is not listed on a 1486
public stock exchange exceeds 20 percent of the fiduciary's 1487
trust's or estate's pro rata share of the entity's gross assets, 1488
as shown by the entity's year -end financial statements 1489
immediately preceding the initial receipt. 1490
1491
This subsection does not apply to an entity to which subsection 1492
(7) applies. 1493
(7)(6) In the case of a capital distribution, the amount 1494
received in an entity distribution allocated to principal must 1495
be reduced to the extent that the cumulative d istributions from 1496
the entity to the fiduciary Money may not be taken into account 1497
in determining any excess under paragraph (5)(b), to the extent 1498
that the cumulative distributions from the entity to the trust 1499
or the estate allocated to income do not exceed the greater of: 1500
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(a) A cumulative annual return of 3 percent of the 1501
entity's carrying value computed at the beginning of each 1502
accounting period, or portion of an accounting period, during 1503
the lookback period for the number of years or portion of years 1504
that the entity was held by the fiduciary . If a fiduciary 1505
trustee has exercised a power to adjust under s. 738.203 during 1506
the lookback period, the fiduciary s. 738.104 during any period 1507
the interest in the entity has been held by the trust, the 1508
trustee, in determining the total income distributions from that 1509
entity, must take into account the extent to which the exercise 1510
of the power resulted in income to the fiduciary trust from that 1511
entity for that period. If the income of a fiduciary during the 1512
lookback trust for any period has been computed under ss. 1513
738.301-738.310, the fiduciary pursuant to s. 738.1041, the 1514
trustee, in determining the total income distributions from the 1515
entity for that period, must take into account the portion of 1516
the unitrust amount pai d as a result of the ownership of the 1517
trust's interest in the entity for that period; or 1518
(b) In If the case of an entity is treated as a 1519
partnership, subchapter S corporation, or a disregarded entity 1520
under pursuant to the Internal Revenue Code of 1986, as amended, 1521
the amount of income tax attributable to the fiduciary's trust's 1522
or estate's ownership share of the entity, based on its pro rata 1523
share of the taxable income of the entity that distributes the 1524
money, during the lookback period for the number of years or 1525
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portion of years that the interest in the entity was held by the 1526
fiduciary, calculated as if all of the that tax was incurred by 1527
the fiduciary. 1528
(8) If a fiduciary receives additional information about 1529
the application of this section to an entit y distribution before 1530
the fiduciary has paid part of the entity distribution to a 1531
beneficiary, the fiduciary may consider the additional 1532
information before making the payment to the beneficiary and may 1533
change a decision to make the payment to the beneficia ry. 1534
(9) If a fiduciary receives additional information about 1535
the application of this section to an entity distribution after 1536
the fiduciary has paid part of the entity distribution to a 1537
beneficiary, the fiduciary is not required to change or recover 1538
the payment to the beneficiary but may consider that information 1539
in determining whether to exercise its other powers, including 1540
but not limited to the power to adjust under s. 738.203. 1541
(10)(7) The following applies to money or property 1542
received by a private t rustee as a distribution from an 1543
investment entity described in this subsection: 1544
(a) The trustee shall first treat as income of the trust 1545
all of the money or property received from the investment entity 1546
in the current accounting period year which would be considered 1547
income under this chapter if the trustee had directly held the 1548
trust's pro rata share of the assets of the investment entity. 1549
For this purpose, all distributions received in the current 1550
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accounting period year must be aggregated. 1551
(b) The trustee shall next treat as income of the trust 1552
any additional money or property received in the current 1553
accounting period year which would have been considered income 1554
in the prior 2 accounting periods years under paragraph (a) if 1555
additional money or property had been received from the 1556
investment entity in any of those prior 2 accounting periods 1557
years. The amount to be treated as income must shall be reduced 1558
by any distributions of money or property made by the investment 1559
entity to the trust during the current and the prior 2 1560
accounting periods years which were treated as income under this 1561
paragraph. 1562
(c) The remainder of the distribution, if any, is treated 1563
as principal. 1564
(d) As used in this subsection, the term: 1565
1. "Investment entity" means an entity, othe r than a 1566
business activity conducted by the trustee described in s. 1567
738.403 or an entity that is listed on a public stock exchange, 1568
which is treated as a partnership, subchapter S corporation, or 1569
disregarded entity under pursuant to the Internal Revenue Co de 1570
of 1986, as amended, and which normally derives 50 percent or 1571
more of its annual cumulative net income from interest, 1572
dividends, annuities, royalties, rental activity, or other 1573
passive investments, including income from the sale or exchange 1574
of such passive investments. 1575
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2. "Private trustee" means a trustee who is a natural 1576
person, but is not an independent person as set forth in s. 1577
738.102 only if the trustee is unable to use the power to adjust 1578
between income and principal with respect to receipts from 1579
entities described in this subsection pursuant to s. 738.104 . A 1580
bank, trust company, or other commercial trustee is not 1581
considered a private trustee. 1582
(11) A fiduciary shall allocate to principal any money and 1583
property the fiduciary receives in a distrib ution or series of 1584
related distributions from a public entity which are greater 1585
than 10 percent of the fair market value of the fiduciary's 1586
interest in the public entity on the first day of the accounting 1587
period. The amount to be allocated to principal mus t be reduced 1588
to the extent that the cumulative distributions from the entity 1589
to the fiduciary allocated to income do not exceed a cumulative 1590
annual return of 3 percent of the fair market value of the 1591
interest in the entity at the beginning of each accounti ng 1592
period, or portion of an accounting period, during the lookback 1593
period. If a fiduciary has exercised a power to adjust under s. 1594
738.203 during the lookback period, the fiduciary, in 1595
determining the total income distributions from that entity, 1596
must take into account the extent to which the exercise of that 1597
power resulted in income to the fiduciary from that entity for 1598
that period. If the income of the fiduciary during the lookback 1599
period has been computed under ss. 738.301 -738.310, the 1600
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fiduciary, in determining the total income distribution from 1601
that entity for that period, must take into account the portion 1602
of the unitrust amount paid as a result of the ownership of the 1603
trust's interest in the entity for that period. As used in this 1604
subsection, the term " public entity" means an entity listed on a 1605
public stock exchange. 1606
(12)(8) This section must shall be applied before ss. 1607
738.506 and 738.507 ss. 738.705 and 738.706 and does not modify 1608
or change any of the provisions of those sections. 1609
Section 21. Section 738.402, Florida Statutes, is amended 1610
to read: 1611
738.402 Distribution from trust or estate. —A fiduciary 1612
shall allocate to income an amount received as a distribution of 1613
income, including a unitrust distribution under ss. 738.301 -1614
738.310, from a trust or an estate in which the fiduciary trust 1615
has an interest, other than an interest a purchased in a trust 1616
that is an investment entity, and shall interest and allocate to 1617
principal an amount received as a distribution of principal from 1618
the such a trust or estate. If a fiduciary purchases , or 1619
receives from a settlor, an interest in a trust that is an 1620
investment entity, or a decedent or donor transfers an interest 1621
in such a trust to a fiduciary, s. 738.401, s. 738.415, or s. 1622
738.416 or s. 738.608 applies to a receipt from the trust. 1623
Section 22. Section 738.403, Florida Statutes, is amended 1624
to read: 1625
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738.403 Business and other activity activities conducted 1626
by fiduciary.— 1627
(1) This section applies to If a fiduciary who conducts a 1628
business or other activity conducted by a fiduciary if the 1629
fiduciary determines that it is in the best interests of 1630
interest of all the beneficiaries to account separately for the 1631
business or other activity instead of: 1632
(a) Accounting for the business or other activity as part 1633
of the fiduciary's trust's or estate's general accounting 1634
records; or 1635
(b) Conducting the business or other activity through an 1636
entity described in s. 738.401(1)(b). , the 1637
(2) A fiduciary may account separately under this section 1638
maintain separate accounting records for the transactions of a 1639
the business or another other activity, regardless of whether or 1640
not the assets of the such business or other activity are 1641
segregated from other trust or estate assets held by the 1642
fiduciary. 1643
(3)(2) A fiduciary who accounts separately under this 1644
section for a business or other activity : 1645
(a) May determine: 1646
1. The extent to which the net cash receipts of the 1647
business or other activity must be retained for : 1648
a. Working capital; 1649
b. The acquisition or replacement of fixed assets; and 1650
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c. Other reasonably foreseeable needs of the business or 1651
other activity; and working capital, the acquisition or 1652
replacement of fixed assets, and other reasonably foreseeable 1653
needs of the business or activity, and 1654
2. The extent to which the remaining net cash receipts are 1655
accounted for as principal or income in the fiduciary's trust's 1656
or estate's general accounting records for the trust. 1657
(b) May make a determination under paragraph (a) 1658
separately and differently f rom the fiduciary's decisions 1659
concerning distributions of income or principal; and 1660
(c) Shall account for the net amount received from the 1661
sale of an asset of If a fiduciary sells assets of the business 1662
or other activity, other than a sale in the ordinary course of 1663
the business or other activity, the fiduciary must account for 1664
the net amount received as principal in the fiduciary's trust's 1665
or estate's general accounting records for the trust, to the 1666
extent the fiduciary determines that the net amount received is 1667
no longer required in the conduct of the business or other 1668
activity. 1669
(4)(3) Activities for which a fiduciary may account 1670
separately under this section maintain separate accounting 1671
records include: 1672
(a) Retail, manufacturing, service, and other tr aditional 1673
business activities. 1674
(b) Farming. 1675
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(c) Raising and selling livestock and other animals. 1676
(d) Managing Management of rental properties. 1677
(e) Extracting Extraction of minerals and other natural 1678
resources. 1679
(f) Growing and cutting timber operations. 1680
(g) An activity Activities to which s. 738.414, s. 1681
738.415, or s. 738.416 s. 738.607 applies. 1682
(h) Any other business conducted by the fiduciary. 1683
Section 23. Section 738.404, Florida Statutes, is created 1684
to read: 1685
738.404 Principal receipts.—A fiduciary shall allocate to 1686
principal: 1687
(1) To the extent not allocated to income under this 1688
chapter, an asset received from any of the following: 1689
(a) An individual during the individual's lifetime. 1690
(b) An estate. 1691
(c) A trust on termination of an income interest. 1692
(d) A payor under a contract naming the fiduciary as 1693
beneficiary. 1694
(2) Except as otherwise provided in ss. 738.401 -738.416, 1695
money or other property received from the sale, exchange, 1696
liquidation, or change in the form o f a principal asset. 1697
(3) An amount recovered from a third party to reimburse 1698
the fiduciary because of a disbursement described in s. 1699
738.502(1) or for another reason to the extent not based on the 1700
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loss of income. 1701
(4) Proceeds of property taken by emine nt domain except 1702
that proceeds awarded for loss of income in an accounting period 1703
are income if a current income beneficiary had a mandatory 1704
income interest during the period. 1705
(5) Net income received in an accounting period during 1706
which there is no benef iciary to which a fiduciary may or must 1707
distribute income. 1708
(6) Other receipts as provided in ss. 738.408 -738.416. 1709
Section 24. Section 738.405, Florida Statutes, is created 1710
to read: 1711
738.405 Rental property. —To the extent that a fiduciary 1712
does not account for the management of rental property as a 1713
business under s. 738.403, the fiduciary shall allocate to 1714
income an amount received as rent of real or personal property, 1715
including an amount received for cancellation or renewal of a 1716
lease. An amount recei ved as a refundable deposit, including a 1717
security deposit or a deposit that is to be applied as rent for 1718
future periods: 1719
(1) Must be added to principal and held subject to the 1720
terms of the lease, except as otherwise provided by law other 1721
than this chapter; and 1722
(2) Is not allocated to income or available for 1723
distribution to a beneficiary until the fiduciary's contractual 1724
obligations have been satisfied with respect to that amount. 1725
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Section 25. Section 738.406, Florida Statutes, is created 1726
to read: 1727
738.406 Receipt on obligation to be paid in money. — 1728
(1) This section does not apply to an obligation to which 1729
s. 738.409, s. 738.410, s. 738.411, s. 738.412, s. 738.414, s. 1730
738.415, or s. 738.416 applies. 1731
(2) A fiduciary shall allocate to income, withou t 1732
provision for amortization of premium, an amount received as 1733
interest on an obligation to pay money to the fiduciary, 1734
including an amount received as consideration for prepaying 1735
principal. 1736
(3) A fiduciary shall allocate to principal an amount 1737
received from the sale, redemption, or other disposition of an 1738
obligation to pay money to the fiduciary. 1739
(4) A fiduciary shall allocate to income the increment in 1740
value of a bond or other obligation for the payment of money 1741
bearing no stated interest but payable or redeemable, at 1742
maturity or another future time, in an amount that exceeds the 1743
amount in consideration of which it was issued. If the increment 1744
in value accrues and becomes payable pursuant to a fixed 1745
schedule of appreciation, it may be distributed to th e 1746
beneficiary who was the income beneficiary at the time of 1747
increment from the first principal cash available or, if none is 1748
available, when the increment is realized by sale, redemption, 1749
or other disposition. If unrealized increment is distributed as 1750
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income but out of principal, the principal must be reimbursed 1751
for the increment when realized. If, in the reasonable judgment 1752
of the fiduciary, exercised in good faith, the ultimate payment 1753
of the bond principal is in doubt, the fiduciary may withhold 1754
the payment of incremental interest to the income beneficiary. 1755
Section 26. Section 738.407, Florida Statutes, is created 1756
to read: 1757
738.407 Insurance policy or contract. — 1758
(1) This section does not apply to a contract to which s. 1759
738.409 applies. 1760
(2) Except as otherwise provided in subsection (3), a 1761
fiduciary shall allocate to principal the proceeds of a life 1762
insurance policy or other contract received by the fiduciary as 1763
beneficiary, including a contract that insures against damage 1764
to, destruction of, or lo ss of title to an asset. The fiduciary 1765
shall allocate dividends on an insurance policy to income to the 1766
extent that premiums on the policy are paid from income and to 1767
principal to the extent premiums on the policy are paid from 1768
principal. 1769
(3) A fiduciary shall allocate to income proceeds of a 1770
contract that insures the fiduciary against loss of: 1771
(a) Occupancy or other use by a current income 1772
beneficiary; 1773
(b) Income; or 1774
(c) Subject to s. 738.403, profits from a business. 1775
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Section 27. Section 738.408, Florida Statutes, is created 1776
to read: 1777
738.408 Insubstantial allocation not required. — 1778
(1) If a fiduciary determines that an allocation between 1779
income and principal required by s. 738.409, s. 738.410, s. 1780
738.411, s. 738.412, or s. 738.415 is in substantial, the 1781
fiduciary may allocate the entire amount to principal, unless s. 1782
738.203(5) applies to the allocation. 1783
(2) A fiduciary may presume an allocation is insubstantial 1784
under subsection (1) if: 1785
(a) The amount of the allocation would increase or 1786
decrease net income in an accounting period, as determined 1787
before the allocation, by less than 10 percent; and 1788
(b) The asset producing the receipt to be allocated has a 1789
carrying value less than 10 percent of the total carrying value 1790
of the assets owned or held by the fiduciary at the beginning of 1791
the accounting period. 1792
(3) The power to make a determination under subsection (1) 1793
may be: 1794
(a) Exercised by a cofiduciary in the manner described in 1795
s. 738.203(6); or 1796
(b) Released or delegated for a reaso n described in s. 1797
738.203(7) and in the manner described in s. 738.203(8). 1798
Section 28. Section 738.409, Florida Statutes, is created 1799
to read: 1800
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738.409 Deferred compensation, annuity, or similar 1801
payment.— 1802
(1) As used in this section, the term: 1803
(a) "Internal income of the separate fund" means the 1804
amount determined under subsection (2). 1805
(b) "Marital trust" means a trust: 1806
1. Of which the settlor's surviving spouse is the only 1807
current income beneficiary and is entitled to a distribution of 1808
all the current net income of the trust; and 1809
2. That qualifies for a marital deduction with respect to 1810
the settlor's estate under the Internal Revenue Code or 1811
comparable law of any state because: 1812
a. An election to qualify for a marital deduction under s. 1813
2056(b)(7) of the Internal Revenue Code has been made; 1814
b. The trust qualified for a marital deduction under s. 1815
2056(b)(5) of the Internal Revenue Code; or 1816
c. The trust otherwise qualifies for a marital deduction. 1817
(c) "Nonseparate fund" means an annuity, a deferred 1818
compensation plan, a pension plan, or other fund for which the 1819
value of the participant's or account owner's right to receive 1820
benefits can be determined only by the occurrence of a date or 1821
event as defined in the instrument governing the fund. 1822
(d) "Payment" means an amount a fiduciary may receive over 1823
a fixed number of years or during the life of one or more 1824
individuals because of services rendered or property transferred 1825
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to the payor in exchange for future amounts the fiduciary may 1826
receive. The term includes an amount received in money or 1827
property from the payor's general assets or from a separate fund 1828
created by the payor. 1829
(e) "Percent calculated" means a percent equal to the rate 1830
determined under s. 7520 of the Internal Revenue Code in effect 1831
for the month preceding the beginning of the accounting period; 1832
however, if the percent calculated exceeds 5 percent, it must be 1833
reduced to 5 percent, and if the percent calculated is less than 1834
3 percent, it must be increased to 3 percent. Notwithstanding 1835
the preceding sentence, a fiduciary who is an independent person 1836
as defined in s. 738.102 may set the percent calculated at a 1837
percentage no less than 3 percent and no greater than 5 percent. 1838
(f) "Separate fund" includes a private or commercial 1839
annuity, an individual retirement account, and a pension, 1840
profit-sharing, stock-bonus, stock ownership plan, or other 1841
deferred compensation fund holding assets exclusively for the 1842
benefit of a participant or account owner. 1843
(2) For each accounting period, the foll owing rules apply 1844
to a separate fund: 1845
(a) The fiduciary may determine the internal income of the 1846
separate fund as if the separate fund were a trust subject to 1847
this chapter. 1848
(b) Alternatively, the fiduciary may deem the internal 1849
income of the separate f und to equal the percent calculated of 1850
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the value of the separate fund according to the most recent 1851
statement of value preceding the beginning of the accounting 1852
period. The fiduciary is not liable for good faith reliance upon 1853
any valuation supplied by the p erson or persons in possession of 1854
the fund. If the fiduciary makes or terminates an election under 1855
this paragraph, the fiduciary must make such disclosure in a 1856
trust disclosure document that satisfies the requirements of s. 1857
736.1008(4)(c). 1858
(c) If the fiduciary cannot determine the value of the 1859
separate fund under paragraph (b), the value of the separate 1860
fund is deemed to equal the present value of the expected future 1861
payments as determined under s. 7520 of the Internal Revenue 1862
Code for the month preceding the beginning of the accounting 1863
period for which the computation is made. 1864
(d) The fiduciary may elect the method of determining the 1865
income of the fund pursuant to this subsection and may change 1866
the method of determining income of the fund for any future 1867
accounting period. 1868
(3) A fiduciary shall allocate a payment received from a 1869
separate fund during an accounting period to income, to the 1870
extent of the internal income of the separate fund during the 1871
period, and allocate the balance to principal. 1872
(4) The fiduciary of a marital trust shall: 1873
(a) Withdraw from a separate fund the amount the current 1874
income beneficiary of the trust requests the fiduciary to 1875
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withdraw, not greater than the amount by which the internal 1876
income of the separate fund during the accounting period exceeds 1877
the amount the fiduciary otherwise receives from the separate 1878
fund during the period. 1879
(b) Transfer from principal to income the amount the 1880
current income beneficiary requests the fiduciary to transfer, 1881
but not greater than the a mount by which the internal income of 1882
the separate fund during the period exceeds the amount the 1883
fiduciary receives from the separate fund during the period 1884
after the application of paragraph (a). 1885
(c) Distribute to the current income beneficiary as 1886
income: 1887
1. The amount of the internal income of the separate fund 1888
received or withdrawn during the period; and 1889
2. The amount transferred from principal to income under 1890
paragraph (b). 1891
(5) For a trust, other than a marital trust, of which one 1892
or more current income beneficiaries are entitled to a 1893
distribution of all the current net income, the fiduciary shall 1894
transfer from principal to income the amount by which the 1895
internal income of the separate fund during the accounting 1896
period exceeds the amount the fidu ciary receives from the 1897
separate fund during the period. 1898
(6) The fiduciary of a nonseparate fund shall calculate 1899
internal income of the fund as the percent calculated of the 1900
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present value of the right to receive the remaining payments as 1901
determined under s. 7520(a)(2) of the Internal Revenue Code for 1902
the month preceding the beginning of the accounting period. 1903
(7) If a fiduciary owns a separate fund or a nonseparate 1904
fund before January 1, 2025, the fiduciary may determine 1905
internal income, allocate paymen ts, and account for unwithdrawn 1906
internal income as provided in this section or in the manner 1907
used by the fiduciary before January 1, 2025. Such fiduciary is 1908
not required to consider subsection (5). If the fiduciary 1909
acquires a separate fund or a nonseparate fund on or after 1910
January 1, 2025, the fiduciary must calculate internal income, 1911
allocate payments, and account for unwithdrawn internal income 1912
as provided in this section. 1913
Section 29. Section 738.603, Florida Statutes, is 1914
transferred, renumbered as se ction 738.410, Florida Statutes, 1915
and amended to read: 1916
738.410 738.603 Liquidating asset.— 1917
(1) As used in For purposes of this section, the term 1918
"liquidating asset" means an asset whose value the value of 1919
which will diminish or terminate because the ass et is expected 1920
to produce receipts for a period of limited time duration. The 1921
term includes a leasehold, patent, copyright, royalty right, and 1922
right to receive payments during a period of for more than 1 1923
year under an arrangement that does not provide for the payment 1924
of interest on the unpaid balance. The term does not include a 1925
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payment subject to s. 738.602, resources subject to s. 738.604, 1926
timber subject to s. 738.605, an activity subject to s. 738.607, 1927
an asset subject to s. 738.608, or any asset for whi ch the 1928
fiduciary establishes a reserve for depreciation under s. 1929
738.703. 1930
(2) This section does not apply to a receipt that is 1931
subject to s. 738.401, s. 738.409, s. 738.411, s. 738.412, s. 1932
738.414, s. 738.415, s. 738.416, or s. 738.503. 1933
(3) A fiduciary shall allocate to income a receipt 1934
produced by a liquidating asset to the extent that the receipt 1935
does not exceed 5 percent of the receipts from the carrying 1936
value of the asset at the beginning of the accounting period and 1937
allocate a liquidating asset and the balance to principal the 1938
balance of the receipt . 1939
(4) The amount Amounts allocated to principal shall reduce 1940
the carrying value of the liquidating asset, but not below zero. 1941
Amounts received in excess of the remaining carrying value must 1942
be allocated to principal. 1943
Section 30. Section 738.604, Florida Statutes, is 1944
transferred, renumbered as section 738.411, Florida Statutes, 1945
and amended to read: 1946
738.411 738.604 Minerals, water, and other natural 1947
resources.— 1948
(1) To the extent that If a fiduciary does not account for 1949
a receipt accounts for receipts from an interest in minerals , 1950
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water, or other natural resources as a business under s. 738.403 1951
pursuant to this section , the fiduciary shall allocate the 1952
receipt such receipts as follows : 1953
(a) To income, to the extent received: 1954
1. If received As nominal delay rental or nominal annual 1955
rent on a lease; 1956
2. As a factor for interest or the equivalent of interest 1957
under an agreement creating a production payment; or 1958
3. On account of an interest in r enewable water;, a 1959
receipt shall be allocated to income. 1960
(b) To principal, if received from a production payment, a 1961
receipt shall be allocated to income if and to the extent that 1962
subparagraph (a)2. does not apply; or the agreement creating the 1963
production payment provides a factor for interest or its 1964
equivalent. The balance shall be allocated to principal. 1965
(c) Between income and principal equitably, to the extent 1966
received: 1967
1. On account of an interest in nonrenewable water; 1968
2. If an amount received As a royalty, shut-in-well 1969
payment, take-or-pay payment, or bonus; or, or delay rental is 1970
more than nominal, 90 percent shall be allocated to principal 1971
and the balance to income. 1972
3.(d) If an amount is received From a working interest or 1973
any other interest not provided for in paragraph (a) or, 1974
paragraph (b) or subparagraph 1. or subparagraph 2. , or 1975
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paragraph (c), 90 percent of the net amount received shall be 1976
allocated to principal and the balance to income. 1977
(2) An amount received on account of an interes t in water 1978
that is renewable shall be allocated to income. If the water is 1979
not renewable, 90 percent of the amount shall be allocated to 1980
principal and the balance to income. 1981
(3) This section chapter applies to an interest owned or 1982
held by a fiduciary regardless of whether or not a settlor 1983
decedent or donor was extracting minerals, water, or other 1984
natural resources before the fiduciary owned or held the 1985
interest became subject to the trust or estate . 1986
(3) An allocation of a receipt under paragraph (1)( c) is 1987
presumed to be equitable if the amount allocated to principal is 1988
equal to the amount allowed by the Internal Revenue Code as a 1989
deduction for depletion of the interest. 1990
(4) If a fiduciary trust or estate owns or holds an 1991
interest in minerals, water, or other natural resources before 1992
January 1, 2025 on January 1, 2003, the fiduciary may allocate 1993
receipts from the interest as provided in this section chapter 1994
or in the manner used by the fiduciary before January 1, 2025 1995
January 1, 2003. If the fiduciary trust or estate acquires an 1996
interest in minerals, water, or other natural resources on or 1997
after January 1, 2025 January 1, 2003, the fiduciary must shall 1998
allocate receipts from the interest as provided in this section 1999
chapter. 2000
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Section 31. Section 738. 605, Florida Statutes, is 2001
transferred, renumbered as section 738.412, Florida Statutes, 2002
and amended to read: 2003
738.412 738.605 Timber.— 2004
(1) To the extent that If a fiduciary does not account 2005
accounts for receipts from the sale of timber and related 2006
products as a business under s. 738.403 pursuant to this 2007
section, the fiduciary shall allocate the such net receipts as 2008
follows: 2009
(a) To income, to the extent that the amount of timber cut 2010
removed from the land does not exceed the rate of growth of the 2011
timber during the accounting periods in which a beneficiary has 2012
a mandatory income interest ; 2013
(b) To principal, to the extent that the amount of timber 2014
cut removed from the land exceeds the rate of growth of the 2015
timber or the net receipts are from the sale of st anding timber; 2016
(c) To or Between income and principal if the net receipts 2017
are from the lease of land used for growing and cutting timber 2018
timberland or from a contract to cut timber from land owned by a 2019
trust or estate by determining the amount of timber cut removed 2020
from the land under the lease or contract and applying the rules 2021
in paragraphs (a) and (b); or 2022
(d) To principal, to the extent that advance payments, 2023
bonuses, and other payments are not allocated under pursuant to 2024
paragraph (a), paragraph (b), or paragraph (c). 2025
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(2) In determining net receipts to be allocated under 2026
pursuant to subsection (1), a fiduciary shall deduct and 2027
transfer to principal a reasonable amount for depletion. 2028
(3) This section chapter applies to land owned or held by 2029
a fiduciary regardless of whether or not a settlor decedent or 2030
donor was cutting harvesting timber from the land property 2031
before the fiduciary owned or held the property became subject 2032
to the trust or estate . 2033
(4) If a fiduciary trust or estate owns or holds an 2034
interest in land used for growing and cutting timber before 2035
January 1, 2025 timberland on January 1, 2003 , the fiduciary may 2036
allocate net receipts from the sale of timber and related 2037
products as provided in this section chapter or in the manner 2038
used by the fiduciary before January 1, 2025 January 1, 2003. If 2039
the fiduciary trust or estate acquires an interest in land used 2040
for growing and cutting timber on or after January 1, 2025 2041
timberland after January 1, 2003 , the fiduciary must shall 2042
allocate net receipts from the sale of timber and related 2043
products as provided in this section chapter. 2044
Section 32. Section 738.606, Florida Statutes, is 2045
transferred, renumbered as section 738.413, Florida Statutes, 2046
and amended to read: 2047
738.413 738.606 Marital deduction property not productive 2048
of income.— 2049
(1) If a trust received property for which a gift or 2050
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estate tax marital deduction was under the Internal Revenue Code 2051
or comparable law of any state is allowed, for all or if part of 2052
a trust received property satisfying , or if assets are 2053
transferred to a trust that satisfies the requirements of s. 2054
732.2025(2)(a) and (c), and such property has assets have been 2055
used in whole or in part to satisfy an election by a surviving 2056
spouse under s. 732.2125 , and the settlor's spouse holds a 2057
mandatory income interest in the trust, the spouse may require 2058
the trustee, to the extent that the trust assets otherwise do 2059
consist of property that, in the aggregate, does not provide the 2060
spouse with sufficient income from or use of the trust assets to 2061
qualify for the deduction, or to satisfy an election by a 2062
surviving spouse under s. 732.2125, to make the property 2063
productive of income within a reasonable time. The trustee may: 2064
(a) Convert property to property productive of income 2065
within a reasonable time; 2066
(b) Exercise the power to adjust under s. 738.203; 2067
(c) Exercise the power to convert to or from a unitrust 2068
under s. 738.303; or 2069
(d) Exercise the fiduciary's authority under the terms of 2070
the trust to otherwise provide the surviving spouse with 2071
sufficient income from the trust assets, or the use of the trust 2072
assets, to qualify for the marital deduction, or to satisfy an 2073
election by a surviving spouse under s. 732.2125. 2074
(2) The trustee may decide which action or combination of 2075
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actions listed in subsection (1) to take. 2076
(3) Subsection (1) shall apply , and if amounts the trustee 2077
transfers from principal to income under s. 73 8.104 and 2078
distributes to the spouse from principal pursuant to the terms 2079
of the trust are insufficient to provide the spouse with the 2080
beneficial enjoyment required to obtain the marital deduction, 2081
even though, in the case of an elective share trust under s. 2082
732.2025(2), a marital deduction is not made or is only 2083
partially made, the spouse may require the trustee of such 2084
marital trust or elective share trust to make property 2085
productive of income, convert property within a reasonable time, 2086
or exercise the power conferred by ss. 738.104 and 738.1041 . 2087
(4) The terms of a trust as defined in s. 738.102 may not 2088
supersede this section unless such terms explicitly reference 2089
this section The trustee may decide which action or combination 2090
of actions to take. 2091
(2) In cases not governed by subsection (1), proceeds from 2092
the sale or other disposition of an asset are principal without 2093
regard to the amount of income the asset produces during any 2094
accounting period. 2095
Section 33. Section 738.607, Florida Statutes, is 2096
transferred, renumbered as section 738.414, Florida Statutes, 2097
and amended to read: 2098
738.414 738.607 Derivatives or and options.— 2099
(1) As used in For purposes of this section, the term 2100
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"derivative" means a contract , an or financial instrument, or 2101
other arrangement, or a combination of contracts , and financial 2102
instruments, or other arrangements, of which the value, rights, 2103
and obligations are, in whole or in part, dependent on or 2104
derived from an underlying which gives a trust the right or 2105
obligation to participa te in some or all changes in the price of 2106
a tangible or intangible asset , a or group of tangible or 2107
intangible assets, an index, or an occurrence of an event. The 2108
term includes stocks, fixed income securities, and financial 2109
instruments and arrangements bas ed on indices, commodities, 2110
interest rates, weather -related events, and credit -default 2111
events assets, or changes in a rate, an index of prices or 2112
rates, or other market indicator for an asset or a group of 2113
assets. 2114
(2) To the extent that a fiduciary does not account for a 2115
transaction in derivatives as a business under s. 738.403 for 2116
transactions in derivatives , the fiduciary shall allocate 10 2117
percent of to principal receipts from the transaction and 10 2118
percent of and disbursements made in connection with the 2119
transaction to income and allocate the balance to principal 2120
those transactions. 2121
(3) Subsection (4) applies if: 2122
(a) A fiduciary: 2123
1. If a fiduciary Grants an option to buy property from a 2124
the trust, regardless of or estate whether or not the trust or 2125
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estate owns the property when the option is granted ;, 2126
2. Grants an option that permits another person to sell 2127
property to the trust ; or 2128
3. estate, or Acquires an option to buy property for the 2129
trust or estate or an option to sell an asset owned by t he trust 2130
or estate;, and 2131
(b) The fiduciary or other owner of the asset is required 2132
to deliver the asset if the option is exercised , an amount 2133
received for granting the option shall be allocated to 2134
principal. An amount paid to acquire the option shall be paid 2135
from principal. 2136
(4) If this subsection applies, the fiduciary must 2137
allocate 10 percent to income and allocate the balance to 2138
principal of the following amounts: 2139
(a) An amount received for granting the option; 2140
(b) An amount paid to acquire the op tion; and 2141
(c) A Gain or loss realized on upon the exercise, 2142
exchange, settlement, offset, closing, or expiration of the 2143
option of an option, including an option granted to a grantor of 2144
the trust or estate for services rendered, shall be allocated to 2145
principal. 2146
Section 34. Section 738.608, Florida Statutes, is 2147
transferred, renumbered as section 738.415, Florida Statutes, 2148
and amended to read: 2149
738.415 738.608 Asset-backed securities.— 2150
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(1) Except as otherwise provided in subsection (2), a 2151
fiduciary shall allocate to income a receipt from or related to 2152
an asset-backed security, as defined in s. 738.102, to the 2153
extent that the payor identifies the payment as being from For 2154
purposes of this section, "asset -backed security" means an asset 2155
the value of which is based upon the right given the owner to 2156
receive distributions from the proceeds of financial assets that 2157
provide collateral for the security. The term includes an asset 2158
that gives the owner the right to receive from the collateral 2159
financial assets onl y the interest or other current return and 2160
allocate to principal the balance of the receipt or only the 2161
proceeds other than interest or current return . The term does 2162
not include an asset to which s. 738.401 or s. 738.602 applies. 2163
(2) If a fiduciary receives one or more payments in 2164
exchange for part or all of the fiduciary's interest in an 2165
asset-backed security, including a liquidation or redemption of 2166
the fiduciary's interest in the security trust or estate 2167
receives a payment from interest or other curren t return and 2168
from other proceeds of the collateral financial assets , the 2169
fiduciary must shall allocate to income 10 percent of receipts 2170
from the transaction and 10 percent of disbursements made in 2171
connection with the transaction, and allocate to principal the 2172
portion of the payment which the payor identifies as being from 2173
interest or other current return and allocate the balance of the 2174
receipts and disbursements payment to principal . 2175
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(3) If a trust or estate receives one or more payments in 2176
exchange for the trust's or estate's entire interest in an 2177
asset-backed security during a single accounting period, the 2178
fiduciary shall allocate the payments to principal. If a payment 2179
is one of a series of payments that will result in the 2180
liquidation of the trust's or estate's interest in the security 2181
over more than a single accounting period, the fiduciary shall 2182
allocate 10 percent of the payment to income and the balance to 2183
principal. 2184
Section 35. Section 738.416, Florida Statutes, is created 2185
to read: 2186
738.416 Other financial instrument or arrangement. —A 2187
fiduciary shall allocate receipts from or related to a financial 2188
instrument or arrangement not otherwise addressed by this 2189
chapter. The allocation must be consistent with ss. 738.414 and 2190
738.415. 2191
Section 36. Section 738.501, Florida Statutes, is amended 2192
to read: 2193
(Substantial rewording of section. See 2194
s. 738.501, F.S., for present text.) 2195
738.501 Disbursement from income. —Subject to s. 738.504, 2196
and except as otherwise provided in s. 738.601(3)(b) or (c), a 2197
fiduciary shall disburse from income: 2198
(1) One-half of: 2199
(a) The regular compensation of the fiduciary and of any 2200
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person providing investment advisory, custodial, or other 2201
services to the fiduciary to the extent that income is 2202
sufficient; and 2203
(b) An expense for an accounting, judicial or nonjudicial 2204
proceeding, or other matter that involves both income and 2205
successive interests to the extent income is sufficient. 2206
(2) The balance of the disbursements described in 2207
subsection (1), to the extent that a fiduci ary who is an 2208
independent person determines that making those disbursements 2209
from income would be in the interests of the beneficiaries. 2210
(3) Any other ordinary expense incurred in connection with 2211
administration, management, or preservation of property and 2212
distribution of income, including interest, an ordinary repair, 2213
a regularly recurring tax assessed against principal, and an 2214
expense of an accounting, judicial or nonjudicial proceeding, or 2215
other matter that involves primarily an income interest, to the 2216
extent that income is sufficient. 2217
(4) A premium on insurance covering loss of a principal 2218
asset or income from or use of the asset. 2219
Section 37. Section 738.502, Florida Statutes, is amended 2220
to read: 2221
(Substantial rewording of section. See 2222
s. 738.502, F.S., for present text.) 2223
738.502 Disbursement from principal. — 2224
(1) Subject to s. 738.505, and except as otherwise 2225
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provided in s. 738.601(3)(b), a fiduciary shall disburse all of 2226
the following from principal: 2227
(a) The balance of the disbursements described in s. 2228
738.501(1) and (3), after application of s. 738.501(2). 2229
(b) The fiduciary's compensation calculated on principal 2230
as a fee for acceptance, distribution, or termination. 2231
(c) A payment of an expense to prepare for or execute a 2232
sale or other disposition of property. 2233
(d) A payment on the principal of a trust debt. 2234
(e) A payment of an expense of an accounting, judicial or 2235
nonjudicial proceeding, or other matter that involves primarily 2236
principal, including a proceeding to construe the terms of the 2237
trust or protect property. 2238
(f) A payment of a premium for insurance, including title 2239
insurance, not described in s. 738.501(4) of which the fiduciary 2240
is the owner and beneficiary. 2241
(g) A payment of estate, inheritance, and other transfer 2242
taxes, including penalties, apportioned to the trust. 2243
(h) A payment related to environmental matters including: 2244
1. Reclamation; 2245
2. Assessing environmental conditions; 2246
3. Remedying and removing environmental contamination; 2247
4. Monitoring remedial activiti es and the release of 2248
substances; 2249
5. Preventing future releases of substances; 2250
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6. Collecting amounts from persons liable or potentially 2251
liable for the costs of the activities described in 2252
subparagraphs 1.-5.; 2253
7. Penalties imposed under environmental laws or 2254
regulations; 2255
8. Other actions to comply with environmental laws or 2256
regulations; 2257
9. Statutory or common law claims by third parties; and 2258
10 Defending claims based on environmental matters. 2259
(i) A payment of a premium for insurance for matters 2260
described in paragraph (h). 2261
(2) If a principal asset is encumbered with an obligation 2262
that requires income from the asset to be paid directly to a 2263
creditor, the fiduciary must transfer from principal to income 2264
an amount equal to the income paid to the c reditor in reduction 2265
of the principal balance of the obligation. 2266
Section 38. Section 738.503, Florida Statutes, is amended 2267
to read: 2268
(Substantial rewording of section. See 2269
s. 738.503, F.S., for present text.) 2270
738.503 Transfers from income to princip al for 2271
depreciation.— 2272
(1) For purposes of this section, "depreciation" means a 2273
reduction in value due to wear, tear, decay, corrosion, or 2274
gradual obsolescence of a tangible asset having a useful life of 2275
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more than 1 year. 2276
(2) A fiduciary may transfer to principal a reasonable 2277
amount of the net cash receipts from a principal asset that is 2278
subject to depreciation but may not transfer any amount for 2279
depreciation: 2280
(a) Of the part of real property used or available for use 2281
by a beneficiary as a residence; 2282
(b) Of tangible personal property held or made available 2283
for the personal use or enjoyment of a beneficiary; or 2284
(c) Under this section, to the extent that the fiduciary 2285
accounts: 2286
1. Under s. 738.410 for the asset; or 2287
2. Under s. 738.403 for the busi ness or other activity in 2288
which the asset is used. 2289
(3) An amount transferred to principal under this section 2290
need not be separately held. 2291
Section 39. Section 738.504, Florida Statutes, is amended 2292
to read: 2293
(Substantial rewording of section. See 2294
s. 738.504, F.S., for present text.) 2295
738.504 Reimbursement of income from principal. — 2296
(1) If a fiduciary makes or expects to make an income 2297
disbursement described in subsection (2), the fiduciary may 2298
transfer an appropriate amount from principal to income in one 2299
or more accounting periods to reimburse income. 2300
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(2) To the extent that the fiduciary has not been and does 2301
not expect to be reimbursed by a third party, income 2302
disbursements to which subsection (1) applies include: 2303
(a) An amount chargeable to pr incipal but paid from income 2304
because principal is illiquid; 2305
(b) A disbursement made to prepare property for sale, 2306
including improvements and commissions; and 2307
(c) A disbursement described in s. 738.502(1). 2308
(3) If an asset whose ownership gives rise to an income 2309
disbursement becomes subject to a successive interest after an 2310
income interest ends, the fiduciary may continue to make 2311
transfers under subsection (1). 2312
Section 40. Section 738.704, is transferred, renumbered as 2313
section 738.505, Florida Statu tes, and amended to read: 2314
738.505 738.704 Reimbursement of principal from income 2315
Transfers from income to reimburse principal .— 2316
(1) If a fiduciary makes or expects to make a principal a 2317
principal disbursement described in subsection (2) this section, 2318
the fiduciary may transfer an appropriate amount from income to 2319
principal in one or more accounting periods to reimburse 2320
principal or to provide a reserve for future principal 2321
disbursements. 2322
(2) Principal disbursements to which subsection (1) 2323
applies include the following, but only To the extent that a the 2324
fiduciary has not been and does not expect to be reimbursed by a 2325
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third party, principal disbursements to which subsection (1) 2326
applies include: 2327
(a) An amount chargeable to income but paid from principal 2328
because income is not sufficient; the amount is unusually large. 2329
(b) The cost of an improvement to principal, whether a 2330
change to an existing asset or the construction of a new asset, 2331
including a special assessment; Disbursements made to prepare 2332
property for rental, including tenant allowances, leasehold 2333
improvements, and broker's commissions. 2334
(c) A disbursement made to prepare property for rental, 2335
including tenant allowances, leasehold improvements, and 2336
commissions; Disbursements described in s. 738.7 02(1)(g). 2337
(d) A periodic payment on an obligation secured by a 2338
principal asset, to the extent the amount transferred from 2339
income to principal for depreciation is less than the periodic 2340
payment; and 2341
(e) A disbursement described in s. 738.502(1). 2342
(3) If an the asset whose the ownership of which gives 2343
rise to a principal disbursement the disbursements becomes 2344
subject to a successive income interest after an income interest 2345
ends, the a fiduciary may continue to make transfers under 2346
transfer amounts from income to principal as provided in 2347
subsection (1). 2348
(4) To the extent principal cash is not sufficient to pay 2349
the principal balance of payments due on mortgaged property, 2350
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income may be applied to such payment in order to avoid a 2351
default on any mortgage or security interest securing the 2352
property. Income shall be reimbursed for such payments out of 2353
the first available principal cash. If the asset the ownership 2354
of which gives rise to the disbursements described in this 2355
subsection becomes subject to a successi ve income interest after 2356
an income interest ends, all rights of the initial income 2357
interest shall lapse, and amounts remaining due from principal 2358
shall not be a lien on the assets of the trust. 2359
Section 41. Section 738.705, Florida Statutes, is 2360
transferred, renumbered as section 738.506, Florida Statutes, 2361
and amended to read: 2362
738.506 738.705 Income taxes.— 2363
(1) A tax required to be paid by a fiduciary which is 2364
based on receipts allocated to income must shall be paid from 2365
income. 2366
(2) A tax required to be paid by a fiduciary which is 2367
based on receipts allocated to principal must shall be paid from 2368
principal, even if the tax is called an income tax by the taxing 2369
authority. 2370
(3) Subject to subsection (4) and ss. 738.504, 738.505, 2371
and 738.507, a tax required to be paid by a fiduciary on a the 2372
trust's or estate's share of an entity's taxable income in an 2373
accounting period must shall be paid from proportionately: 2374
(a) From Income and principal proportionately to the 2375
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allocation between income and principal of to the extent 2376
receipts from the entity in the period are allocated to income . 2377
(b) From principal to the extent receipts from the entity 2378
are allocated to principal. 2379
(c) From Principal to the extent that the tax exceeds the 2380
income taxes payable by the trust or estate exceed the total 2381
receipts from the entity in the period. 2382
(4) After applying subsections (1), (2), and (3), a 2383
fiduciary shall adjust income or principal receipts, to the 2384
extent the taxes that the fiduciary pays are re duced because of 2385
a deduction for a payment made to a beneficiary. 2386
(5) Subject to the limitations and excluded assets 2387
provided under s. 736.08145, a reimbursement of state or federal 2388
income tax elected to be made by a fiduciary pursuant to s. 2389
736.08145 must be allocated and paid under paragraphs (3)(a) and 2390
(b) After applying subsections (1) -(3), the fiduciary shall 2391
adjust income or principal receipts to the extent that the 2392
trust's or estate's income taxes are reduced, but not 2393
eliminated, because the trust or estate receives a deduction for 2394
payments made to a beneficiary . The amount distributable to that 2395
beneficiary as income as a result of this adjustment shall be 2396
equal to the cash received by the trust or estate, reduced, but 2397
not below zero, by the entity' s taxable income allocable to the 2398
trust or estate multiplied by the trust's or estate's income tax 2399
rate. The reduced amount shall be divided by the difference 2400
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between 1 and the trust's or estate's income tax rate in order 2401
to determine the amount distributa ble to that beneficiary as 2402
income before giving effect to other receipts or disbursements 2403
allocable to that beneficiary's interest. 2404
Section 42. Section 738.706, Florida Statutes, is 2405
transferred, renumbered as section 738.507, Florida Statutes, 2406
and amended to read: 2407
738.507 738.706 Adjustment Adjustments between principal 2408
and income because of taxes. — 2409
(1) A fiduciary may make an adjustment adjustments between 2410
principal and income and principal to offset the shifting of 2411
economic interests or tax benefits between current income 2412
beneficiaries and successor remainder beneficiaries which arises 2413
arise from: 2414
(a) An election or decision Elections and decisions, other 2415
than those described in paragraph (b), that the fiduciary makes 2416
from time to time regarding a tax matter, other than a decision 2417
to claim an income tax deduction to which subsection (2) applies 2418
matters; 2419
(b) An income tax or any other tax that is imposed on upon 2420
the fiduciary or a benefic iary as a result of a transaction 2421
involving the fiduciary or a distribution by from the fiduciary 2422
estate or trust; or 2423
(c) The Ownership by the fiduciary an estate or trust of 2424
an interest in an entity a part of whose taxable income, 2425
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regardless of whether or not distributed, is includable in the 2426
taxable income of the fiduciary estate, trust, or a beneficiary; 2427
or 2428
(d) An election or decision a fiduciary makes to reimburse 2429
any tax under s. 736.08145 . 2430
(2) If the amount of an estate tax marital deduction or 2431
charitable contribution deduction is reduced because a fiduciary 2432
deducts an amount paid from principal for income tax purposes 2433
instead of deducting it such amount for estate tax purposes , 2434
and, as a result, estate taxes paid from principal are increased 2435
and income taxes paid by a fiduciary or a an estate, trust, or 2436
beneficiary are decreased, the fiduciary shall charge each 2437
estate, trust, or beneficiary that benefits from the decrease in 2438
income tax to shall reimburse the principal from which the 2439
increase in estate tax is paid. The total reimbursement must 2440
shall equal the increase in the estate tax , to the extent that 2441
the principal used to pay the increase would have qualified for 2442
a marital deduction or charitable contribution deduction but for 2443
the payment. The proportionate share of the reimbursement for 2444
each fiduciary estate, trust, or beneficiary whose income taxes 2445
are reduced must shall be the same as its such estate's, 2446
trust's, or beneficiary's proportionate share of the total 2447
decrease in income tax. An estate or trust shall reimburse 2448
principal from income. 2449
(3) A fiduciary that charges a beneficiary under 2450
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subsection (2) may offset the charge by obtaining payment from 2451
the beneficiary, withholding an amount from future dist ributions 2452
to the beneficiary, or adopting another method or combination of 2453
methods. 2454
Section 43. Section 738.508, Florida Statutes, is created 2455
to read: 2456
738.508 Apportionment of property expenses between tenant 2457
and remainderman.— 2458
(1) For purposes of this section, the term: 2459
(a) "Remainderman" means the holder of the remainder 2460
interests after the expiration of a tenant's estate in property. 2461
(b) "Tenant" means the holder of an estate for life or 2462
term of years in real property or personal property, or both. 2463
(2) If a trust has not been created, expenses shall be 2464
apportioned between the tenant and remainderman as follows: 2465
(a) The following expenses are allocated to and shall be 2466
paid by the tenant: 2467
1. All ordinary expenses incurred in connection wit h the 2468
administration, management, or preservation of the property, 2469
including interest, ordinary repairs, regularly recurring taxes 2470
assessed against the property, and expenses of a proceeding or 2471
other matter that concerns primarily the tenant's estate or us e 2472
of the property. 2473
2. Recurring premiums on insurance covering the loss of 2474
the property or the loss of income from or use of the property. 2475
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3. Any of the expenses described in subparagraph (b)3. 2476
which are attributable to the use of the property by the t enant. 2477
(b) The following expenses are allocated to and shall be 2478
paid by the remainderman: 2479
1. Payments on the principal of a debt secured by the 2480
property, except to the extent that the debt is for expenses 2481
allocated to the tenant. 2482
2. Expenses of a pro ceeding or other matter that concerns 2483
primarily the title to the property, other than title to the 2484
tenant's estate. 2485
3. Except as provided in subparagraph (a)3., expenses 2486
related to environmental matters, including reclamation, 2487
assessing environmental conditions, remedying and removing 2488
environmental contamination, monitoring remedial activities and 2489
the release of substances, preventing future releases of 2490
substances, collecting amounts from persons liable or 2491
potentially liable for the costs of such activ ities, penalties 2492
imposed under environmental laws or regulations and other 2493
payments made to comply with those laws or regulations, 2494
statutory or common law claims by third parties, and defending 2495
claims based on environmental matters. 2496
4. Extraordinary repa irs. 2497
(c) If the tenant or remainderman incurred an expense for 2498
the benefit of his or her own estate without consent or 2499
agreement of the other, he or she must pay such expense in full. 2500
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(d) Except as provided in paragraph (c), the cost of, or 2501
special taxes or assessments for, an improvement representing an 2502
addition of value to property forming part of the principal 2503
shall be paid by the tenant if the improvement is not reasonably 2504
expected to outlast the estate of the tenant. In all other 2505
cases, only a part shall be paid by the tenant while the 2506
remainder shall be paid by the remainderman. The part payable by 2507
the tenant is ascertainable by taking that percentage of the 2508
total that is found by dividing the present value of the 2509
tenant's estate by the present val ue of an estate of the same 2510
form as that of the tenant, except that it is limited for a 2511
period corresponding to the reasonably expected duration of the 2512
improvement. The computation of present values of the estates 2513
shall be made by using the rate determined under s. 7520(a)(2) 2514
of the Internal Revenue Code then in effect and, in the case of 2515
an estate for life, the official mortality tables then in effect 2516
under s. 7520 of the Internal Revenue Code. Other evidence of 2517
duration or expectancy may not be considered . 2518
(3) This section does not apply to the extent that it is 2519
inconsistent with the instrument creating the estates, the 2520
agreement of the parties, or the specific direction of the 2521
Internal Revenue Code taxing or other applicable law. 2522
(4) The common law ap plicable to tenants and remaindermen 2523
supplements this section, except as modified by this section or 2524
other laws. 2525
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Section 44. Section 738.601, Florida Statutes, is amended 2526
to read: 2527
(Substantial rewording of section. See 2528
s. 738.601, F.S., for present t ext.) 2529
738.601 Determination and distribution of net income. — 2530
(1) This section applies when: 2531
(a) The death of an individual results in the creation of 2532
an estate or trust; or 2533
(b) An income interest in a trust terminates, whether the 2534
trust continues or is distributed. 2535
(2) A fiduciary of an estate or trust with an income 2536
interest that terminates shall determine, under subsection (6) 2537
and ss. 738.401-738.508 and 738.701-738.703, the amount of net 2538
income and net principal receipts received from property 2539
specifically given to a beneficiary. The fiduciary shall 2540
distribute the net income and net principal receipts to the 2541
beneficiary who is to receive the specific property. 2542
(3) A fiduciary shall determine the income and net income 2543
of an estate or income int erest in a trust which terminates, 2544
other than the amount of net income determined under subsection 2545
(2), under ss. 738.401 -738.508 and 738.701-738.703, and by: 2546
(a) Including in net income all income from property used 2547
or sold to discharge liabilities. 2548
(b) Paying from income or principal, in the fiduciary's 2549
discretion, fees of attorneys, accountants, and fiduciaries; 2550
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court costs and other expenses of administration; and interest 2551
on estate and inheritance taxes and other taxes imposed because 2552
of the decedent's death, but the fiduciary may pay the expenses 2553
from income of property passing to a trust for which the 2554
fiduciary claims an estate tax marital or charitable deduction 2555
under the Internal Revenue Code or comparable law of any state 2556
only to the extent tha t: 2557
1. The payment of the those expenses from income will not 2558
cause the reduction or loss of the deduction; or 2559
2. The fiduciary makes an adjustment under s. 738.507(2); 2560
and 2561
(c) Paying from principal other disbursements made or 2562
incurred in connection with the settlement of the estate or the 2563
winding up of an income interest that terminates, including: 2564
1. To the extent authorized by the decedent's will, the 2565
terms of the trust, or applicable law, debts, funeral expenses, 2566
disposition of remains, family a llowances, estate and 2567
inheritance taxes, and other taxes imposed because of the 2568
decedent's death; and 2569
2. Related penalties apportioned by the decedent's will, 2570
the terms of the trust, or applicable law to the estate or 2571
income interest that terminates. 2572
(4) If a decedent's will or the terms of a trust provide 2573
for the payment of interest or the equivalent of interest to a 2574
beneficiary who receives a pecuniary amount outright, the 2575
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fiduciary shall make the payment from net income determined 2576
under subsection (3) or from principal to the extent that net 2577
income is insufficient. 2578
(5) A fiduciary shall distribute net income remaining 2579
after payments required by subsection (4) in the manner 2580
described in s. 738.602 to all other beneficiaries, including a 2581
beneficiary who receives a pecuniary amount in trust, even if 2582
the beneficiary holds an unqualified power to withdraw assets 2583
from the trust or other presently exercisable general power of 2584
appointment over the trust. 2585
(6) A fiduciary may not reduce principal or income 2586
receipts from property described in subsection (2) because of a 2587
payment described in s. 738.501 or s. 738.502 to the extent that 2588
the decedent's will, the terms of the trust, or applicable law 2589
requires the fiduciary to make the payment from assets other 2590
than the property or that the fiduciary recovers or expects to 2591
recover the payment from a third party. The net income and 2592
principal receipts from the property must be determined by 2593
including the amount the fiduciary receives or pays regarding 2594
the property, whether the amount accrued or became due before, 2595
on, or after the date of the decedent's death or an income 2596
interest's terminating event, and making a reasonable provision 2597
for an amount the estate or income interest may become obligated 2598
to pay after the prope rty is distributed. 2599
Section 45. Section 738.602, Florida Statutes, is amended 2600
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to read: 2601
(Substantial rewording of section. See 2602
s. 738.602, F.S., for present text.) 2603
738.602 Distribution to successor beneficiary. — 2604
(1) Except to the extent that ss. 738.301-738.310 apply 2605
for a beneficiary that is a trust, each beneficiary described in 2606
s. 738.601(5) is entitled to receive a share of the net income 2607
equal to the beneficiary's fractional interest in undistributed 2608
principal assets, using carrying values as of the distribution 2609
date. If a fiduciary makes more than one distribution of assets 2610
to beneficiaries to which this section applies, each 2611
beneficiary, including a beneficiary who does not receive part 2612
of the distribution, is entitled, as of each distributi on date, 2613
to a share of the net income the fiduciary received after the 2614
decedent's death, an income interest's other terminating event, 2615
or the preceding distribution by the fiduciary. 2616
(2) In determining a beneficiary's share of net income 2617
under subsection (1), the following rules apply: 2618
(a) The beneficiary is entitled to receive a share of the 2619
net income equal to the beneficiary's fractional interest in the 2620
undistributed principal assets immediately before the 2621
distribution date. 2622
(b) The beneficiary's f ractional interest under paragraph 2623
(a) must be calculated: 2624
1. On the aggregate carrying value of the assets as of the 2625
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distribution date; and 2626
2. Reduced by: 2627
a. Any liabilities of the estate or trust; 2628
b. Property specifically given to a beneficiary u nder the 2629
decedent's will or the terms of the trust; and 2630
c. Property required to pay pecuniary amounts not in 2631
trust. 2632
(c) If a disproportionate distribution of principal is 2633
made to any beneficiary, the respective fractional interests of 2634
all beneficiaries in the undistributed principal assets must be 2635
recomputed by: 2636
1. Adjusting the carrying value of the principal assets to 2637
their fair market value before the distribution; 2638
2. Reducing the fractional interest of the recipient of 2639
the disproportionate distr ibution in the remaining principal 2640
assets by the fair market value of the principal distribution; 2641
and 2642
3. Recomputing the fractional interests of all 2643
beneficiaries in the remaining principal assets based upon the 2644
now restated carrying values. 2645
(d) The distribution date under paragraph (a) may be the 2646
date as of which the fiduciary calculates the value of the 2647
assets if that date is reasonably near the date on which the 2648
assets are distributed. All distributions to a beneficiary must 2649
be valued based on the as sets' fair market value on the date of 2650
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the distribution. 2651
(3) To the extent that a fiduciary does not distribute 2652
under this section all the collected but undistributed net 2653
income to each beneficiary as of a distribution date, the 2654
fiduciary shall maintain records showing the interest of each 2655
beneficiary in the net income. 2656
(4) If this section applies to income from an asset, a 2657
fiduciary may apply the requirements in this section to net gain 2658
or loss realized from the disposition of the asset after the 2659
decedent's date of death, an income interest's terminating 2660
event, or the preceding distribution by the fiduciary. 2661
(5) The carrying value or fair market value of trust 2662
assets shall be determined on an asset -by-asset basis and is 2663
conclusive if reasonable and de termined in good faith. 2664
Determinations of fair market value based on appraisals 2665
performed within 2 years before or after the valuation date are 2666
presumed reasonable. The values of trust assets are conclusively 2667
presumed to be reasonable and determined in goo d faith unless 2668
proven otherwise in a proceeding commenced by or on behalf of a 2669
person interested in the trust within the time provided in s. 2670
736.1008. 2671
Section 46. Section 738.701, Florida Statutes, is amended 2672
to read: 2673
(Substantial rewording of section . See 2674
s. 738.701, F.S., for present text.) 2675
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738.701 When right to income begins and ends. — 2676
(1) An income beneficiary is entitled to net income in 2677
accordance with the terms of the trust from the date an income 2678
interest begins. The income interest begins on the date 2679
specified in the terms of the trust or, if no date is specified, 2680
on the date an asset becomes subject to: 2681
(a) The trust for the current income beneficiary; or 2682
(b) A successive interest for a successor beneficiary. 2683
(2) An asset becomes su bject to a trust under paragraph 2684
(1)(a): 2685
(a) For an asset that is transferred to the trust during 2686
the settlor's life, on the date the asset is transferred; 2687
(b) For an asset that becomes subject to the trust because 2688
of a decedent's death, on the date of the decedent's death, even 2689
if there is an intervening period of administration of the 2690
decedent's estate; or 2691
(c) For an asset that is transferred to a fiduciary by a 2692
third party because of a decedent's death, on the date of the 2693
decedent's death. 2694
(3) An asset becomes subject to a successive interest 2695
under paragraph (1)(b) on the day after the preceding income 2696
interest ends, as determined under subsection (4), even if there 2697
is an intervening period of administration to wind up the 2698
preceding income interes t. 2699
(4) An income interest ends on the day before an income 2700
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beneficiary dies or another terminating event occurs, or on the 2701
last day of a period during which there is no beneficiary to 2702
which a fiduciary may or must distribute income. 2703
Section 47. Section 738.702, Florida Statutes, is amended 2704
to read: 2705
(Substantial rewording of section. See 2706
s. 738.702, F.S., for present text.) 2707
738.702 Apportionment of receipts and disbursements when 2708
decedent dies or income interest begins. — 2709
(1) A fiduciary shal l allocate an income receipt or 2710
disbursement, other than a receipt to which s. 738.601(2) 2711
applies, to principal if its due date occurs before the date on 2712
which: 2713
(a) For an estate, the decedent died; or 2714
(b) For a trust or successive interest, an income interest 2715
begins. 2716
(2) If the due date of a periodic income receipt or 2717
disbursement occurs on or after the date on which a decedent 2718
died or an income interest begins, a fiduciary must allocate the 2719
receipt or disbursement to income. 2720
(3) If an income receipt or disbursement is not periodic 2721
or has no due date, a fiduciary must treat the receipt or 2722
disbursement under this section as accruing from day to day. The 2723
fiduciary shall allocate to principal the portion of the receipt 2724
or disbursement accruing before the date on which a decedent 2725
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died or an income interest begins, and shall allocate to income 2726
the balance. 2727
(4) A receipt or disbursement is periodic under 2728
subsections (2) and (3) if: 2729
(a) The receipt or disbursement must be paid at regular 2730
intervals under an obligation to make payments; or 2731
(b) The payor customarily makes payments at regular 2732
intervals. 2733
(5) An item of income or an obligation is due under this 2734
section on the date the payor is required to make a payment. If 2735
a payment date is not stated, there is no due date. 2736
(6) Distributions to shareholders or other owners from an 2737
entity to which s. 738.401 applies are due: 2738
(a) On the date fixed by or on behalf of the entity for 2739
determining the persons entitled to receive the dis tribution; 2740
(b) If no date is fixed, on the date of the decision by or 2741
on behalf of the entity to make the distribution; or 2742
(c) If no date is fixed and the fiduciary does not know 2743
the date of the decision by or on behalf of the entity to make 2744
the distribution, on the date the fiduciary learns of the 2745
decision. 2746
(7) Section 733.817 controls over any provision of this 2747
chapter to the contrary. 2748
Section 48. Section 738.703, Florida Statutes, is amended 2749
to read: 2750
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(Substantial rewording of section. See 2751
s. 738.703, F.S., for present text.) 2752
738.703 Apportionment when income interest ends. — 2753
(1) As used in this section, the term "undistributed 2754
income" means net income received on or before the date on which 2755
an income interest ends. The term does not include an item of 2756
income or expense which is due or accrued or net income that has 2757
been added or is required to be added to principal under the 2758
terms of the trust. 2759
(2) Except as otherwise provided in subsection (3), when a 2760
mandatory income interest of a benefi ciary ends, the fiduciary 2761
shall pay the beneficiary's share of the undistributed income 2762
that is not disposed of under the terms of the trust to the 2763
beneficiary or, if the beneficiary does not survive the date the 2764
interest ends, to the beneficiary's estate. 2765
(3) If a beneficiary has an unqualified power to withdraw 2766
more than 5 percent of the value of a trust immediately before 2767
an income interest ends: 2768
(a) The fiduciary shall allocate to principal the 2769
undistributed income from the portion of the trust whic h may be 2770
withdrawn; and 2771
(b) Subsection (2) applies only to the balance of the 2772
undistributed income. 2773
(4) When a fiduciary's obligation to pay a fixed annuity 2774
or a fixed fraction of the value of assets ends, the fiduciary 2775
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shall prorate the final payment as required to preserve income 2776
tax, gift tax, estate tax, or other tax benefits. 2777
Section 49. Section 738.801, Florida Statutes, is amended 2778
to read: 2779
(Substantial rewording of section. See 2780
s. 738.801, F.S., for present text.) 2781
738.801 Uniformity of application and construction. —In 2782
applying and construing this act, consideration shall be given 2783
to the need to promote uniformity of the law with respect to its 2784
subject matter among states that enact it. 2785
Section 50. Section 738.802, Florida Statutes, i s amended 2786
to read: 2787
(Substantial rewording of section. See 2788
s. 738.802, F.S., for present text.) 2789
738.802 Relation to Electronic Signatures in Global and 2790
National Commerce Act. —This chapter modifies, limits, or 2791
supersedes the Electronic Signatures in Glob al and National 2792
Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not modify, 2793
limit, or supersede section 101(c) of that act, 15 U.S.C. s. 2794
7001(c), or authorize electronic delivery of any of the notices 2795
described in s. 103(b) of that act, 15 U.S.C. s. 700 3(b). This 2796
chapter does not modify, limit, or supersede s. 117.285. 2797
Section 51. Section 738.803, Florida Statutes, is amended 2798
to read: 2799
738.803 Severability. —If any provision of this chapter or 2800
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its application to any person or circumstance is held inv alid, 2801
the invalidity does shall not affect other provisions or 2802
applications of this chapter which can be given effect without 2803
the invalid provision or application, and to this end the 2804
provisions of this chapter are severable. 2805
Section 52. Section 738.80 4, Florida Statutes, is amended 2806
to read: 2807
738.804 Application. —Except as provided in the terms of 2808
the trust instrument, the will, or this chapter, this chapter 2809
shall apply to any receipt or expense received or incurred and 2810
any disbursement made after January 1, 2025 January 1, 2003, by 2811
any trust or decedent's estate, whether established before or 2812
after January 1, 2025 January 1, 2003, and whether the asset 2813
involved was acquired by the trustee or personal representative 2814
before or after January 1, 2025 January 1, 2003. Receipts or 2815
expenses received or incurred and disbursements made before 2816
January 1, 2025, must January 1, 2003, shall be governed by the 2817
law of this state in effect at the time of the event, except as 2818
otherwise expressly provided in the will or terms of the trust 2819
or in this chapter. 2820
Section 53. This act shall take effect January 1, 2025. 2821