Did a trust have Florida intangible-tax situs when two of three equal trustees lived outside Florida?

Plain-English summary

The trust did not have a taxable situs in Florida because two of its three equal-management trustees lived outside the state. The majority-nonresident rule applied when three or more trustees shared management and control equally.

The Florida trustee's remainder interest also was not a taxable beneficial interest under the definition cited in the ruling. But the Department warned that if the Florida trustee later became one of only two trustees, or the sole trustee, the trust would acquire Florida situs under the cited provisions.

What this means for you

Trust situs depended on the actual number, residence, and allocation of management authority among trustees. The ruling separately analyzed whether the resident trustee held a taxable beneficial interest.

Common questions

Q: Did having one Florida trustee create situs? No, not while two nonresident trustees shared management and control equally.

Q: Could a later trustee change matter? Yes. The ruling said a reduction to two trustees including the Florida trustee, or to that trustee alone, would create Florida situs.

Q: Was the Florida trustee's remainder interest taxable? No, under the beneficial-interest definition applied in the ruling.

Citations and references

• Fla. Stat. § 199.052(5) — trust situs
• Fla. Stat. § 199.023(7) — beneficial interest in a foreign trust
• Fla. Admin. Code rr. 12C-2.006(3)(f), (4), 12C-2.003(3)(a), (e) — trustee and grantor rules
• 26 U.S.C. § 2041(b)(1) — general power of appointment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99C2-006

Original ruling text

SUMMARY

QUESTION: Will the trust or beneficial interest have a
taxable situs in Florida if two of the three trustees
reside outside the state and all trustees have equal share
in management and control?

ANSWER - Based on Facts Below: When a trust is managed and
controlled equally by three or more trustees, with the
majority of the trustees residing outside the state, the
trust will not have a taxable situs in Florida. The
beneficial interest will not be taxable in Florida provided
it does not include a current right to income and a power
to revoke the trust or general power of appointment as
defined in 26 U.S.C. s. 2041(b)(1).

Sep 22, 1999

Re: Technical Assistance Advisement No. 99(C)2-006
Intangible Tax - Trust
Sections 199.023(7), and 199.052, F.S.; Rule 12C-2.006,
F.A.C.
XXX (hereinafter Trustees)
XXX (hereinafter current beneficiaries)

Dear :

Your letter requesting a Technical Assistance Advisement
has been referred to this office for response. Facts on which
the advice has been requested are summarized below.

Facts as Presented by Petitioner

A trust, as amended, is managed by three trustees. Two of
the trustees reside outside the state of Florida. The trustees
share in the management and administration of the trust. The
trustees are also the settlors of the trust, and they have an
interest in the trust remainder. The current beneficiaries of

the trust are the father and the mother of the trustees. The
trust agreement permits absolute discretion in allowing
distributions from the trust assets for the benefit of the
current beneficiaries. Under the terms of the trust agreement,
two or one of the current trustees may become the only trustees.

Request for Advisement

You request an advisement that the trust does not have a
taxable situs in Florida, and that the beneficiary who resides
in Florida does not possess a taxable beneficial interest in the
trust.

Provisions of Law

Section 199.052(5)(a) and (b), F.S., states:

(5) The trustee of a Florida-situs trust is primarily
responsible for returning the trust's intangible personal
property and paying the annual tax on it.

(a) A trust has a Florida situs when:

1. All trustees are residents of the state;

2. There are three or more trustees sharing equally in
   the ownership, management, or control of the trust's
   intangible property, and the majority of the trustees
   are residents of this state; or

3. Trustees consist of both residents and nonresidents
   and management or control of the trust is with a
   resident trustee.

(b) When trustees consist of both residents and
nonresidents and management or control is with a
nonresident trustee, the trust does not have Florida situs
and no return is necessary by any resident trustee.

Rule 12C-2.006(3)(f), F.A.C., also provides:

When there are three or more trustees and they are
residents and nonresidents and they share equally in the
management and control, the trust has a taxable situs in
this state if the majority of the trustees are residents of
this state. In such a case only one return is to be filed
for the trust. If the majority of the trustees are
nonresidents the trust does not have a taxable situs in
this state and no return is to be filed.

Section 199.023(7), F.S., provides:

A resident has a "beneficial interest" in a foreign trust
if the resident has a vested interest, 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, as defined in 26 U.S.C. s.
2041(b)(1).

Rule 12C-2.006(4) describes some circumstances in which a
Florida domiciled grantor of a trust is subject to tax on
intangible personal property held as trust principal.

Determination

The trust is managed and controlled equally by three
trustees, with the majority of the trustees residing outside the
state. Pursuant to section 199.052(5), F.S., and Rule 12C2.006(3)(f), F.A.C., the trust is not considered to have a
taxable situs in Florida. If the Florida trustee becomes one of
only two trustees, or the only trustee, then section
199.052(5)(c) or (a), F.S., and Rule 12C-2.003(3)(e) or (a),
F.A.C., provide that the trust will be considered to have a
taxable situs in Florida. The intangible personal property held
as principal of this trust is not taxable to the Florida
domiciled grantor under Rule 12C-2.006(4), F.A.C. Finally,
pursuant to s. 199.023(7), F.S., the remainder interest of the
Florida trustee is not a taxable beneficial interest.

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, your request
and related backup documents are public records under Chapter
119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

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