The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Judiciary
BILL: SB 1316
INTRODUCER: Senator Berman
SUBJECT: Florida Uniform Fiduciary Income and Principal Act
DATE: February 2, 2024
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Davis Cibula JU Pre-meeting
2. BI
3. RC
I. Summary:
SB 1316 replaces the current Florida Uniform and Principal Income Act with the
Florida Uniform Fiduciary Income and Principal Act. The provisions in this bill, which are found
in ch. 738, F.S., govern the allocation of trust and estate receipts and disbursements between
principal and interest where a Florida trust does not provide its own terms for the allocation. The
new act, or FUFIPA, would, in addition to modernizing trust law generally:
Allow for total-return investing under the “modern portfolio theory.”
Provide for the conversion of an existing trust into a unitrust.
Provide flexibility for more individualized estate planning.
Provide a governing law provision to reduce jurisdictional disputes.
The bill takes effect January 1, 2025.
II. Present Situation:
Background
Trusts
A trust is a relationship in which one party, the settlor,
1
gives another party, the trustee, the right
to hold title to the settlor’s assets for the benefit of a third party, the beneficiary. A trust may be
created and take effect during a settlor’s lifetime, which is known as a living trust, or may be
created by a will and take effect when the settlor dies, which is known as a testamentary trust.
2
A trust may be revocable, so that the terms may be changed at any time before the settlor dies, or
irrevocable, so that the terms cannot be modified after the trust is created unless the beneficiaries
1
“Settlor” means a person, including a testator, who creates or contributes property to a trust. Section 736.0103(18), F.S.
2
See “inter vivos trust” and “testamentary trust,” Black’s Law Dictionary (11th ed. 2019).
REVISED: BILL: SB 1316 Page 2
consent to the modifications.
3
Most trusts are generally governed by the Florida Trust Code,
codified in chapter 736, F.S. However, additional provisions of Florida law may apply if the trust
has special attributes.
Uniform Fiduciary Income and Principal Act
Traditionally, many trust beneficiaries were entitled to receive either income earned by trust
investments, referred to as an income beneficiary or a share of trust principal when an income
interest ended, which is referred to as a remainder beneficiary.
4
In this scenario, the trustee’s
allocation of receipts and disbursements to income or principal had a direct effect on a
beneficiary’s financial interests, and thus the financial interests of an income beneficiary were
often at odds with those of the remainder beneficiary.
5
In 1931, the National Conference of Commissioners on Uniform State Laws, also known as the
Uniform Law Commission, or ULC,
6
adopted the first Uniform Principal and Income Act which
was referred to as the UPIA. In pertinent part, UPIA governed the allocation of trust and estate
receipts and disbursements between income and principal where the terms of the trust or will did
not provide for the allocation or give the fiduciary a discretionary power of administration.
Forty-seven states, including Florida, subsequently adopted some form of UPIA. Florida’s
version, adopted in 2002 and known as the Florida Uniform Principal and Income Act or FUPIA,
is codified in ch. 738, F.S.
However, in recent decades, the distinction between income and principal has lost some
significance, for two reasons. First, the “modern portfolio theory” allows trustees to invest for
the maximum total return, whether the return is in the form of income or principal growth.
7
This
has led to the rise in popularity of the “unitrust,” which trust allows the income beneficiary to
receive income from the trust at a set percentage of the trust’s fair market value while the
remainder beneficiary receives a fair disbursement after the income interest ends, thereby
reducing the likelihood that the financial interests of the income beneficiary and the remainder
beneficiary will be at odds.
8
In other words, under a unitrust, both the income beneficiary and
remainder beneficiary benefit from an increase in the value of a trust’s assets.
9
Second, modern
3
Greg Depersio, Investopedia (Apr. 30, 2023), Revocable Trust v. Irrevocable Trust: What’s the Difference,
https://www.investopedia.com/ask/answers/071615/what-difference-between-revocable-trust-and-living-trust.asp (last
visited Jan. 31, 2024).
4
For example, a trust may require that all trust income be distributed to the settlor’s surviving spouse, but that trust principal be held and
accumulated for the settlor’s surviving children, to be paid after the surviving spouse’s death. Uniform Law Commission, The Uniform
Fiduciary Income and Principal Act: A Summary, https://www.uniformlaws.org/viewdocument/enactment-kit-
74?CommunityKey=1105f9bb-eb93-4d4d-a1ab-a535ef73de0c&tab=librarydocuments (last visited Jan. 25, 2024).
5
Id.
6
The NCCUSL is an association of commissioners appointed by each state, the District of Columbia, the Commonwealth of
Puerto Rico, and the U.S. Virgin Islands, that discusses and debates which areas of the law require uniformity among the
states and territories and drafts uniform acts accordingly. Legal Information Institute, National Conference of Commissioners
on Uniform State Laws,
https://www.law.cornell.edu/wex/national_conference_of_commissioners_on_uniform_state_laws_(nccusl) (last visited Jan.
25, 2024).
7
Uniform Law Commission, supra note 4.
8
Id.; Rod Fluck, What is a Unitrust and Why is it Used, http://buteralaw.com/newsletters/estate/what-is-a-unitrust-and-why-
is-it-used/ (last visited Jan. 25, 2024).
9
Fluck, supra note 8. BILL: SB 1316 Page 3
trusts are often drafted with more flexible terms, thereby giving trustees discretion to accumulate
income or invade principal when advantageous to further the trust’s overall purposes.
10
In 2018, the ULC adopted the Uniform Fiduciary Income and Principal Act (UFIPA) to account
for these developments, provide additional flexibility in tailoring individual trusts to meet a
settlor’s specific needs, provide for the conversion of older trusts into unitrusts, and provide a
governing law section to help avoid jurisdictional disputes.
11
Seven states have since enacted
some form of UFIPA.
12
In response to UFIPA’s adoption, the Real Property, Probate and Trust Law Section of The
Florida Bar asked its Principal and Income Committee to review UFIPA and consider whether
Florida should adopt the new model law. The Committee ultimately proposed a revision to
FUPIA, known as the Florida Uniform Fiduciary Income and Principal Act (FUFIPA), that
would incorporate UFIPA language wherever possible while preserving certain public policy
choices found in existing Florida law that continue to make sense for the state.
III. Effect of Proposed Changes:
SB 1316 codifies FUFIPA into ch. 738, F.S., replacing FUPIA as the law governing the
allocation of trust and estate receipts and disbursements between principal and interest where a
Florida trust does not provide its own terms for such an allocation. FUFIPA would, in addition to
modernizing Florida trust law generally:
Allow for total-return investing under the “modern portfolio theory.”
Further develop the unitrust concept to promote uniformity among the states.
Provide flexibility for more individualized estate planning.
Provide a governing law provision to reduce jurisdictional disputes.
Definitions
The bill revises s. 738.102, F.S., to modify existing definitions and provide new definitions to
incorporate UFIPA terminology and concepts. Under the bill, the definitions of “accounting
period,” “income,” “mandatory income interest,” and “person” remain unchanged, while
definitions for new terms, including “court,” “estate,” “personal representative,” and “record,”
were added without impacting current policy. However, the bill modifies the following
definitions in a substantive way:
“Beneficiary” is redefined to distinguish between current income beneficiaries and current
remainder beneficiaries, as well as to encompass persons holding life estates or term
interests.
“Fiduciary” is broadened to apply not only to the personal representative and trustee, as
under current law, but also to those with a power to direct, those under a fiduciary’s
delegation, and those holding property for a successor beneficiary who may be impacted by
principal or income allocations.
10
Uniform Law Commission, supra note 4.
11
Id.
12
Uniform Law Commission, supra note 4. BILL: SB 1316 Page 4
“Income interest” is redefined as a right of a current income beneficiary and includes a
current beneficiary’s use of property held by a fiduciary.
“Net income” is broadened to include application to a unitrust and an adjustment from
principal to income.
“Principal” is modified from meaning that which is distributed to a remainder beneficiary to
that which is held for distribution to, for production of income for, or for use by, a current or
successor beneficiary.
“Terms of the trust” is broadened to extend to wills, life estates, and term interests, and thus
more closely follows the definition of the term in the Florida Trust Code.
Additionally, the bill adds the following new definitions, which modify Florida law in a
substantive way:
“Distribution,” means a payment or transfer by a fiduciary to a beneficiary in the
beneficiary’s capacity as a beneficiary, without consideration other than the beneficiary’s
right to receive the payment or transfer under the terms of the trust, will, life estate, or term
interest.
“Independent person,” means a person that is not:
o For a trust, a qualified beneficiary; a settlor; an individual whose legal obligation to
support a beneficiary may be satisfied by a trust distribution; or any trustee whom an
interested distributee may remove and replace with a related or subordinate party.
o For an estate, a beneficiary; a spouse, parent, brother, sister, or issue of specified persons;
a corporation, partnership, limited liability company, or other entity in which specified
persons have voting control; or an employee of a specified person.
“Personal representative,” means an executor, administrator, successor personal
representative, special administrator, or person that performs substantially the same function
with respect to an estate under the law governing the person’s status.
“Record,” means information that is inscribed on a tangible medium or stored in an
electronic or other medium and is retrievable in perceivable form.
“Settlor,” means a person, including a testator, that creates or contributes property to a trust.
“Special tax benefit,” means the annual gift tax exclusion,
13
qualified subchapter S status,
14
federal marital tax deduction,
15
and generation-skipping transfer tax exemption.
16
“Successive interest,” means the interest of a successor beneficiary.
13
The Internal Revenue Service allows individuals to give away up to a specific amount of assets each year tax-free under the annual gift
tax exclusion. Jean Gordon Carter and Janice L. Davies, Gift Tax, the Annual Exclusion and Estate Planning,
https://www.actec.org/resource-center/video/gift-tax-the-annual-exclusion-and-estate-planning/ (last visited Jan. 25, 2024).
14
A trust with qualified subchapter S status is eligible to own stock in an S corporation. A settlor can use this type of trust to make a gift of
all or a part of the S corporation stock and retain voting power while the beneficiary receives the income and the tax burden. Rebecca C.
Bowen, Trusts as Eligible Shareholders of an S Corporation, https://www.t-mlaw.com/commentary/trusts-as-eligible-shareholders-of-an-s-
corporation/ (last visited Jan. 25, 2024).
15
The Internal Revenue Service allows a spouse to leave property of unlimited value to his or her surviving spouse tax-free. Such assets
may be distributed by a direct transfer from the decedent to the surviving spouse or by an indirect transfer to a qualifying trust for the
surviving spouse’s benefit. Peter B. von Stein, Basic Estate Tax Planning for Married Couples: Opportunities for Use of Estate Tax
Exemptions, https://www.wardandsmith.com/articles/basic-estate-tax-planning-married-couples-use-estate-tax-exemptions (last visited Jan.
25, 2024).
16
The generation-skipping transfer tax is a federal tax on a gift or an inheritance that prevents the donor from avoiding estate taxes by
skipping over children in favor of grandchildren. However, the Internal Revenue Service allows a person to give up to a certain amount to a
qualified recipient to avoid this tax. Troy Segal, What is the Generation-Skipping Transfer Tax, Investopedia (Feb. 7, 2023),
https://www.investopedia.com/terms/g/generation-skipping-transfer-tax.asp (last visited Jan. 25, 2024). BILL: SB 1316 Page 5
“Successor beneficiary,” means a person entitled to receive income or principal or to use
property when an income interest or other current interest ends.
“Trust,” means an express trust, whether private or charitable, with additions to the trust,
wherever and however created, and a trust created or determined by judgment or decree
under which the trust is to be administered in the manner of an express trust.
“Trustee,” means a person, other than a personal representative, that owns or holds property
for the benefit of a beneficiary.
“Will,” means any testamentary instrument recognized by applicable law which makes a
legally effective disposition of an individual’s property, effective at the individual’s death,
and includes a codicil or other amendment to a testamentary instrument.
Scope
The bill amends s. 738.103, F.S., to provide FUFIPA’s scope. Specifically, the bill states that,
except as otherwise provided by the terms of a trust or FUFIPA, FUFIPA applies to a trust or
estate and to a life estate or other term interest in which someone’s interest will be succeeded by
another’s interest under s. 738.508, F.S.
Governing Law
The bill adds a new governing law provision to renumbered s. 738.104, F.S. Specifically, the bill
provides that, if the principal place of administration of a trust or estate or the situs of property
not held in trust or an estate is Florida, the trustee is governed by FUFIPA, except as otherwise
provided in the terms of the trust or elsewhere in that chapter.
General Principles of Fiduciary Duties
The bill renumbers from s. 738.103, F.S., to s. 738.201, F.S., a provision setting forth a trustee’s
fiduciary duties, including the duty to administer a trust or estate impartially based on what is
fair and reasonable to all beneficiaries. Current law also establishes the general principles for
allocating receipts and disbursements to or between principal and income, specifying that,
generally speaking, receipts and disbursements be allocated to principal, and establishes a
presumption that a determination made in accordance with ch. 738 is fair and reasonable.
The bill substantially preserves current law, with four exceptions. Specifically, the bill:
Incorporates the revised definition of “terms of the trust.”
Adds an express requirement that a fiduciary act in good faith.
Requires a fiduciary to add undistributed income to principal within a specified time period.
Incorporates the factors currently set out in s. 738.104(2), F.S., applicable in exercising the
adjustment power, and making such factors applicable to all fiduciary decisions under
FUFIPA.
The factors incorporated from s. 738.104(2), F.S., remain largely the same as in current law,
except that the bill substitutes the objective “terms of the trust” factor for the subjective “intent
of the grantor” factor, in keeping with changes made by UFIPA. BILL: SB 1316 Page 6
Judicial Review
The bill renumbers from s. 738.105, F.S., to s. 738.202, F.S., a provision governing judicial
review of a trustee’s exercise of or failure to exercise any discretionary power under FUFIPA, as
it relates to a decision to transfer principal to income, or vice versa. Under current law, a court
may not determine that a trustee abused its discretion merely because the court would have
exercised the discretion differently, but, once an abuse of discretion is found, the court must take
certain actions to restore the beneficiaries to the positions they would have been in had the
trustee not abused its discretion.
The bill substantially preserves current law, with four exceptions. Specifically, the bill:
Updates the term “trustee” in this provision to “fiduciary,” thus broadening this section’s
scope.
Defines “fiduciary decisions” to expressly include the fiduciary’s allocation between income
and principal and the exercise or failure to exercise any power under FUFIPA.
Expressly adds to the remedies available when a fiduciary abuses his or her discretion “all
remedies authorized by law,” including remedies and damages for breach of trust as set out in
the Florida Trust Code in ss. 736.1001 and 736.1002, F.S.
Removes an unnecessary provision prohibiting the court from substituting its discretion for
that of the fiduciary.
Fiduciary’s Adjustment Powers
The bill renumbers from s. 738.104, F.S., to s. 738.203, F.S., a provision authorizing a trustee to
adjust between income and principal if specified conditions are met, including the consideration
of enumerated factors, and a determination that an adjustment is necessary to administer the trust
impartially, based on what is fair and reasonable. Under current law, a trustee is prohibited from
exercising the adjustment power under certain circumstances where adverse tax consequences
would result but may release all or part of the power for any time period. Further, current law
expressly negates any inference of impropriety simply because a trustee declines to exercise the
power.
The bill makes several changes to current law. Specifically, the bill:
Expands the scope of this section from trustees to all fiduciaries.
Relocates the conditions limiting when a fiduciary may adjust between principal and income
to a different section, making such conditions applicable to all fiduciary decisions.
Replaces the standard of “impossibility” with a standard of “assistance,” thereby authorizing
a fiduciary to exercise the adjustment power if the fiduciary determines that doing so will
assist the fiduciary in administering the trust or estate impartially.
Authorizes the appointment of a co-fiduciary to exercise the adjustment power under
specified circumstances.
Includes a presumption that a release or delegation of the adjustment power is permanent
under specified circumstances, such as when a co-fiduciary is appointed.
Clarifies that the exercise of the adjustment power may apply to the immediately preceding
period, current period, and one or more subsequent periods. BILL: SB 1316 Page 7
Adds new accountability procedures, including a requirement that the exercise of the
adjustment power be included in the annual accounting report or communicated at least
annually to the trust’s qualified beneficiaries.
Unitrusts
The bill replaces s. 738.1041, F.S., which specifically authorizes the express creation of a
unitrust, provides that the unitrust amount is considered to be the trust’s net income for purposes
of allowing or requiring income distributions, and provides for the conversion of an income trust
to a unitrust, or vice versa, with ss. 738.301-738.310, F.S.
The bill makes several changes to current law. Specifically, the bill:
Separates provisions relating to unitrusts into distinct sections, making them more visible.
Specifies that these sections apply to estates only where a trust is a beneficiary of an estate.
Adds definitions applicable to a unitrust, including “applicable value,” “express unitrust,”
“net fair market value of a trust,” “unitrust,” “unitrust policy,” and “unitrust rate.”
Modernizes but does not substantially alter provisions relating to a fiduciary’s authority and
duties as they relate to unitrusts; the method for determining the unitrust rate; and the method
for determining an asset’s fair market value for the purpose of determining the unitrust
amount.
Ensures that the unitrust provisions remain within the IRS safe harbor of 3 – 5 percent.
However, flexibility is included in that trusts may be drafted outside of this range.
Character of Receipts
The bill amends s. 738.401, F.S., which currently characterizes receipts from entities, applies a
“lookback period”
17
of unlimited duration, and establishes rules applicable to receipts from
public entities; provisions regarding private trustees administering investment entities; treating as
principal money received from specified sources; and treating as income dividends a fiduciary
elects to reinvest. Current law favors objective calculations over the exercise of fiduciary
discretion in such matters.
The bill modifies current law by:
Limiting the lookback period to three accounting periods to simplify trust administration.
Restructuring the law to more closely match UFIPA’s overall organization.
Amending or adding definitions, including “capital distribution,” “entity,” and “entity
distribution,” to clarify certain concepts incorporated into this section.
Allocations
Deferred Compensation Accounts, Annuities, and Similar Arrangements
The bill renumbers from s. 738.602, F.S., to s. 738.409, F.S., a section of law characterizing
receipts from deferred compensation accounts, annuities, and other similar arrangements. Under
current law, the “income of the fund” is determined in a specified manner, and the amount is
17
Florida’s “lookback period” applies a portion of large receipts to income, at a rate of 3 percent per year. BILL: SB 1316 Page 8
compared to payments actually received from the fund; the lesser of such amounts is then
allocated to income, while the remainder is allocated to principal.
The bill modifies this section by:
Changing the phrase “income of the fund” to the more customary “internal income.”
Adding an accounting period concept to balance the allocation of intra-period receipts
between principal and income.
Specifically authorizing fiduciaries to transfer assets from principal to income as necessary to
fully fund the internal income of the fund and distribute such income to the beneficiary.
Minerals, Water, and Other Natural Resources
The bill renumbers from s. 738.604, F.S., to s. 738.411, F.S., a provision allocating receipts from
an interest in minerals, water, or other natural resources as 90 percent to principal and ten percent
to income. The bill modifies this section by removing the 90/10 allocation standard and replacing
it with a fact-specific standard.
Marital Deduction Property Not Productive of Income
The bill renumbers from s. 738.606, F.S., to s. 738.413, F.S., a provision providing a safe harbor
to ensure that a trust intending to qualify for the estate tax marital deduction allows the surviving
spouse to require the trustee to make property income-producing where the trust assets do not
otherwise provide the spouse with sufficient income to qualify for the deduction. Current law
also allows the surviving spouse to require the trustee to make property income-producing where
trust assets have been used in whole or in part to satisfy the spouse’s elective share under s.
732.2125, F.S.,
18
and the property, in the aggregate, does not provide the spouse with sufficient
income.
The bill substantially preserves current law but provides that this section may be overridden only
if the terms of the trust explicitly reference this section.
Derivatives and Options
The bill renumbers from s. 738.607, F.S., to s. 738.414, F.S., a provision providing for the
allocation of all amounts received from derivatives and options to principal. The bill also
modifies this section to provide for the allocation of 10 percent of receipts from the transaction
and 10 percent of disbursements made in connection with the transaction to income, with the
remaining balance allocated to principal.
Asset-Backed Securities
The bill renumbers from s. 738.608, F.S., to s. 738.415, F.S. a provision for the allocation of
payments received in exchange for the trust’s or estate’s entire interest in an asset-backed
security
19
during a single accounting period entirely to principal. Current law also provides that,
for payments that are part of a series of payments that will result in the liquidation of the trust’s
18
This section allows the surviving spouse of a decedent to claim up to 30 percent of the decedent’s estate, regardless of the terms of the
decedent’s will. Practically speaking, this prevents a surviving spouse from being disinherited and potentially left destitute.
19
Under current law, an “asset-backed security” is an asset, the value of which is based upon the right given to the owner to receive
distributions from the proceeds of financial assets that provide collateral for the security. BILL: SB 1316 Page 9
or estate’s interest in the security over more than a single accounting period, the fiduciary must
allocate 10 percent of the payment to income and the balance to principal.
The bill modifies the definition of an “asset-backed security” to more closely align with the
definition used by the Securities and Exchange Commission and extends the 90/10 distribution
rule to all receipts from or related to such a security.
Other Financial Instruments or Arrangements
The bill creates s. 738.416, F.S., to be a “catch-all” provision for the allocation of receipts and
disbursements arising from or related to financial instruments or arrangements not specifically
mentioned in FUFIPA. Under the bill, allocation must be 90 percent to principal and 10 percent
to income, making the allocation standard the same as for derivatives, options, and asset-backed
securities.
Disbursements
Disbursements from Income and Principal
The bill amends s. 738.501, F.S., which currently directs that one-half of certain forms of
compensation and expenses be disbursed from income, along with all of the ordinary expenses
incurred in connection with a trust property that primarily concerns the income interest.
The bill modifies this section to address what happens where there is insufficient income to
disburse the full amount charged and to give the fiduciary the discretion to disburse specified
amounts charged if the fiduciary is an independent person and the disbursement would be in the
beneficiaries’ interest.
The bill also amends s. 738.502, F.S., which currently directs that the remaining one-half of
certain forms of compensation and expenses be disbursed from principal, along with all of the
trustee’s compensation for preparing property for sale; payments on the principal of trust debt;
and expenses of proceedings that primarily concern trust principal.
The bill modifies this section to provide that principal must be disbursed in an amount equal to
the remaining balance of the compensation and expenses provided for in s. 738.501, F.S., and to
allow a fiduciary to use income to disburse the balance of those amounts charged to income
before using principal. Further, the bill incorporates certain tax provisions found elsewhere in
current law into this section.
Transfers from Income to Principal for Depreciation
The bill amends s. 738.503, F.S., which currently allows a fiduciary to transfer a reasonable
amount of the net cash receipts from a principal asset from income to principal, subject to
depreciation to such principal, with restrictions.
The bill substantially preserves current law, with three exceptions. Specifically, the bill:
Replaces the term “fixed asset” with the term “tangible asset” to conform to changes made
elsewhere in FUFIPA.
Excludes depreciation for assets accounted for as a liquidating asset. BILL: SB 1316 Page 10
Removes a safe harbor specifying that any amount of depreciation taken for an asset must be
presumed to be a reasonable amount of depreciation.
Reimbursements
The bill amends s. 738.504, F.S., which currently relates to allocations from insurance policies
and similar contracts, to create a provision authorizing a fiduciary to reimburse income from
principal. This reimbursement is not presently authorized under Florida law.
The bill also renumbers from s. 738.704, F.S., to s. 738.505, F.S., a provision authorizing a
fiduciary to transfer an appropriate amount of income to principal to either reimburse or provide
a reserve in specified situations. The bill modifies this section by clarifying that, when a current
income interest of a principal asset ends and a successive income interest remains, the fiduciary
may continue to transfer those appropriate amounts from income to principal as specified in this
section. The bill also authorizes fiduciaries to transfer an appropriate amount from income to
principal for the cost of an improvement to principal, whether a change to an existing asset or the
construction of a new asset, and for a periodic payment on an obligation secured by a principal
asset, in specified circumstances.
Income Taxes
The bill renumbers from s. 738.705, F.S., to s. 738.506, F.S., a provision specifying that, with
respect to income tax, the fiduciary must disburse from income those amounts allocated to
income and from principal those amounts allocated to principal. Current law also specifies that
the same allocation rules must be followed on the trust’s or estate’s share of an entity’s taxable
income, except that principal must be used to disburse amounts exceeding total receipts from the
entity; however, the fiduciary must also adjust income or principal receipts, pursuant to a
specified formula, to the extent the trust’s or estate’s income taxes are reduced, but not
eliminated, due to a deduction for beneficiary payments.
The bill substantially retains current law but makes several changes. Specifically, the bill:
Removes the phrase “but not eliminated,” because it created confusion.
Removes the formula outlining the amount distributable to a beneficiary.
Adds a mechanism that allows a fiduciary to reimburse the settlor of a “grantor trust”
20
for
income taxes paid, either from income or principal.
Adjustments Between Principal and Income Because of Taxes
The bill renumbers from s. 738.706, F.S., to s. 738.507, F.S., a provision authorizing a fiduciary
to adjust between principal and income to offset the shifting of economic interests or tax benefits
between income and remainder beneficiaries due to elections and decisions made by a fiduciary;
a tax imposed on the fiduciary or beneficiary due to a distribution from the trust or estate; or the
taxable income of an entity owned by the trust or estate includable in the taxable income of the
trust, estate, or beneficiary. This section also provides that, when an estate tax marital deduction
or charitable contribution deduction is reduced due to a fiduciary deducting an amount paid from
20
A “grantor trust” is a type of trust that allows the settlor, in this case known as the “grantor,” to retain some control over trust assets. For
tax purposes, the grantor is considered the owner of the trust and is liable for any taxes on trust income. Christopher R. Callahan and Scott
M. Snyder, Foreign Grantor Trust Planning: A Flexible Planning Structure for U.S. Income Tax, Fla. Bar Journal Vol. 97, No. 6
(Nov./Dec. 2023), https://www.floridabar.org/the-florida-bar-journal/foreign-grantor-trust-planning-a-flexible-planning-structure-for-u-s-
income-tax/ (last visited Jan. 25, 2024). BILL: SB 1316 Page 11
principal for income tax purposes, resulting in the amount of income tax paid by the trust or
estate decreasing, the income tax payor must reimburse principal for the amount of tax not paid,
with limitations (“deduction adjustment”).
The bill substantially preserves current law but modifies this section to specify that a fiduciary
that charges a beneficiary under the deduction adjustment may offset the charge by obtaining
payment from the beneficiary, withholding future distributions to the beneficiary, or adopting
another method or combination of methods.
Apportionment when Income Interest Ends
The bill amends s. 738.703, F.S., to incorporate the substance of former s. 738.303, F.S., which
provides for the apportionment of income after an income interest ends. The bill also removes a
provision for the proration of the unitrust amount under this section, because this concept is
covered elsewhere in FUFIPA.
Relation to Electronic Signatures in Global and National Commerce Act
The bill amends s. 738.802, F.S., to replace existing law relocated elsewhere in the bill with a
provision, not found in current law, specifying that FUFIPA modifies, limits, or supersedes the
Electronic Signatures in Global and National Commerce Act (“GNCA”),
21
with exceptions, but
does not authorize electronic delivery of specified notices described in the GNCA.
Non-Substantive Changes
The bill makes non-substantive, technical changes to what are now numbered as ss. 738.402,
738.403, 738.410, 738.412, 738.501, 738.502, 738.503, 738.504, 738.508, 738.601, 738.602,
738.701, 738.702, and 738.801, F.S.
Severability
The bill amends s. 738.803, F.S., to provide for severability. Specifically, the bill states that if
any provision of FUFIPA or its application to any person or circumstance is held invalid, the
invalidity does not affect other provisions or applications of FUFIPA which can be given effect
without the invalid provisions or application. The current act contains a similar provision.
Applicability
The bill amends s. 738.804, F.S., to provide that, except as otherwise provided by a trust’s terms
or the bill itself, the bill applies to any receipt or expense received or incurred and any
disbursement made after January 1, 2025, by any trust or estate, regardless of when the trust or
estate was established or the asset involved was acquired.
21
See 15. U.S.C. s. 7001(c). The GNCA provides a general rule of validity for electronic records and signatures for transactions in or
affecting interstate or foreign commerce, allowing the use of electronic records to satisfy any statute, regulation, or rule of law requiring
that such information be provided in writing. BILL: SB 1316 Page 12
Effective Date
The bill provides an effective date of January 1, 2025.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
The bill amends s. 738.802, F.S., to specify that FUFIPA modifies, limits, or supersedes
the Electronic Signatures in Global and National Commerce Act (“GNCA”), using
language similar to language already appearing elsewhere in Florida law.
The GNCA is a federal law, codified at 15 U.S.C. s. 7001, which provides a general rule
of validity for electronic records and signatures for transactions in or affecting interstate
or foreign commerce, allowing the use of electronic records to satisfy any statute,
regulation, or rule of law requiring that the information be provided in writing. To the
extent that, in a particular case, FUFIPA could conflict with the GNCA, or its application
could impair interstate or foreign commerce, a court may find the GNCA controls over
the amendment to s. 738.802, F.S. This is because under the Supremacy Clause, found in
Article IV of the U.S. Constitution, federal law is given supremacy over state law when
the laws conflict.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
The bill will likely have a positive economic impact on the private sector to the extent
that it provides more flexibility for individualized estate planning, allows for total-return BILL: SB 1316 Page 13
investing under the “modern portfolio theory,” and otherwise gives Floridians advantages
that benefit their financial interests.
C. Government Sector Impact:
None.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes: 738.101, 738.102,
738.103, 738.104, 738.201, 738.202, 738.301, 738.302, 738.303, 738.401, 738.402, 738.403,
738.501, 738.502, 738.503, 738.504, 738.603, 738.604, 738.605, 738.606, 738.607, 738.608,
738.704, 738.705, 738.706, 738.601, 738.602, 738.701, 738.702, 738.703, 738.801, 738.802,
738.803, and 738.804.
This bill creates the following sections of the Florida Statutes: 738.203, 738.304, 738.305,
738.306, 738.307, 738.308, 738.309, 738.310, 738.404, 738.405, 738.406, 738.407, 738.408,
738.409, 738.416, and 738.508.
This bill repeals the following sections of the Florida Statutes: 738.1041, 738.105.
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
None.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.