Did an income beneficiary have a taxable Florida trust interest when appointment rights were limited and the trustee was outside Florida?

Plain-English summary

The Florida Department of Revenue concluded that neither the trustee nor the income beneficiary of the 1995 irrevocable trust was liable for Florida intangible tax. No returns were required for the trust.

The current trustee was not a Florida resident. The trust prohibited an individual trustee from residing in Florida, prohibited a corporate trustee from qualifying to do or doing business in Florida, and required any trustee who became taxable in Florida to cease serving. The Department therefore found no Florida taxable situs.

The beneficiary had a right to trust income and a limited power of appointment. The trust barred appointments to the grantor, the grantor's estate, or creditors of the estate, and the beneficiary could neither revoke the trust nor invade its corpus. Those restrictions prevented the beneficiary's interest from meeting the cited taxable-beneficial-interest definition.

What this means for you

Income beneficiaries

The Department analyzed the income right together with the beneficiary's other powers. The absence of revocation, corpus-invasion, and general appointment authority was decisive under these facts.

Trustees

Florida situs turned on residence and legal or commercial domicile. The trust required a trustee to remain outside the Florida connections described in the ruling.

Accountants and tax professionals

The ruling's no-tax and no-filing result applied to this trust's 1996 facts and cited law. Review current law and the complete trust instrument before applying the same treatment now.

Common questions

Q: Did the beneficiary receive trust income? A: Yes. The ruling expressly described a right to trust income.

Q: Could the beneficiary revoke the trust or invade its corpus? A: No.

Q: Could the beneficiary appoint trust property for the grantor's benefit? A: No. The restriction also covered the grantor's estate and creditors of that estate.

Q: Did either the trustee or beneficiary have to file a Florida intangible-tax return? A: The ruling said neither was liable and no returns were required for the trust.

Citations and references

• Fla. Stat. § 199.052(5) — responsibility of a Florida trustee for intangible tax
• Fla. Stat. § 199.175 — 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

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-149

Original ruling text

Dec 26, 1996

Re: Technical Assistance Advisement No. 96(C)2-149 Intangible Tax; Trust ss. 199.023(7), and 199.052(5), F.S. XXX Irrevocable Trust of 1995

Dear :

This office has received your request for a Technical Assistance Advisement for the trust listed above. This office has examined the provisions of the trust document that contains provisions governing duties of trustees and rights of the beneficiary.

Discussion of Trust Provisions

Under the provisions of the trust, the beneficiary is granted the right to trust income and 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 the individual trustee may not be a resident of Florida and that a corporate trustee may neither be qualified to do nor do business in Florida. If any trustee becomes taxable in Florida, the trust requires that the trustee cease to act as trustee.

Provisions and Discussion of Law

Section 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. Based upon this statute and the provisions of the trust, the individual trustee may not be a resident of Florida and no corporate trustee may do or be qualified to do business

in Florida. The current trustee is a not a Florida resident. Therefore, the trustee does not have a taxable situs in Florida.

Section 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. Based on the statute and the express provisions of the trust, 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. Therefore, 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,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance

JVP/mh