Did a Florida income beneficiary owe intangible tax on two out-of-state trusts when the beneficiary held only a limited power of appointment?

Subject

Property Subject to Tax - Beneficial Interest in Trust - Taxable Situs - Trustee

Plain-English summary

Neither the Florida grantor-beneficiary nor the North Carolina trustee owed Florida intangible tax on the two trusts. The beneficiary had a current right to trust income but only a limited power to appoint successor beneficiaries.

That power expressly could not be exercised for the grantor, the grantor's estate, the grantor's creditors, or the estate's creditors. The Department said a current income right alone was not enough; the beneficiary also needed a broader power such as revocation, corpus invasion, or an unlimited appointment power. The nonresident trustee separately had no Florida liability.

What this means for you

Under this historical regime, the precise trust powers mattered more than the beneficiary's Florida residence alone. A general appointment power or right to reach the corpus could have changed the analysis.

Common questions

Q: Did the Florida beneficiary's right to income create tax liability? No, not without one of the broader control rights described in the ruling.

Q: Was the limited power of appointment enough? No.

Q: Did the North Carolina trustee owe Florida tax? No.

Citations and references

• Fla. Stat. § 199.023(7) — beneficial interest in a foreign trust
• Fla. Stat. § 199.052(5), (6) — trust filing responsibility
• Fla. Admin. Code rr. 12C-2.002(1)(b)-(c) and 12C-2.006(3) — taxable trust interests and situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-030

Original ruling text

Nov 15, 1993

Re: Technical Assistance Advisement 93(C)2-030
Intangible Tax - Filing Requirements
Sections 199.023(7), and 199.052(5) & (6), F.S.
Rules 12C-2.002(1)(c) and 12C-2.006(3), F.A.C.
XXX (Trust I)
XXX (Trust II)
XXX (Grantor/Beneficiary)
XXX (Trustee)

Dear :

We have received your letter requesting a Technical
Assistance Advisement on the taxation of Trust I and Trust II.

Statement of Facts

Based upon the information contained in the documents
submitted with the request for a technical assistance advisement
the trustee for Trust I and Trust II is a resident of North
Carolina. The Grantor/Beneficiary of the trusts is a resident
of Florida. The Florida Grantor/Beneficiary has no rights in
the trusts other than the present right to receive the income of
each trust. Under the provisions of Article I, Paragraph C.,
the Grantor/Beneficiary has reserved the right of a limited
power of appointment. This provision specifically prohibits the
Grantor/Beneficiary from exercising the power of appointment in
favor of the grantor, the grantor's estate, the grantor's
creditors or the creditors of the grantor's estate.

Provisions of Law

Section 199.023(7), F.S., states that a resident has a
beneficial interest in a foreign trust if the resident has a
vested interest in the trust, which includes at least a current
right to income and either a power to revoke the trust or a
general power of appointment over the assets of the trust.

Section 199.052(5), F.S., states that the trustee of a
Florida situs trust is primarily responsible for returning the
trust assets and paying the annual tax.

Rule 12C-2.002(1)(b), F.A.C., states that a taxable
beneficial interest in trust is one in which the beneficiary has
a current income coupled with: The right to invade the corpus of
the trust; or the right to revoke the trust; or the right to
appoint successor beneficiaries without limitation.

Discussion of Law

The provisions of Trust I and Trust II grant the Grantor/
Beneficiary the current right to income and a limited power of
appointment. The statute allows taxation of a beneficiary only
when the beneficiary has more than a mere right to income.
Article I, Paragraph C of each trust agreement clearly limits
the Grantor/Beneficiary's right to appoint successor
beneficiaries. Therefore, the Grantor/Beneficiary has no tax
liability for either Trust I or Trust II. The Trustee, not
residing in Florida has no liability for the intangible tax.
Therefore, neither the Trustee nor the Grantor/Beneficiary has
any tax liability for taxes arising out of Trust I or Trust II.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the Department
only under the facts and circumstances described in the request
for this advice as specified in Section 213.22, F.S. Our
response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of Section 213.22,
F.S. Your name, address, and any other details which might lead
to identification of the taxpayer must be deleted by the
Department before disclosure. In an effort to protect the

confidentiality of such information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request or the response.

Sincerely,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance

JVP/mh