Did an irrevocable trust with an out-of-state trustee, Florida grantor, and out-of-state trust advisor owe Florida intangible tax?

Plain-English summary

The Florida Department of Revenue concluded that the trust, its Florida grantor, its out-of-state trustee, and its out-of-state trust advisor were not liable for Florida intangible tax under the facts presented.

The irrevocable trust required its sole trustee to hold and manage all assets outside Florida. The trustee was not a Florida resident and had no Florida office or place of business, so the trust had no Florida taxable situs and the trustee did not have to file a return or pay the annual tax.

The Florida grantor had no current right to trust income, could not revoke or terminate the trust, could not invade principal, and held no power to appoint or change beneficiaries. The Department therefore found no taxable beneficial interest. The grantor's daughter lived outside Florida and served as trust advisor with limited fiduciary rights; exercising those rights had no Florida intangible-tax effect.

What this means for you

Trustees of out-of-state trusts

For this 1996 ruling, trust situs followed where the sole trustee was domiciled and where the trust's books, management, and assets were kept. The trust documents prohibited Florida management, and the trustee kept the trust outside the state.

Florida grantors and beneficiaries

A Florida domicile did not by itself make the grantor taxable on the foreign trust. The Department focused on whether she had a current income right plus specified control powers; she had none of them.

Trust advisors and estate planners

The nonresident daughter's limited trust-advisor powers did not create Florida liability. Different powers, Florida residence, a Florida trustee or office, or management of trust assets within Florida could require a different analysis.

Common questions

Q: Did the trust have Florida taxable situs?
A: No. Its sole trustee was outside Florida and was required to hold and manage the assets outside Florida.

Q: Did the Florida grantor have a taxable beneficial interest?
A: No. She lacked a current right to income and the revocation, principal-invasion, appointment, and beneficiary-control powers described in the ruling.

Q: Did the trustee have to file a Florida intangible tax return?
A: No. Because the trust lacked Florida situs, the Department said the trustee did not have to file or pay the annual tax on the trust assets.

Q: Did the daughter's trust-advisor role create tax liability?
A: No. She was domiciled outside Florida, and the Department said her exercise of the limited rights granted by the trust had no Florida intangible-tax impact.

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. § 199.032 (annual intangible personal property tax)
• Fla. Stat. § 199.175(1), (1)(a)3. and Fla. Admin. Code r. 12C-2.006(3) (trust domicile and taxable situs)
• Fla. Stat. § 199.052(6) (return responsibility for a foreign-trust beneficiary)
• Fla. Stat. § 199.023(7) and Fla. Admin. Code r. 12C-2.002, (1)(ee) (taxable beneficial interest)
• Fla. Stat. § 213.22 and Fla. Admin. Code ch. 12-11 (technical assistance advisements)
• Fla. Stat. ch. 119 (public records)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-141

Original ruling text

Dec 20, 1996

Re: Technical Assistance Advisement No. 96(C)2-141
Florida Intangible Tax; Trust
Section 199.032, F.S.
XXX (Grantor/Taxpayer)
XXX (Trust)
XXX (Trustee)
XXX (Grantor's Daughter/Trust Advisor)

Dear :

Your letter dated November 19, 1996, requests a Technical
Assistance Advisement regarding the applicability of Florida
intangible tax pursuant to s. 199.032, F.S., under the facts and
documents set forth herein. This request is made pursuant to
Chapter 12-11, F.A.C., and is issued to you under the authority
of s. 213.22, F.S.

Statement of Facts

The Taxpayer is a domiciliary of Florida and maintains her
permanent residence in XXX. The taxpayer is subject to and must
file the applicable return with FDOR for the Florida intangible
tax with respect to the value of such taxable property which she
owns, controls or manages, either directly or indirectly through
an agent or other third party, in the State of Florida as of
January 1 of each calender year.

The Taxpayer, as the Grantor, intends to establish a Trust
with the Trustee, in accordance with the specific terms and
conditions set forth in the Trust documents. The Trust, which
is to be governed by the laws of the State of XXX, is
irrevocable and no person, including the Trustee, has the power
to terminate the Trust at any time.

The Grantor may not alter, amend, revoke or terminate any
provision of the Trust. The assets of the Trust will be held
and exclusively managed by the Trustee in XXX. The Grantor is

precluded from managing any of the assets held by the Trustee
during the term of the Trust. The assets of the Trust may never
be managed by the Trustee within the State of Florida and the
Trustee does not maintain any office or place of business within
the State of Florida. The Trustee, in its discretion, may make
distributions of income and principal to the Grantor as it may
deem necessary for the benefit and general welfare of the
Grantor.

On XXX 1st of each calendar year all assets held in trust
in excess of $XX will revert back to the Grantor by operation of
law and be transferred to the Grantor by the Trustee in
accordance with such instructions as are provided in writing by
the Grantor. Where no written instruction is given, the
required distribution arising by virtue of the reversionary
interest held by the Grantor (or her estate in the event of her
death) shall be made to the Trustee for the Grantor/Taxpayer.

The Trust Advisor has the power to remove the Trustee at
any time and appoint a successor corporate trustee which is
prohibited from holding and managing the assets of the Trust
within the State of Florida.

The Grantor's daughter is designated in the Trust
instrument to serve as the "Trust Advisor". The Trust Advisor's
rights with respect to the management of the Trust's assets are
specifically limited by the Trust and the exercise of such
rights is subject to applicable rules governing fiduciaries.
The Grantor's daughter is domiciled in the State of XXX and has
no residence within the State of Florida.

The Taxpayer intends to make additional contributions of
cash or other property from time to time to the Trust, which
Trust will, at all times, maintain a minimum balance of $XX in
cash or value of other property.

Requested Ruling

You request that we answer the following:

1. Is the Taxpayer subject to Florida intangible tax with

respect to any and all property held by the Trust;
which property would otherwise be taxable property for
intangible tax purposes?

2. Is the Trustee subject to Florida intangible tax with
   respect to any and all property comprising the trust
   estate, including property which would otherwise be
   taxable property for intangible tax purposes, under
   its management and control?
3. Is the Taxpayer's daughter, as Trust Advisor, subject
   to Florida intangible tax with respect to any and all
   property in the Trust?

Provision 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.

Intangible personal property shall have a taxable situs in
this state when it is managed or controlled by any person
domiciled in this state on January 1 of the tax year. (See s.
199.175(1), F.S.) A trust is deemed to be domiciled in this
state if the trustee is domiciled in the state. (See s.
199.175(1)(a) 3., F.S.) The taxable situs of a trust shall be in
Florida if the trustee's usual place of business where the books
and records pertaining to the trust are kept is in Florida. If
the trustee has no principal place of business, then situs is
determined by whether management and control exists in Florida,
or by the residence of the trustee. (See Rule 12C-2.006(3),
F.A.C.)

When there is no taxable situs in Florida, a beneficiary of
a trust having a taxable beneficial interest in the trust may be
responsible for filing a return for taxable trust assets. (See
s. 199.052(6), F.S., and Rule 12C-2.002(1)(ee), F.A.C.) A
resident has a taxable beneficial interest in a foreign trust if
the resident has a vested interest in the trust, even if subject
to divestment, which includes at least a current right to income
and either a power to revoke the trust, or a general power of
appointment. (See s. 199.023(7), F.S.)

By rule, taxable beneficial interest in a trust is 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.
(See Rule 12C-2.002, F.A.C.)

Conclusion

The Taxpayer has no current right to income of the Trust.
The out-of-state Trustee has the full discretion for
distribution of income of the Trust. The Taxpayer retains no
power of appointment over any portion of the Trust, has no right
to revoke the Trust, has no right to change the beneficiaries of
the Trust or appoint successor beneficiaries, or any right to
invade the corpus of the Trust. Therefore, pursuant to the
statutory and administrative provisions, the Taxpayer has no
taxable beneficial interest in the Trust.

When there is a sole Trustee who is not a resident of the
State of Florida who manages and holds the Trust's assets at all
times outside of the State of Florida as required by the Trust,
then the Trust has no Florida situs and the Trustee is not
required to file a return or pay the annual intangible tax on
the assets of the trust.

The Taxpayer's daughter, who is designated by the Trust to
serve as an Advisor to the Trustee, is domiciled outside of
Florida. The Taxpayer's daughter is not a resident of the State
of Florida. The exercise of all rights set forth under the
Trust as Trust Advisor does not have any impact for Florida
intangible tax purposes.

Therefore, based on the provisions of the statutes and the
provisions of the Trust, neither the Trustee, the Grantor, nor
the Trust Advisor are liable for the Florida intangible tax.

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

BES/mh