Did a Florida grantor-beneficiary owe intangible tax after transferring assets to a foreign-situs trust but retaining consent power over pledges and dispositions?

Plain-English summary

The Florida resident had no taxable beneficial interest in the foreign trust, but she still had to file an intangible-tax return because she retained control as grantor.

As beneficiary, she had no current right to income, no right to revoke the trust, no general power of appointment, and no stated right to invade the corpus. Those facts did not create the taxable beneficial interest described in the statute and rule.

The revised ruling added a decisive trust provision: the trustee needed the grantor's written consent before pledging or disposing of trust property. The Department found that this consent right left the Florida-resident grantor with ownership, management, and control of the trust assets. The assets therefore had Florida taxable situs through her, and she was responsible for filing.

What this means for you

Beneficiary rights and grantor control are separate questions. A person can lack a taxable beneficial interest yet still own, manage, or control the trust assets through retained approval powers. Trust documents should be reviewed for consent rights over pledges, sales, and other dispositions, not only for income and revocation provisions.

Common questions

Q: Did the beneficiary have a taxable beneficial interest? A: No. She lacked a current income right and the specified revocation, corpus-invasion, and general appointment powers.

Q: Why did she still have to file?
A: As grantor, her written consent was required before the trustee could pledge or dispose of trust property, which the Department treated as retained ownership, management, and control.

Q: Did the non-Florida location of the trustee end the analysis? A: No. The retained control of the Florida-resident grantor gave the intangible property Florida taxable situs under the revised ruling.

Q: How did this differ from the original TAA 96C2-108? A: The revision considered the grantor-consent provision and concluded that the resident grantor had filing responsibility despite lacking a taxable beneficial interest.

Citations and references

• Fla. Stat. § 199.023(7) — taxable beneficial interests in foreign-situs trusts
• Fla. Stat. § 199.052(1), (5) — filing responsibility
• Fla. Stat. § 199.175(1) — ownership, management, control, and taxable situs
• Fla. Admin. Code r. 12C-2.002(1)(c) — foreign-trust beneficial interests
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-108R

Original ruling text

Status: Supersedes TAA 96C2-108, issued October 10, 1996

             Dec 20, 1996

Re: Technical Assistance Advisement No. 96(C)2-108 REVISED Intangible Tax; Taxable Situs- Foreign Trust Sections 199.023(7), 199.052(6), 199.052(7), 199.175(1), F.S. XXX (hereinafter referred to as "Grantor") XXX (hereinafter referred to as the "Trust") XXX (hereinafter referred to as the "Trustee")

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 Grantor, a Florida resident and beneficiary of the Trust, will assign all of her rights, title and interest in and to certain intangibles to the Trust. The Trustee is a resident of the State of XXX, and the situs for the Trust is in the State of XXX. The Trustee does not have an office in Florida. The beneficiary of the Trust does not have a current right to income; and the Trustee has been granted full discretion for distributions of income and principal. The beneficiary does not have the right to revoke her Trust nor does she have a general power of appointment. If the beneficiary dies prior to the end of the Term of the Trust, the assets shall be payable to the beneficiary's revocable trust, if any, and if none, to the beneficiary's estate. Based upon the provisions of the Trust under Article III.C.6, the Trustee must obtain the written consent of the Grantor "prior to pledging, hypothetically (Sic) or disposing of any trust property."

           Provisions of Law

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

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provide that a taxable beneficial interest in a foreign-situs 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 trustee of a Florida situs trust. To have a taxable situs in Florida the trust must meet the provisions of s. 199.175(1), F.S., which states that intangible personal property has a taxable situs in this state when it is owned, managed, or controlled by any person domiciled in this state on January 1 of the tax year.

             Discussion of Law

Based upon the provisions of the Trust under Article III.C.6, the Grantor, a Florida resident, retains ownership, management and control of the trust assets. As a beneficiary, she does not have a taxable beneficial interest in the Trust. However, as the Grantor and Florida resident, she meets the provisions of s. 199.052(1), F.S., and is responsible for filing a Florida intangible tax return because she falls under s. 199.175(1), F.S., due to the taxable situs of the intangible property which is owned, managed and controlled by her.

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.

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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
                Tax Policy and Dispute Resolution
                Office of General Counsel

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