Under Florida's 1996 intangible tax, did a beneficiary's limited appointment power create a taxable trust interest?

Plain-English summary

Florida found that the beneficiary's limited power of appointment did not create a taxable beneficial interest in the trust.

The beneficiary could not appoint trust assets or income to themselves, their estate, or their estate's creditors. The beneficiary also could not revoke the trust or invade its corpus.

The trust separately required its individual trustee to remain a non-Florida resident and its corporate trustee not to qualify or do business in Florida. A trustee that became taxable in Florida had to be removed. Because neither beneficiary rights nor trustee situs met the cited tax tests, no Florida return was required for the trust.

What this means for you

• A limited appointment power differed from an unlimited power benefiting the holder.
• No revocation or corpus-invasion right existed.
• The trust document actively prevented Florida trustee situs.

Common questions

Q: Did the beneficiary have a taxable trust interest? A: No.

Q: Did the trustees have Florida taxable situs? A: No.

Q: Was a Florida trust return required? A: No.

Citations and references

• Fla. Stat. § 199.023(7) — taxable beneficial interest
• Fla. Stat. § 199.052(5) — trustee responsibility
• Fla. Stat. § 199.175 — Florida taxable situs
• Fla. Admin. Code r. 12C-2.002(1)(c) — taxable beneficial interest
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-021

Original ruling text

Feb 29, 1996

Re: Technical Assistance Advisement No. 96(C)2-021 Intangible Tax; Trust Trust - Taxable Beneficial Interest in Trust Section 199.023(7), F.S., and Rule 12C-2.002(1)(c), F.A.C. XXX (hereafter referred to as the "Trust")

Dear :

This office has received your request for a Technical Assistance Advisement for the trust listed above.

Discussion of Trust Provisions

Under the provisions of the Trust the beneficiary is granted a limited power of appointment over the assets of the trust. This limitation states that the beneficiary may not appoint to or for the benefit of the beneficiary, or the beneficiary's estate, or the creditors of the beneficiary's estate, any asset or income of the trust. The Trust further provides that the individual trustee may not be a resident of Florida and that the corporate trustee may not be qualified to or be doing business in Florida. If either of the trustees becomes taxable in Florida the Trust requires that the trustee be removed and a successor trustee be appointed.

Provisions of Law

Section 199.023(7), F.S., and Rule 12C-2.002(1)(c), F.A.C., state that a taxable beneficial interest in a trust is the current right to income coupled with either a right to revoke the trust, or the right to invade the corpus of the trust, or an unlimited power of appointment of future beneficiaries.

Section 199.052(5), F.S., places primary responsibility for payment of the intangible tax on the Florida trustee. To have a taxable situs in Florida the provisions of s. 199.175, F.S., must be met. The trustee must be a Florida resident or legally

or commercially domiciled in Florida to have a taxable situs in Florida.

Discussion of Law

Based upon the provisions of the Trust the beneficiary has a limited power of appointment over the assets of the Trust, does not have a power to invade the corpus of the Trust, nor the power to revoke the Trust. Therefore, the beneficiary of the Trust does not have a taxable beneficial interest in the Trust.

The individual trustee may not be a resident of Florida and the corporate trustee may not be doing or be qualified to do business in Florida. Therefore, no trustee has a taxable situs in Florida.

In summary, neither the beneficiary nor the trustee is liable for the intangible tax in Florida, and no returns are required to be filed for the Trust.

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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance

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