Under Florida's 1996 intangible tax, were a non-Florida trustee or a grantor with only an income interest liable for an irrevocable trust?

Plain-English summary

Florida found that neither the non-Florida trustee nor the grantor was subject to the state's 1996 intangible tax on the trust.

The grantor's non-Florida brother served as trustee. The grantor had a lifetime income interest, but principal could be invaded only in the trustee's sole discretion under an ascertainable standard. The grantor could not revoke the trust, held no general power over the remainder, and had only a limited testamentary power that excluded himself, his estate, and their creditors.

The Department said the trustee did not create Florida trust situs and the grantor lacked the additional rights required to turn the income interest into a taxable beneficial interest.

What this means for you

• An income interest alone did not produce the cited taxable beneficial interest.
• The trustee, not the grantor, controlled discretionary principal distributions.
• The grantor's limited appointment power was materially narrower than a general power.

Common questions

Q: Was the non-Florida trustee liable for Florida intangible tax? A: No.

Q: Was the grantor's income interest taxable? A: No, because the grantor lacked the additional control rights identified by the rule.

Q: Could the grantor revoke the trust or take principal? A: No.

Citations and references

• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 199.052(5) — trustee filing duty for Florida-situs trusts
• 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 96C2-036

Original ruling text

Apr 01, 1996

Re: Technical Assistance Advisement 96(C)2-036 Intangible Tax - Trust XXX (Grantor) XXX (Trustee)

Dear :

Your letter of November 21, 1995 requests a Technical Assistance Advisement ruling that the Trust established by the Grantor is not subject to the Florida Intangible Tax. The specific facts for which advice has been requested are summarized below:

Facts

On XXX, Grantor established the Trust designating his brother, a non-Florida resident having no residence or place of business within the State of Florida, as a Trustee. Grantor has only an income interest in the trust during his lifetime, but invasions of principal limited to an ascertainable standard can only be made in the sole discretion of the Trustee.

Grantor has neither a general power of appointment over the remainder nor a right to revoke the Trust. The power of revocation is given only to the Trustee who is an adverse party as the father of the presumptive contingent remaindermen of the Trust. Grantor retained a limited testamentary power of appointment (not a general power) to appoint the remainder of the trust only to persons other than himself, his estate, his creditors and the creditors of his estate.

Upon the death of Grantor, Trustee is to distribute any remaining Trust assets, subject to the provisions set forth in the Trust Agreement, per stirpes, to the Grantor's then living decedents.

The Trust provides that XXX law shall govern its validity,

construction, effect and administration.

Provision of Law

Section 199.032, F.S., imposes an annual tax of 2 mills on each dollar of the just valuation of all intangible personal property that is owned, managed or controlled by a person domiciled or having a taxable situs in this state. Section 199.052 (5), F.S., states that only a trustee of a Florida-situs trust is responsible for returning the trust's intangible personal property and paying the annual tax on it.

Rule 12C-2.002 (1)(c), F.A.C., defines taxable beneficial interest in a Trust as the current right to 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. A beneficial interest in a trust is taxable only to the extent the trust corpus consists of property subject to the annual tax.

Department's Position

Based upon the provisions of the statutes, rules and the trust agreement provided, Trustee would not have a taxable situs in this state.

Grantor does not have a power to invade the corpus of the Trust, nor the power to revoke the Trust. Therefore, the Grantor as a beneficiary of the Trust does not have a taxable beneficial interest in the Trust.

Therefore, neither the Trustee, nor the Grantor is subject to the Florida intangible tax imposed under Chapter 199, F.S.

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,

Baldan E. Sulker
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

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