Florida Wills & Trusts
June 2007 Update

 

Legal Developments

 

New Florida Trust Code (FTC)

On June 14, 2006, the Governor of Florida approved the new Florida Trust Code (FTC), effective as of July 1, 2007.  The new Code is the result of an extensive five-year effort to codify Florida trust law consistent with a growing interest in a number of jurisdictions around the country to adopt a trust code based on the enactment of the Uniform Trust Code (UTC).

Ch. 736 was added to the Florida Statutes replacing Florida’s existing statutory trust law, most of which is found in Ch. 737 relating to trust administration.  The new Ch. 736 significantly impacts trust drafting and administration.  It consists of 13 parts corresponding in title and content to the 11 articles that make up the Uniform Trust Code, plus two additional parts covering rules of construction and charitable trusts.  

Approximately 40% of the new Trust Code’s provisions are from prior Florida law and about 60% are based on the Uniform Trust Code. Of the 60%, about a third of the provisions were substantively revised.

In revising the program to take the new Trust Code into account, the authors sought to minimize changes in philosophy whenever possible.  Some aspects of the new Trust Code are not capable of being overridden in the trust instrument, such as execution requirements, judicial oversight, and providing information to beneficiaries.  With this in mind, the program continues to provide drafters with the flexibility to reduce the trustees' burden from many administrative requirements, if desired.

The new law offers some additional planning opportunities regarding ‘difficult’ beneficiaries by allowing the client to name a Designated Representative to receive notices and accountings and behalf of one or more beneficiaries.  Another interesting addition is the ability of the client to name a person who can amend or revoke the trust, or who can direct the trustee in its administration; this is similar to a ‘Trust Protector’ sometimes used in other jurisdictions.

To view the entire Florida Trust Code as well as a conversion table between the new code sections in Chapter 736 and the old sections in Chapter 737 select Resources from the Help menu in Lawgic and then click the Florida Statutes link.

The following questions contain revisions to the Law & Strategy that include references to the new Trust Code and (in most cases) revised or new commentary by the authors:

Question 6 (Ancillary Documents) - Fla. Stat. § 736.1017, § 736.0705

Question 116 (Grantor Trust Status) – Fla. Stat. § 736.0505(1)(c)

Question 126 (Annuity Payments) - Fla. Stat. § 736.0814(2)

Question 140 (Crummey Powers) - Fla. Stat. § 736.0505(2), § 736.0505(2)(b)

Question 144 (Amendment by Agent) - Fla. Stat. §§ 736.0602 (5) and (6), § 736.0105,  § 736.0207; §§ 736.0415 and 736.0416, §§ 736.0808(2) and (3)

Question 174 (Power to Terminate Trust) - Fla. Stat. § 736.0808(3)

Question 205 (Tangible Personal Property) - Fla. Stat. § 736.0403(2)(b)

Question 331 (Income to Spouse Required) - Fla. Stat. § 736.0306, § 736.0302

Question 336 (Five and Five Power) - Fla. Stat. §  736.0302.

Question 341 (Long Form: Greater of $ or % Limit?) - Fla. Stat. §§  736.0505 (1)(b) and (2)(b)

Question 404 (QTIP: Withdrawal of Principal) - Fla. Stat. § 736.0501, 0505

Question 407 (Special Power of Appointment) - Fla. Stat. § 736.0302

Question 413 (Five and Five Power) - Fla. Stat. § 736.0505(2), §§  736.0505 (1)(b) and (2)(b)

Question 445 (Payments to Family) - Fla. Stat. § 736.0103(14),  § 736.0306

Question 448 (Principal Distributions) - Fla. Stat. § 736.0501, 0505

Question 467 (Special Power of Appointment) - Fla. Stat. § 736.0302

Question 474 (Dynasty Trust) - Fla. Stat. § 736.0412), § 736.04115, § 736.04113

Question 498 (Remaining Income) - Fla. Stat. §§ 736.0503 and 736.0504

Question 607 (Optional Provisions – Spendthrift) - Fla. Stat. § 736.0503, § 736.0503(2)(b)

Question 737 (Advisors or Committee) - Fla. Stat. § 736.0808

Question 781 (Waive Court Supervision) - Fla. Stat. § 736.0105

Question 782 (Multiple Trustees Provision) - Fla. Stat. § 736.0703, § 737.404

Question 848 (Use Which Form?) - Fla. Stat. § 736.0505)

Question 856 (Tiered Withdrawal System) - Fla. Stat. § 736.0505(2)

Question 859 (Lapse of Power) - Fla. Stat. § 736.505

Question 906 (Fiduciary Powers Included) - Fla. Stat. § 733.612, § 736.0816, § 736.0105)

Question 907 (Commodities, Options, Futures) - Fla. Stat.  § 736.0802(5)(e)2

Question 910 (Distributions Under What Age) - Fla. Stat.. § 736.0816(21)(d)

Question 911 (Terminate Small Trusts) - Fla. Stat. § 736.0414

Question 918 (Tax Reimbursement) - Fla. Stat. § 736.0505(1)(c)

Question 947 (Perpetuities Period) - Fla. Stat. § 736.04115(4), § 736.04113, § 736.04115, § 736.0412 § 736.0412(4)(b)

Question 953 (Waive Notice) – Fla. Stat. § 736.0105(2)(f)]

Question 964 (Per Stirpes) - Fla. Stat. § 736.01103

Question 970 (Dispute Resolution) - Fla. Stat. § 736.0105(2)(e)

Question 1348 (Oral Trust Confirmation) - Fla. Stat. § 736.0401 and 736.0407

For a complete list of questions containing all of the changes made in this update, including changes to text, Law & Strategy, answer choices and Question Help open the ‘Up_Jun07’ flag file as instructed at the end of this letter.

The ‘Product Features’ section (below) summarizes the most significant changes that were made to the program based on the new Trust Code.

 

Updated Product Features

 

New Trust Advisor Options Added

The existing feature of having a Trust Advisor has been expanded to allow greater function under the Trust Code.  Retained was the duty to advise trustees in general, but new optional powers include the ability to amend or revoke trust, direct or restrict specific investments, direct distributions of income and/or principal, direct the exercise of any fiduciary power, and direct the change of Trust Situs. Other administrative provisions were added commensurate with status as a fiduciary. New Questions 742 and 743.

New ‘Appointment of a Designated Representative’ Article Added

Allows the client to name a Designated Representative to receive notices and accountings on behalf of one or more beneficiaries.  Although beneficiaries are specifically given greater rights (or at least no lesser rights) to receive information on a continuing basis, the Trust Code has created a powerful tool to restrict unreasonable beneficiaries.  The Designated Representative can be used as a buffer between a trustee and a beneficiary, retaining the accountability of the trustee, yet potentially simplifying the administrative process.   New Questions 820-833.

New ‘Applicable Law: Trust Situs’ Article Added

New provisions include Validity; Construction, Principal Place of Administration, Determining and Transferring Situs, and Substitute Trustees. These provisions were originally contained in the ‘Miscellaneous’ Article, but because of new provisions in the Florida Trust Code adding rules for determining a trust's principal place of administration and for transferring trust situs, these provisions were expanded.  The new Trust Code imposes significant requirements, including possible court approval, for a transfer of the trust's situs; while giving notice to beneficiaries remains an option, we chose to eliminate the need for court approval in a situs transfer, leaving this in the discretion of the trustee.  New Questions 951-956.

New Certification of Trust Document Added

The old method of creating a trust certificate in Lawgic – marking selected articles to import into a trust certificate shell -- has been greatly simplified because it has been superseded by the new statutory method. Fla Stat §736.1017. It fulfills the same purpose as before regarding title to real estate, if the option to allow identification of successor trustees (not contemplated by the statutory form) is selected.  Question 6, New Questions 1197-1208.

Option to Include IRD Gift to Spouse Modified

When drafting a preresiduary marital gift you may now opt to include (or exclude) a specific gift of income in respect of a decedent to avoid acceleration of income in the estate. Previously, this provision was automatically included as a safety feature, even if IRD was not anticipated;  restructuring it as an option provides greater flexibility for smaller estates.  Question 285.

New Option to Include State Gap Provision for Property in Other States

You may now specify the creation of a State Marital Tax Trust to cover states that have decoupled their death tax exclusions from the federal applicable exclusion amounts.  New Question 288.

By Whom Exercisable Provision Revised

This reflects new provisions authorizing amendment by an attorney-in-fact or a guardian of the property of the settlor. Fla. Stat. §§ 736.0602 (5) and (6).  Also, a new Communication in Writing question has been added to specify how trustees must be notified of the written exercise of reserved powers. Question 144 and new Question 145, respectively.

Fiduciary Powers Revised

Many of the Fiduciary Powers provisions have been modified to reflect the new Trust Code. Some of these additions or modifications are simply to reflect new powers granted under the Trust Code, or to increase the trustee's discretion under certain powers (e.g., terminating small trusts or investing in certain securities).  The changed provisions, which have related questions are: Commodities, Options, Futures; Advisors; Indirect Distributions; and Terminate Small Trusts.  Questions 906, 907, 909, 910, 911, 912.

Additional provisions revised (or new) that do not have related questions include: Introduction, Specific Securities, Financial Accounts (new), Insurance (new), Self-Dealing, Expenses, Sever or Join Trusts, Loans; Advances, Election of Benefits (new), and Winding Up (new).  

Spendthrift Article Modified

Lawgic formerly gave an option to except from the operation of the spendthrift clause an assignment to family members (old Question 616).  The Trust Code will now void a spendthrift clause if a beneficiary can assign an interest in a trust to anyone, even family members.  Therefore, that option has been deleted.  If this language has been included in documents signed before July 1, 2007, it will be given effect; documents signed after July 1 should not allow the assignment.  No other changes were made to the spendthrift clause. Provision is automatically included when ‘Spendthrift Provision’ selected at Question 607 (Optional Provisions).

Additional Provisions Revised or Added to Reflect Florida Trust Code

The following provisions, none of which have corresponding questions in the program, were either revised or added in accordance with the new Trust Code:

Intangible Tax Trust Deleted

The Intangible Tax Trust has been deleted, as the intangible tax was repealed effective January 1, 2007.

 

Software Upgrades

 

New ‘Search’ Feature Added

A major upgrade to the software in the form of a new ‘Search’ feature has been added that will greatly enhance use of the program. You may now search the Navigator, Answers, Law & Strategy, Notes, Question Help, and the Text that appears in the Progress window by selecting Questions on the Lawgic menu and then Search. This greatly expands the search capabilities of the program and eliminates the need to create the ‘Outline’ document --- created by selecting File, Send, Navigator/Outline -- for purposes of searching the questions and answers.

Drop-Down Menus Added

Drop-down menus have replaced radio buttons for ‘bundle’ questions (screens with more than one question on them), which contain long lists of answer choices. Examples include Question 643 (Trustee Info --Type) and Question 650 (First Successor Trustee -- Type), to name a few.

 

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To view those questions that are new in this update, or whose Law & Strategy, choices, or default answers have changed, use the "Up_Jun07" flag file.  From inside Lawgic, open any existing answer file; on the Flags menu, click Open Flags, select the appropriate Title (click OK), and next select the "Up_Jun07" flag file (and click OK).  To view all flagged questions, click Expand All on the Answers menu and scroll the Navigator.  Flagged questions will be indicated with bold text.  

 

Please continue to send us your suggestions on existing or new products. Contact our Technical Support Department at 1-877-2-LAWGIC (252-9442) or e-mail us at support@lawgic.com.

 

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