Did an irrevocable trust owe Florida intangible tax when no trustee could be a Florida resident and the beneficiary held only a limited appointment power?

Plain-English summary

The Florida Department of Revenue concluded that neither the trustee nor the beneficiary owed Florida intangible tax, and no trust return was required. The irrevocable trust prohibited any trustee from being a Florida resident, so the Department found no trustee with Florida taxable situs.

The beneficiary held only a limited power of appointment. That power could not be used for the grantor, the grantor's estate, or creditors of the grantor's estate. The beneficiary also could not revoke the trust or invade its principal.

Because the beneficiary lacked the control rights required by the cited statute and rule, the Department found no taxable beneficial interest in the foreign trust.

What this means for you

Trustees of foreign trusts

For this 1996 ruling, the trust's absolute bar on a Florida-resident trustee prevented trustee-level Florida situs. The conclusion depended on that restriction being followed.

Trust beneficiaries

A limited appointment power was not treated as a general power of appointment. Without revocation or principal-invasion rights, the beneficiary did not have the taxable beneficial interest described in the ruling.

Estate planners and tax professionals

The ruling separately analyzed trustee situs and beneficiary powers. A Florida-resident trustee or broader beneficiary control could change either side of the analysis.

Common questions

Q: Did the trustee owe Florida intangible tax? A: No. The trust prohibited any trustee from being a Florida resident, so the Department found no Florida trustee situs.

Q: Did the beneficiary have a taxable beneficial interest? A: No. The beneficiary held only a limited appointment power and could not revoke the trust or invade its principal.

Q: Was a Florida trust return required? A: No. The Department concluded that neither the trustee nor beneficiary was liable and no returns were required.

Q: Did the ruling decide how a corporate trustee's Florida business activity is treated? A: No. It stated only that no trustee could be a Florida resident and did not separately analyze a corporate trustee's Florida business qualification.

Q: Can another trust rely on this TAA? A: Not automatically. The advisement states that it binds the Department only under the facts and circumstances described in the request, and later legal changes or court interpretations may produce a different result.

Citations and references

• Fla. Stat. § 199.052(5) (Florida trustee responsibility)
• Fla. Stat. § 199.175 (Florida taxable situs)
• Fla. Stat. § 199.023(7) and Fla. Admin. Code r. 12C-2.002(1)(c) (taxable beneficial interest in a foreign trust)
• Fla. Stat. § 213.22 (technical assistance advisements)
• Fla. Stat. ch. 119 (public records)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-137

Original ruling text

Dec 17, 1996

Re: Technical Assistance Advisement No. 96(C)2-137 Intangible Tax;

XXX Trust
Dear :
This office has received your request for a Technical Assistance Advisement for the trust listed above. We have examined the trust document that contains provisions governing the duties of

the trustee and rights of the beneficiary.

Discussion of Trust Provisions

Under the provisions of the irrevocable trust, the beneficiary

is granted a limited power of appointment over the assets of the trust. This limitation states that the beneficiary/grantor may

not appoint to or for the benefit of the grantor, or the

grantor's estate, or the creditors of the grantor's estate, any asset or income of the trust. The trust further provides that

no trustee may be a resident of Florida.

Provisions of Law

Subsection 199.052(5), F.S., places primary responsibility for payment of intangible tax on a Florida trustee. Section 199.175, F.S., describes persons and assets with taxable situs in Florida. A trustee must be a Florida resident or legally or commercially domiciled in Florida to have a taxable situs in

Florida.

Subsection 199.023(7), F.S., and Rule 12C-2.002(1)(c), F.A.C., state that a taxable beneficial interest in a foreign trust includes at least a current right to income coupled with either

a right to revoke the trust, or a right to invade the corpus of

the trust, or a general power of appointment.

Discussion of Law

The trust provides no trustee may be a resident of Florida.

Therefore, no trustee has a taxable situs in Florida.

Based on the express provisions of the trust, that the income 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, and does not have power to revoke the trust, the beneficiary does not have a taxable beneficial interest in the

trust.

In summary, neither the trustee nor the beneficiary 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,

Mary Ella Ingram

Tax Specialist

Tax Policy and Dispute Resolution