Florida Banking April 2022

themselves to become a beneficiary after the beneficiary spouse dies. In either case, the assets would not be subject to creditor claims, but, if option two is selected, then the SLAT would be removed from Florida. The proposed amendment would allow the donor-spouse to use a Florida SLAT to achieve the same planning already allowed in other states and keep the SLAT in Florida. Keeping Florida Assets in Florida The proposed amendment to Fla. Stat. § 736.0505(3) would take effect on July 1, 2022, if passed. It would allow Florida residents to use Florida SLATs with peace of mind that the planning will work as intended. If they do not have this peace of mind in Florida, they may opt to create these trusts in any of the 10 other states where this planning is more advantageous under current law. This amendment will even the playing field with these other states in terms of this issue and make Florida a more attractive state for tax and estate planning purposes. Ultimately, this amendment will keep Florida SLATs in Florida where they can continue to use Florida trust companies, investment firms and banks. Michael M. Rubenstein, JD, LLM, MBA, CTFA is the Senior Fiduciary Advisor of the Southeast US Region for BMO Wealth Management. Rubenstein serves as an advisor in the areas of tax, trust and estate planning to high-net-worth individuals, families, trusts, and organizations, including closely-held and family-owned businesses. Michael provides customized advanced planning strategies to integrate client objectives with “best practices” to achieve tax, legacy, and estate planning goals. 1 IRC 2010(c) 2 PL 105-34 "Taxpayer Relief Act of 1997"; https:/ taxfoundation.org/federal-estate-and-gift-tax-rates exemptions-and-exclusions-1916-2014/ 3 IRC 2010(c)(3)(C) 4 A projected and round amount based on 2.2% annual inflation on $5 million indexed for inflation as of 2010. 5 84 FR 64995 6 See. E.g. Rev. Ruling 76-103; Fla. Stat. § 736.0505(1)(b) 7 See Ariz. Rev. Stat. §14-10505(E); Del. Code Ann. tit. 12, §3536(c); Ky. Rev. Stat. Ann. §386B.5-020(8) (a); Miss. Code Ann. §91-8-504(d); N.H. Rev. Stat. Ann. §564-B:5-505; N.C. Gen. Stat. §36C-5-505(c); S.D.C.L. §55-1-36; Tenn. Code Ann. §35-15 505(d),(h); Tex. Prop. Code §112.035(g); Wisc. Stat. Ann. §701.0505(2)(e). 8 Fla. Stat. § 726.105 9 Fla. Stat. § 726.108; As discussed above, this creditor access would also cause the same assets to be deemed part of the individual’s taxable estate.

Trust Banking, Continued from page 16

Not to fear, there is a solution. The Florida residents could choose to perform the same tax planning in a different state. In fact, there are 10 other states (Washington, D.C. inclusive) that allow for similar tax planning via SLATs without causing inclusion into the donor-spouse’s estate. 7 Should the Florida resident family choose to use an out-of-state trust, they may also choose to use out-of-state trustees and banks as well. The assets in the SLAT would then be removed from Florida, which is bad for Florida banks. The Solution: Fla. Stat. §736.0505(3) The proposed amendment to Fla. Stat. §736.0505(3) was drafted to address this issue. The proposed amendment provides that a beneficial interest in the donor-spouse after the lifetime of the beneficiary spouse will not cause the SLAT to be subject to the donor spouse’s creditors, so long as the donor-spouse was not a beneficiary of the SLAT (within the meaning of Fla. Stat. §736.0103(19)(a)) during the beneficiary spouse’s lifetime and the SLAT was a completed gift for federal tax purposes. Currently, Florida residents are at a distinct disadvantage compared to residents of other states which have enacted laws permitting this planning without exposing the SLAT to the donor-spouse’s creditors. The proposed amendment to Fla. Stat. §736.0505(3) would provide Florida residents the same gift and estate tax planning opportunities already available to residents of those other states. Florida residents will be able to keep their assets in Florida SLATs, rather than SLATs in other states, and achieve their planning goals. What About Creditor Claims Against Settlor? This article has focused almost exclusively on tax planning, and this is because SLATs are mainly used for tax planning. However, the title of Fla. Stat. §736.0505 is “creditors’ claims against settlor” ; therefore, I would be remiss to not expand on the creditor claim issues. When assets are transferred into a SLAT, they are intended to be removed from the estate of the donor spouse, and not subject to future creditor claims against the individual. Future being a key word. If an individual has a current creditor and transfers assets into a SLAT with the “actual intent to hinder, delay or defraud” the creditor, then this would be a fraudulent conveyance under Florida law. 8 The creditor can prove their claim was prior to the transfer, void the transfer, and access the funds for payment. 9 If the Florida resident had concerns about future creditor claims, then the Florida resident could still use SLAT planning and fully protect the assets from creditor claims. However, under current law, the Florida resident would have to choose between two options; (1) use a Florida SLAT and not permit themselves to become a beneficiary after the beneficiary-spouse dies, or (2) use a SLAT in any of 10 other states that already have a version of this proposed amendment and permit

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