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‘FORE!’ Recent Changes in Florida’s Trust Laws to Review Before Hitting the Golf Course

Joshua R. Landsman
Published Date:
Dec 1, 2023

With more than 1,200 golf courses, Florida has more courses than any other state in the United States. With plenty of golf courses and warm weather, Florida has been a “hot” destination for new residents. According to the United States Census Bureau, Florida saw the biggest increase in population in 2022 with 319,000 new residents. (Forbes, Florida’s Moving Statistics that May Surprise You, July 28, 2023, Florida Moving Stats You Should Know – Forbes Home).

Warmer weather and golf aren’t the only advantages of living in Florida or relocating to the Sunshine State. Beginning in 2021, the Florida Trust Code has heated up with some legislative changes that impact estate planning for Florida residents. This article addresses four (fore, if you like golf puns!) recent changes to Florida’s trust laws.

New Directed Trust Act

When it comes to trusts, there are often several “players” named in the document. Each player has its own job to do when it comes to administering the trust. In addition to naming a settlor and a trustee, trusts often name “directors,” “advisors,” and/or “protectors,” and grant said individuals (who are not the trustee) with certain power over some aspect of the trust administration (commonly control over the investments of a trust’s assets, i.e., an “investment trustee” or “investment advisor”). Although their titles may vary, the concept of a “directed trust” is the same—there is a division of authority between someone who is not serving as trustee of the trust and the trustee.

In response to uncertainty surrounding certain aspects of directed trusts, Florida enacted the Florida Uniform Directed Trust Act (FUDTA), which expands Florida’s directed trust laws and more clearly defines the duties and liabilities of trust directors and directed trustees of Florida trusts. (See Florida Statutes Sections 736.1401-736.1416.) The FUDTA is effective as of July 1, 2021; however, it applies to the actions of any trust director, even for trusts created before the effective date. 

Although not defined in FUDTA, in general, practitioners agree that FUDTA is intended to cover individuals functioning as a “trust protector.” In particular, the legislative commentary to FUDTA provides that: “This act applies to any arrangement that exhibits the functional features of a directed trust within the meaning of this act, even if the terms of the trust use other terminology, such as “trust protector,” “trust advisor,” or “administrative trustee.”

The FUDTA is a comprehensive law with many details that are outside of the scope of this summary. Two key points, however, are addressed by the Act:

  1. A Florida trust director (or as noted above a trust protector, advisor, administrative trustee, etc.) has the same duties and liabilities as a trustee and because they are considered fiduciaries under the Act, they can be sued like a trustee (and can also be exculpated from liability like a trustee).

  2. A Florida-directed trustee can be sued for doing what a trust director tells the directed trustee to do; however, under FUDTA, a directed trustee can only be sued for doing what he, she, it is directed to do only if doing so would constitute “willful misconduct.” Therefore, a directed trustee in Florida is likely not liable if something goes wrong because the directed trustee complied with the directions of a trust director, unless doing so amounts to “willful” or “intentional” misconduct.

There are two recognized property regimes for spouses in the United States—“separate property” and “community property.” In separate property states, married couples can have spirited discussions about who owns what, i.e., “this is mine and that is yours.” Most states (41), including Florida, are “separate property” states. The other nine states, however, that have adopted a “community property” regime that views all property acquired (and income earned) during marriage as being owned one-half by each spouse regardless of how title to property is taken, i.e., “this is ours.”

New Community Property Trust Act

Effective July 1, 2021, Florida’s Community Property Trust Act (CPTA) allows married couples to hold assets in a community property trust (a CPT). (See Florida Statutes Sections 736.1501-736.1512.) Why would Florida spouses want to establish and fund a CPT? Well, a CPT potentially offers a federal tax benefit to couples who convert separate property to community property using a CPT—a “double basis step-up” in the property held in the CPT. [See Internal Revenue Code Section 1014(b)(6).]

Because Florida is a separate property state, under the current federal income tax laws, upon the death of a spouse, a surviving spouse inherits the deceased spouse’s one half-share of jointly owned property and receives a basis adjustment for only that one half-share of the property.  However, by contrast, in a community property jurisdiction federal income tax laws dictate that upon the death of a spouse the entire community property owned by a couple will generally receive a step-up in basis to the fair market value. Individuals may be able to take advantage of this tax benefit by holding assets in a CPT, under which each spouse holds a one half-interest in the trust’s assets and the trust assets receive community property treatment. 

Clients should consult with their legal counsel about the specific requirements to establish a CPT and some of the risks of creating a CPT. For example, it is unclear whether the IRS will permit a full basis step-up for property in a trust that grants community property treatment to individuals who do not live in a community property state like Florida. Additionally, spouses may be foregoing certain asset protection benefits afforded to property transferred to the trust that was previously held by the spouses as “tenants by the entireties.” Further, it is unclear what impact spouses’ transfers of property to a CPT will have on existing pre- or postnuptial agreements. 

Trusts Can Last Longer in Florida

Some families in Florida may want to start planning their reunions in the year 3023! In May 2022, Florida amended its statutory rule against perpetuities period—the maximum permitted duration of a Florida trust—from 360 to 1,000 years. [See Florida Statute Section 689.225(g).] Under the new law, an interest in any trust created on or after July 1, 2022 must vest within 1,000 years of that interest’s creation. Florida had previously extended its perpetuities period from 90 to 360 years, effective for trusts created between January 2001 and June 2022.   

New SLAT Provision

Over the last few years, estate planners have been busy advising clients on how to effectively utilize their federal, estate, and generation-skipping transfer (GST) tax exemptions prior to 2026, when the current increased exemptions ($12.92 million per individual for 2023) are scheduled to be cut in half, unless reduced by legislation before 2026. One type of trust that estate planners have suggested to clients is known as a spousal lifetime access trust (SLAT). 

In general, a SLAT is an irrevocable trust created by one spouse for the benefit of the other spouse (which can and often does also include other beneficiaries, such as descendants). One of the benefits of using a SLAT is that in addition to utilizing an individual’s lifetime gift tax exemption, the SLAT can provide the settlor (the “contributing spouse”) with indirect access to the trust assets by virtue of distributions made to the beneficiary spouse during the marriage.  However, for Florida residents desiring to create a SLAT, it was unclear how the contributing spouse could access the funds in the SLAT if the beneficiary spouse predeceased him or her. 

Florida law now permits a contributing spouse who survives the beneficiary spouse to be a beneficiary of the SLAT following the beneficiary spouse’s death. (See Florida Statute Section 736.0505.) Currently, Florida law allows the creditors of the settlor of a trust to access the trust’s assets if the settlor is a beneficiary of the trust, even if distributions to the settlor are limited to what is needed for the settlor’s health, education, maintenance, and support. (This is known as a self-settled trust and includes your typical revocable living trust.) Accordingly, many Floridians have been using the laws of other jurisdictions (e.g., Delaware, Nevada, South Dakota), that extend creditor protection over trust assets that can be distributed to a settlor of a trust who is also a beneficiary of the trust.  

Florida’s new law provides that if a contributing spouse who is a Florida resident establishes a SLAT under Florida law that complies with three requirements, the contributing spouse could potentially become a beneficiary after the death of the beneficiary spouse without exposing the trust assets to the claims of the settlor’s creditors (with some exceptions).

The three requirements for a Florida SLAT are:

  1. The settlor cannot be a beneficiary of the SLAT until after the death of the settlor’s spouse for whom the SLAT was established.

  2. The settlor’s spouse for whom the SLAT was established must remain a beneficiary of the SLAT for such spouse’s lifetime.

  3. Transfers to the trust by the settlor must be considered completed gifts under the Internal Revenue Code.

Although the new law allows for some creditor protection for Florida SLATs, there are planning limitations and tax risks that should be explored before setting up a Florida SLAT. For example, because the beneficiary spouse must remain a trust beneficiary of the SLAT until his or her death, planning in the event of a divorce is foreclosed. Further, it is not clear whether the IRS would consider a contributing spouse’s interest in a SLAT after the death of the beneficiary spouse as a “reversionary interest” that would cause the assets of the SLAT to be pulled back into the contributing spouse’s estate for estate tax purposes, thereby defeating the tax planning goals of using the SLAT in the first place. The amended law is effective for SLATs created on or after July 1, 2022.

The recent developments summarized in this article provide welcome updates to Florida’s trust code and can serve to provide new estate planning opportunities to Florida residents.  Clients should consult with their legal counsel and other advisors on how these legislative updates may impact their estate plans. 

Joshua R. Landsman is a senior wealth strategist with Wilmington Trust Emerald Family Office and Advisory, where he provides strategic and holistic wealth planning advice to successful high-net-worth individuals, entrepreneurs, executives, and their families.


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