Who owed Florida's historical intangible tax on QTIP and residuary trusts when the wife had income rights and Florida trustees served?

Subject

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

Plain-English summary

The wife-beneficiary had no personal filing duty because her current income right did not amount to a taxable beneficial interest. The trustees, not the wife as beneficiary, controlled discretionary payments from corpus.

While the wife and Florida bank served as trustees, they had to file the trusts' intangible-tax returns and pay the tax. The ruling said the QTIP and residuary trusts would cease being subject to the tax after the wife resigned, removed the Florida corporate trustee, and appointed the described non-Florida trustee.

What this means for you

The historical ruling analyzed beneficiary rights separately from trust situs. An income-only beneficiary was not liable, while Florida trustees created the filing obligation until the represented trustee change occurred.

Common questions

Did the wife's lifetime income right create a taxable beneficial interest? No, not under the stated trust provisions.

Who initially had to file and pay? The Florida individual and corporate trustees.

When did the ruling say tax would end? After both Florida trustees were removed and the non-Florida corporate trustee was appointed.

Citations and references

• Fla. Stat. §§ 199.023, 199.052(5), and 213.22
• Fla. Admin. Code r. 12C-2.002(1)(c)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94C2-004

Original ruling text

Feb 16, 1994

Re: Technical Assistance Advisement 94(C)2-004
Intangible tax - Property Subject to Tax - Beneficial
Interest - Taxable Situs - Trustee
XXX (Husband)
XXX (Wife)
XXX (Corporate Trustee)

Dear :

Your letter requesting a Technical Assistance Advisement on
the application of intangible tax to the beneficial interest in
trust has been received by this office.

The scenario for consideration is as follows:

A husband established a qualified terminable interest
property trust (QTIP trust) with respect to which Wife is
the current beneficiary. At Husband's death an election
was made so that the property in the QTIP trust qualified
for the deduction for federal estate tax purposes. Also,
at Husband's death an irrevocable residuary trust was
established. The QTIP trust income is to be paid over at
least quarterly to Wife during her lifetime. The income or
principal of the residuary trust is to be paid to or for
the support of Wife, Husband's children, and the
descendants of Husband's children living from time to time,
or any one or more of them, in such amounts or proportions
as the trustees deem appropriate. Upon Wife's death the
trustee is to divide each of the trusts into three equal
shares, one for each of Husband's children, or their
respective descendants, each to be held in a separate
trust.

Currently there are two trustees for each trust. Wife, a
Florida resident, is the individual trustee and a Florida
bank serves as the corporate trustee. It is planned that
Wife will resign as trustee and will exercise her power to

remove the corporate trustee and will appoint a non-Florida
corporation which is not authorized to do business in
Florida as the corporate trustee.

Provisions of Law

Section 199.023, F.S., and Rule 12C-2.002(1)(c), F.A.C.,
defines a taxable beneficially interest in trust to be at least
a current right to income coupled with a power to revoke the
trust, a power of appointment of future beneficiaries or a right
to invade the corpus of the trust.

Section 199.052(5), F.S., states that the trustee of a
Florida situs trust is primarily response for returning the
trust's intangible property and paying the tax.

Discussion of Law

Under the provisions of Article Three of the Amended and
Restated Trust Agreement, which created the QTIP Trust and the
Residuary Trust, Wife is granted a current right to income only.
The trustees may at their discretion pay from the corpus of the
trust so much as is necessary for the maintenance and support of
the current beneficiary or beneficiaries. A wife's rights under
Article Three of the trust do not cause her to have a taxable
beneficial interest in trust as defined in s. 199.023, F.S., or
Rule 12C-2.002(1)(c), F.A.C. Therefore, Wife as the income
beneficiary has no filing requirement for the trust assets.
However, Wife and Corporate Trustee are both in Florida and as
the Trustees of the QTIP and Residual Trusts are required to
file an intangible tax return and pay the appropriate tax.

Under the provisions of Article Four, Wife is granted power
to remove and appoint trustees. It states that Wife intends to
remove herself and the Corporate Trustee and appoint a non
Florida trustee. When Wife takes this action the QTIP Trust and
the Residual Trust will no longer be subject to the intangible
tax.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 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 s. 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