Senate Bill sb2606

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    Florida Senate - 2007                                  SB 2606

    By Senator Aronberg





    27-766D-07

  1                      A bill to be entitled

  2         An act relating to the administration of

  3         trusts; amending s. 689.071, F.S.; limiting the

  4         definition of the term "land trust" to an

  5         arrangement in which title to real property is

  6         vested in a trustee by a recorded instrument

  7         that confers certain authority as prescribed by

  8         state law; providing that such a recorded

  9         instrument does not itself create an entity;

10         providing that a recorded instrument is

11         effective regardless of whether it refers to

12         beneficiaries of the trust; providing that a

13         recorded instrument vests both legal and

14         equitable title to real property or the

15         interest therein in the trustee; conforming

16         cross-references; amending s. 731.201, F.S.;

17         redefining the term "trust"; conforming a

18         cross-reference; amending s. 731.303, F.S.;

19         excluding trusts from guidelines regarding

20         administration and judicial proceedings;

21         amending s. 736.0102, F.S.; conforming a

22         cross-reference; amending s. 736.0501, F.S.;

23         limiting the ability of creditors or assignees

24         of a beneficiary to reach the beneficiary's

25         interest in a trust; amending s. 736.0502,

26         F.S.; clarifying the application of

27         restrictions on transferring a beneficiary's

28         interest under a spendthrift provision;

29         amending s. 736.0503, F.S.; providing an

30         exception to a provision authorizing the

31         attachment of trust distributions; amending s.

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 1         736.0504, F.S.; defining the term

 2         "discretionary distribution"; prohibiting

 3         certain creditors from compelling distributions

 4         or attaching a beneficiary's interest or

 5         expectancy; amending ss. 736.0813 and 736.1008,

 6         F.S.; conforming dates of applicability of the

 7         accounting provision and corresponding

 8         limitations to the effective date of the code;

 9         amending s. 736.1011, F.S.; providing that

10         direct communication of exculpatory terms to

11         the trust settlor is required only for trusts

12         created on or after July 1, 2007; amending s.

13         736.1106, F.S.; providing that certain

14         antilapse provisions continue to apply to

15         irrevocable trusts created between June 12,

16         2003, and July 1, 2007; amending s. 736.1204,

17         F.S.; clarifying the use of income interest of

18         a trust; amending ss. 736.1209 and 736.1001,

19         F.S., relating to the release of power by a

20         trustee and removal of a trustee; conforming

21         cross-references; providing an effective date.

22  

23  Be It Enacted by the Legislature of the State of Florida:

24  

25         Section 1.  Paragraph (d) of subsection (2),

26  subsections (3) and (7), and paragraph (a) of subsection (9)

27  of section 689.071, Florida Statutes, as amended by section 21

28  of chapter 2006-217, Laws of Florida, are amended to read:

29         689.071  Florida Land Trust Act.--

30         (2)  DEFINITIONS.--As used in this section, the term:

31  

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 1         (d)  "Land trust" is not the creation of an entity, but

 2  means any express written agreement or arrangement by which a

 3  use, confidence, or trust is declared of any land, or of any

 4  charge upon land, for the use or benefit of any beneficiary,

 5  under which the title to real property, both legal and

 6  equitable, is vested in a trustee by a recorded instrument

 7  that confers on the trustee the power and authority prescribed

 8  in subsection (3). The recorded instrument does not itself

 9  create an entity, regardless of whether the relationship among

10  the beneficiaries and the trustee is deemed to be an entity

11  under other applicable law. held by a trustee, subject only to

12  the execution of the trust, which may be enforced by the

13  beneficiaries.

14         (3)  OWNERSHIP VESTS IN TRUSTEE.--Every conveyance,

15  deed, mortgage, lease assignment, or other instrument

16  heretofore or hereafter made, hereinafter referred to as the

17  "the recorded instrument," transferring any interest in real

18  property in this state, including, but not limited to, a

19  leasehold or mortgagee interest, to any person or any

20  corporation, bank, trust company, or other entity duly formed

21  under the laws of its state of qualification, in which

22  recorded instrument the person, corporation, bank, trust

23  company, or other entity is designated "trustee," or "as

24  trustee," without therein naming the beneficiaries of such

25  trust, whether or not reference is made in the recorded

26  instrument to the beneficiaries of such trust or to any

27  separate collateral unrecorded declarations or agreements, is

28  effective to vest, and is hereby declared to have vested, in

29  such trustee both legal and equitable title, and full rights

30  of ownership, over the real property or interest therein, with

31  full power and authority as granted and provided in the

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 1  recorded instrument to deal in and with the property or

 2  interest therein or any part thereof; provided, the recorded

 3  instrument confers on the trustee the power and authority

 4  either to protect, to conserve, and to sell, or to lease, or

 5  to encumber, or otherwise to manage and dispose of the real

 6  property described in the recorded instrument.

 7         (7)  TRUSTEE LIABILITY.--In addition to any other

 8  limitation on personal liability existing pursuant to statute

 9  or otherwise, the provisions of ss. 736.08125 and 736.1013 s.

10  736.1013 apply to the trustee of a land trust created pursuant

11  to this section.

12         (9)  SUCCESSOR TRUSTEE.--

13         (a)  The provisions of s. 736.0705 s. 737.309 relating

14  to the resignation of a trustee do not apply to the

15  appointment of a successor trustee under this section.

16         Section 2.  Subsection (35) of section 731.201, Florida

17  Statutes, as amended by section 29 of chapter 2006-217, Laws

18  of Florida, is amended to read:

19         731.201  General definitions.--Subject to additional

20  definitions in subsequent chapters that are applicable to

21  specific chapters or parts, and unless the context otherwise

22  requires, in this code, in s. 409.9101, and in chapters 737,

23  738, 739, and 744, the term:

24         (35)  "Trust" means an express trust, private or

25  charitable, with additions to it, wherever and however

26  created. It also includes a trust created or determined by a

27  judgment or decree under which the trust is to be administered

28  in the manner of an express trust. "Trust" excludes other

29  constructive trusts, and it excludes resulting trusts;

30  conservatorships; custodial arrangements pursuant to the

31  Florida Uniform Transfers to Minors Act; business trusts

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 1  providing for certificates to be issued to beneficiaries;

 2  common trust funds; land trusts under s. 689.071, except to

 3  the extent provided in s. 689.071(7) s. 689.05; trusts created

 4  by the form of the account or by the deposit agreement at a

 5  financial institution; voting trusts; security arrangements;

 6  liquidation trusts; trusts for the primary purpose of paying

 7  debts, dividends, interest, salaries, wages, profits,

 8  pensions, or employee benefits of any kind; and any

 9  arrangement under which a person is nominee or escrowee for

10  another.

11         Section 3.  Section 731.303, Florida Statutes, is

12  amended to read:

13         731.303  Representation.--In the administration of or

14  in judicial proceedings involving estates of decedents or

15  trusts, the following apply:

16         (1)  Persons are bound by orders binding others in the

17  following cases:

18         (a)1.  Orders binding the sole holder or all coholders

19  of a power of revocation or a general, special, or limited

20  power of appointment, including one in the form of a power of

21  amendment or revocation to the extent that the power has not

22  become unexercisable in fact, bind all persons to the extent

23  that their interests, as persons who may take by virtue of the

24  exercise or nonexercise of the power, are subject to the

25  power.

26         2.  Subparagraph 1. does not apply to:

27         a.  Any matter determined by the court to involve fraud

28  or bad faith by the trustee;

29         b.  A power of a trustee to distribute trust property;

30  or

31  

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 1         c.  A power of appointment held by a person while the

 2  person is the sole trustee.

 3         (b)  To the extent there is no conflict of interest

 4  between them or among the persons represented:

 5         1.  Orders binding a guardian of the property bind the

 6  ward.

 7         2.  Orders binding a trustee bind beneficiaries of the

 8  trust in proceedings to probate a will, in establishing or

 9  adding to a trust, in reviewing the acts or accounts of a

10  prior fiduciary, and in proceedings involving creditors or

11  other third parties. However, for purposes of this section, a

12  conflict of interest shall be deemed to exist when each

13  trustee of a trust that is a beneficiary of the estate is also

14  a personal representative of the estate.

15         3.  Orders binding a personal representative bind

16  persons interested in the undistributed assets of a decedent's

17  estate, in actions or proceedings by or against the estate.

18         (c)  An unborn or unascertained person, or a minor or

19  any other person under a legal disability, who is not

20  otherwise represented is bound by an order to the extent that

21  person's interest is represented by another party having the

22  same or greater quality of interest in the proceeding.

23         (2)  Orders binding a guardian of the person shall not

24  bind the ward.

25         (3)  In proceedings involving the administration of

26  estates or trusts, notice is required as follows:

27         (a)  Notice as prescribed by law shall be given to

28  every interested person, or to one who can bind the interested

29  person as described in paragraph (1)(a) or paragraph (1)(b).

30  Notice may be given both to the interested person and to

31  another who can bind him or her.

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 1         (b)  Notice is given to unborn or unascertained persons

 2  who are not represented pursuant to paragraph (1)(a) or

 3  paragraph (1)(b) by giving notice to all known persons whose

 4  interests in the proceedings are the same as, or of a greater

 5  quality than, those of the unborn or unascertained persons.

 6         (4)  If the court determines that representation of the

 7  interest would otherwise be inadequate, the court may, at any

 8  time, appoint a guardian ad litem to represent the interests

 9  of an incapacitated person, an unborn or unascertained person,

10  a minor or any other person otherwise under a legal

11  disability, or a person whose identity or address is unknown.

12  If not precluded by conflict of interest, a guardian ad litem

13  may be appointed to represent several persons or interests.

14         (5)  The holder of a power of appointment over property

15  not held in trust may represent and bind persons whose

16  interests, as permissible appointees, takers in default, or

17  otherwise, are subject to the power. Representation under this

18  subsection does not apply to:

19         (a)  Any matter determined by the court to involve

20  fraud or bad faith by the trustee;

21         (b)  A power of a trustee to distribute trust property;

22  or

23         (c)  A power of appointment held by a person while the

24  person is the sole trustee.

25         Section 4.  Section 736.0102, Florida Statutes, is

26  amended to read:

27         736.0102  Scope.--This code applies to express trusts,

28  charitable or noncharitable, and trusts created pursuant to a

29  law, judgment, or decree that requires the trust to be

30  administered in the manner of an express trust. This code does

31  not apply to constructive or resulting trusts;

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 1  conservatorships; custodial arrangements pursuant to the

 2  Florida Uniform Transfers to Minors Act; business trusts

 3  providing for certificates to be issued to beneficiaries;

 4  common trust funds; land trusts under s. 689.071, except to

 5  the extent provided in s. 689.071(7) s. 689.05; trusts created

 6  by the form of the account or by the deposit agreement at a

 7  financial institution; voting trusts; security arrangements;

 8  liquidation trusts; trusts for the primary purpose of paying

 9  debts, dividends, interest, salaries, wages, profits,

10  pensions, or employee benefits of any kind; and any

11  arrangement under which a person is nominee or escrowee for

12  another.

13         Section 5.  Section 736.0501, Florida Statutes, is

14  amended to read:

15         736.0501  Rights of beneficiary's creditor or

16  assignee.--Except as provided in s. 736.0504, to the extent a

17  beneficiary's interest is not subject to a spendthrift

18  provision, the court may authorize a creditor or assignee of

19  the beneficiary to reach the beneficiary's interest by

20  attachment of present or future distributions to or for the

21  benefit of the beneficiary or by other means. The court may

22  limit the award to such relief as is appropriate under the

23  circumstances.

24         Section 6.  Subsection (1) of section 736.0502, Florida

25  Statutes, is amended to read:

26         736.0502  Spendthrift provision.--

27         (1)  A spendthrift provision is valid only if the

28  provision restrains both voluntary and involuntary transfer of

29  a beneficiary's interest. This subsection does not apply to

30  any trust the terms of which are included in an instrument

31  

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 1  executed before in existence on the effective date of this

 2  code.

 3         Section 7.  Subsection (3) of section 736.0503, Florida

 4  Statutes, is amended to read:

 5         736.0503  Exceptions to spendthrift provision.--

 6         (3)  Except as otherwise provided in this subsection

 7  and in s. 736.0504, a claimant against which a spendthrift

 8  provision may not be enforced may obtain from a court, or

 9  pursuant to the Uniform Interstate Family Support Act, an

10  order attaching present or future distributions to or for the

11  benefit of the beneficiary. The court may limit the award to

12  such relief as is appropriate under the circumstances.

13  Notwithstanding this subsection, the remedies provided in this

14  subsection apply to a claim by a beneficiary's child, spouse,

15  former spouse, or a judgment creditor described in paragraph

16  (2)(a) or paragraph (2)(b) only as a last resort upon an

17  initial showing that traditional methods of enforcing the

18  claim are insufficient.

19         Section 8.  Section 736.0504, Florida Statutes, is

20  amended to read:

21         736.0504  Discretionary trusts; effect of standard.--

22         (1)  As used in this section, the term "discretionary

23  distribution" means a distribution that is subject to the

24  trustee's discretion whether or not the discretion is

25  expressed in the form of a standard of distribution and

26  whether or not the trustee has abused the discretion. Whether

27  or not a trust contains a spendthrift provision, a creditor of

28  a beneficiary may not compel a distribution that is subject to

29  the trustee's discretion, even if:

30         (a)  The discretion is expressed in the form of a

31  standard of distribution; or

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 1         (b)  The trustee has abused the discretion.

 2         (2)  Whether or not a trust contains a spendthrift

 3  provision, if a trustee may make discretionary distributions

 4  to or for the benefit of a beneficiary, a creditor of the

 5  beneficiary, including a creditor as described in s.

 6  736.0503(2), may not:

 7         (a)  Compel a distribution that is subject to the

 8  trustee's discretion; or

 9         (b)  Attach or otherwise reach the interest, if any,

10  which the beneficiary might have as a result of the trustee's

11  authority to make discretionary distributions to or for the

12  benefit of the beneficiary.

13         (3)(2)  If the trustee's discretion to make

14  distributions for the trustee's own benefit is limited by an

15  ascertainable standard, a creditor may not reach or compel

16  distribution of the beneficial interest except to the extent

17  the interest would be subject to the creditor's claim were the

18  beneficiary not acting as trustee.

19         (4)(3)  This section does not limit the right of a

20  beneficiary to maintain a judicial proceeding against a

21  trustee for an abuse of discretion or failure to comply with a

22  standard for distribution.

23         Section 9.  Subsection (5) of section 736.0813, Florida

24  Statutes, is amended to read:

25         736.0813  Duty to inform and account.--The trustee

26  shall keep the qualified beneficiaries of the trust reasonably

27  informed of the trust and its administration.

28         (5)  This section applies to trust accountings rendered

29  for accounting periods beginning on or after July 1, 2007

30  January 1, 2008.

31  

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 1         Section 10.  Subsection (6) of section 736.1008,

 2  Florida Statutes, is amended to read:

 3         736.1008  Limitations on proceedings against

 4  trustees.--

 5         (6)  This section applies to trust accountings for

 6  accounting periods beginning on or after July 1, 2007 January

 7  1, 2008, and to written reports, other than trust accountings,

 8  received by a beneficiary on or after July 1, 2007 January 1,

 9  2008.

10         Section 11.  Subsection (2) of section 736.1011,

11  Florida Statutes, is amended to read:

12         736.1011  Exculpation of trustee.--

13         (2)  An exculpatory term drafted or caused to be

14  drafted by the trustee is invalid as an abuse of a fiduciary

15  or confidential relationship unless:

16         (a)  The trustee proves that the exculpatory term is

17  fair under the circumstances; and that

18         (b)  The term's existence and contents were adequately

19  communicated directly to the settlor. This paragraph applies

20  only to trusts created on or after July 1, 2007.

21         Section 12.  Subsection (5) of section 736.1106,

22  Florida Statutes, is amended to read:

23         736.1106  Antilapse; survivorship with respect to

24  future interests under terms of inter vivos and testamentary

25  trusts; substitute takers.--

26         (5)  Subsections (1) through (4) apply This section

27  applies to all trusts other than trusts that were irrevocable

28  before the effective date of this code. Sections 732.603,

29  732.604, and 737.6035, as they exist on June 30, 2007,

30  continue to apply to other trusts executed on or after June

31  12, 2003.

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 1         Section 13.  Subsection (4) of section 736.1204,

 2  Florida Statutes, is amended to read:

 3         736.1204  Powers and duties of trustee of a private

 4  foundation trust or a split interest trust.--

 5         (4)  Paragraphs (3)(b) and (c) shall not apply to a

 6  split interest trust if:

 7         (a)  All the income interest from income, and none of

 8  the remainder interest, of the trust is devoted solely to one

 9  or more of the purposes described in s. 170(c)(2)(B) of the

10  Internal Revenue Code, and all amounts in the trust for which

11  a deduction was allowed under s. 170, s. 545(b)(2), s.

12  556(b)(2), s. 642(c), s. 2055, s. 2106(a)(2), or s. 2522 of

13  the Internal Revenue Code have an aggregate fair market value

14  of not more than 60 percent of the aggregate fair market value

15  of all amounts in the trust; or

16         (b)  A deduction was allowed under s. 170, s.

17  545(b)(2), s. 556(b)(2), s. 642(c), s. 2055, s. 2106(a)(2), or

18  s. 2522 of the Internal Revenue Code for amounts payable under

19  the terms of the trust to every remainder beneficiary but not

20  to any income beneficiary.

21         Section 14.  Section 736.1209, Florida Statutes, is

22  amended to read:

23         736.1209  Election to come under this part.--With the

24  consent of that organization or organizations, a trustee of a

25  trust for the benefit of a public charitable organization or

26  organizations may come under s. 736.1208(5) s. 736.0838(5) by

27  filing with the state attorney an election, accompanied by the

28  proof of required consent. Thereafter the trust shall be

29  subject to s. 736.1208(5).

30         Section 15.  Subsection (2) of section 736.1001,

31  Florida Statutes, is amended to read:

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 1         736.1001  Remedies for breach of trust.--

 2         (2)  To remedy a breach of trust that has occurred or

 3  may occur, the court may:

 4         (a)  Compel the trustee to perform the trustee's

 5  duties;

 6         (b)  Enjoin the trustee from committing a breach of

 7  trust;

 8         (c)  Compel the trustee to redress a breach of trust by

 9  paying money or restoring property or by other means;

10         (d)  Order a trustee to account;

11         (e)  Appoint a special fiduciary to take possession of

12  the trust property and administer the trust;

13         (f)  Suspend the trustee;

14         (g)  Remove the trustee as provided in s. 736.0706 s.

15  736.706;

16         (h)  Reduce or deny compensation to the trustee;

17         (i)  Subject to s. 736.1016, void an act of the

18  trustee, impose a lien or a constructive trust on trust

19  property, or trace trust property wrongfully disposed of and

20  recover the property or its proceeds; or

21         (j)  Order any other appropriate relief.

22         Section 16.  This act shall take effect July 1, 2007.

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 1            *****************************************

 2                          SENATE SUMMARY

 3    Limits the definition of "land trust" to an arrangement
      in which title to real property is vested in a trustee by
 4    a recorded instrument that confers certain authority as
      prescribed by state law. Provides that such a recorded
 5    instrument does not itself create an entity. Provides
      that a recorded instrument is effective regardless of
 6    whether it refers to beneficiaries of the trust. Provides
      that a recorded instrument vests both legal and equitable
 7    title to real property or the interest therein in the
      trustee. Limits the ability of creditors or assignees of
 8    a beneficiary to reach the beneficiary's interest in a
      trust. Extends the grandfathering of testamentary trusts
 9    to include those created in wills executed before a
      certain date under specified conditions. Provides that
10    the rights given to exception creditors are subservient
      to the protection given to beneficiaries of discretionary
11    trusts. Defines the term "discretionary distribution."
      Provides protection to discretionary interests from the
12    ability of exception creditors to compel distributions or
      attach a beneficiary's interest or expectancy. Provides
13    that direct communication of exculpatory terms to the
      trust settlor is required only for trusts created on or
14    after a certain date. Provides that existing antilapse
      provisions continue to apply to irrevocable trusts
15    created within a specified period. Conforms dates of
      applicability of the accounting provision and
16    corresponding limitations to the effective date of the
      trust code. Restores previously codified wording to
17    certain sections of the code.

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