Did trusts with Florida settlors owe intangible tax when an out-of-state trustee controlled revocation and the settlors lacked broad access powers?

Plain-English summary

Florida concluded that no intangible personal property tax was due on the two trusts and that neither the settlors nor the trustee had to file an intangible-tax return.

The settlors lived in Florida, but the trusts had an out-of-state trustee. The settlors could amend or revoke only with the trustee's written approval, could not invade trust principal, and retained only a limited special power to appoint new beneficiaries. That power could not benefit the settlors, their estates, or their creditors.

Florida defined a taxable beneficial interest as a current income right combined with a right to revoke, invade corpus, or exercise an unlimited power to appoint future beneficiaries. The ruling found the described trust terms did not produce tax liability, and it also noted that a trust has Florida situs when its trustee is domiciled in Florida.

What this means for you

• The settlors' retained powers were limited in specific, material ways.
• The trustee's out-of-state domicile mattered to the trust-situs analysis.
• A different revocation right, principal-access right, or appointment power could change the result.

Common questions

Q: Was intangible tax due on the trusts? A: No.

Q: Did the Florida settlors have to file an intangible-tax return? A: No.

Q: Did the out-of-state trustee have to file? A: No.

Citations and references

• Fla. Stat. § 199.023(7) — taxable beneficial interest
• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 199.052(1), (5) — ministerial functions and trust situs
• Fla. Stat. § 199.175 — taxable situs
• Fla. Admin. Code r. 12-2.002(1)(c) — taxable beneficial interest
• Fla. Admin. Code r. 12C-2.006(3) — trust situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-058

Original ruling text

May 22, 1996

Re: Technical Assistance Advisement No. 96(C)2-058 Intangible Tax; Revocable Trust XXX (Settlor) XXX (Settlor) XXX (Trustee) XXX (Trust) XXX (Trust)

Dear :

Your letter requesting a Technical Assistance Advisement has been referred to this office for response. The specific scenario for which the response is being written is presented below.

Statement of the Facts

The settlors are Florida residents. In XXX, the trusts were amended establishing an out of state resident as trustee of the trusts. The trusts provide that the settlors may not amend or revoke the trusts except with the written approval of the trustee. The settlors do not have the power to invade the principal of the trust. A limited special power of appointment has been retained by the settlors which allows them to appoint new beneficiaries of the trust. However, the power of appointment may not be used for the benefit of the settlors, their estates, the creditors of the settlors, or the creditors of their estates.

Provisions of the Law

Section 199.032, F.S., imposes an annual tax of 2 mills on all intangible property that is owned, managed or controlled by a person domiciled or having a taxable situs in Florida. (See ss. 199.052 and 199.175, F.S.)

Section 199.023(7), F.S., and Rule 12-2.002(1)(c), F.A.C.,

define taxable beneficial interest in a trust as the current right to income coupled with either a right to revoke the trust, the right to invade the corpus of the trust, or an unlimited power of appointment of future beneficiaries.

Section 199.052(1), F.S., also provides that management or control does not include any ministerial function or processing activity. A trust will have a taxable situs in Florida if the Trustee is domiciled in this State. (See s. 199.052(5), F.S., and Rule 12C-2.006(3), F.A.C.

Conclusion

Based on the provisions of the statutes and the provisions of the Trusts, Intangible Personal Property Tax is not due on the trusts described. Therefore, neither the settlors nor the Trustee are required to file an intangible tax return.

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,

Celestine Grantham
Senior Tax Specialist
Tax Policy and Dispute
Resolution
Office of General Counsel

CG/mh