Florida Banking February/March 2025

TRUST & WEALTH MANAGEMENT

FLORIDA’S NEW INCOME AND PRINCIPAL ACT PROMOTES FIDUCIARY FLEXIBILITY

BY ALEXANDER M. PARTHEMER, LLM, ATTORNEY I JONES FOSTER, AND SASHA KLEIN, PARTNER, PWC US TAX, LLP I PRIVATE

T he Florida Uniform Fiduciary Income and Principal Act (“FIPA” or the “Act”), effective Jan. 1, 2025, introduces revisions to Florida Statutes Chapter 738. The Act provides a comprehensive update to the state's trust and estate administration laws, which govern the allocation of receipts and disbursements between income and principal when the governing document does not specify. Superseding Florida’s Uniform Principal and Income Act of 2002 (“FUPIA”), the Act aligns Florida with contemporary

between income and principal resulting from flexible drafting, have created challenges to trust administration under current law. Accordingly, in 2018, the Uniform Law Commission updated its 1997 Act by enacting UFIPA, providing greater flexibility for fiduciaries. Florida adopted UFIPA’s framework within FIPA while retaining its unique policy choices that ensure continuity for existing trusts and preserve Florida specific provisions, such as the use of carrying value in asset valuation. This

fiduciary practices while addressing the evolving trust environment, which is characterized by longer and more adaptable trusts. The Act primarily incorporates the Uniform Law Comissioner’s Uniform Fiduciary Income and Principal Act of 2018 (“UFIPA”) while retaining essential Florida-specific provisions that ensure its relevance and applicability within the current legal framework.

update to Florida law aims to improve trust administration in Florida and resolve issues within the current law. Key Changes from Florida’s Prior Law • E n h a n c e d Flexibility for Fiduciaries with the Power to Adjust — Fla. Stat. § 738.203 FIPA adopts UFIPA’s expanded power to adjust, allowing fiduciaries to reallocate income and principal to achieve impartiality. Under FUPIA, this power was restricted by an “impossibility” standard, often discouraging its use.

“FIPA MARKS A SIGNIFICANT MILESTONE IN FLORIDA’S TRUST AND ESTATE ADMINISTRATION LAWS.”

This article highlights (1) some key changes under FIPA, (2) some of its key deviations from UFIPA and examines the impact on fiduciaries and trust administration in Florida. Background FIPA represents Florida’s latest effort to modernize trust and estate administration. Rooted in the 1997 Uniform Principal and Income Act (“1997 Act”), Florida enacted its version (FUPIA) in 2002. Over the past two decades, evolving investment strategies, extended trust durations, and blurred distinction

FIPA replaces this with a standard of “assistance,” empowering fiduciaries to act when adjustments support equitable administration. • Restructured Unitrust Provisions — Fla. Stat. §§ 738.301 — 738.310 Unitrust provisions, previously consolidated in one dense section, are now distributed across 10 specific sections. This structural change simplifies the administration of unitrusts and aligns Florida law

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