Florida Banking February/March 2025

with UFIPA. The Act also maintains Florida’s 3-5% safe harbor for unitrust payouts, offering consistency and tax compliance benefits. • Modernized Income and Principal Definitions — Fla. Stat. § 738.102 FIPA introduces nuanced definitions that reflect modern trust structures. Terms such as “capital distribution” replace outdated concepts like “partial liquidation,” and definitions for “income interest” and “successive interest” clarify beneficiary rights. Governing Law and Portability — Fla. Stat. § 738.104 Under FIPA, Florida law applies to trusts administered in the state, even if created elsewhere. This rule enhances predictability for trustees managing multi jurisdictional trusts and reinforces Florida’s appeal as a trust administration hub. Deviations from the Uniform Law Although FIPA adopts much of UFIPA’s modern framework, several Florida-specific provisions remain, reflecting the state’s distinct policy choices and historical preferences. • Carrying Value for Asset Valuation — Fla. Stat. § 738.104(4) Unlike UFIPA, which utilizes the current fair market value of assets, Florida retains the use of carrying value for certain calculations. Carrying value, representing the book value of an asset, reduces the need for frequent and costly appraisals, simplifying trust administration. This approach offers fiduciaries a consistent and accessible baseline for determining allocations, minimizing disputes while aligning with Florida’s preference for practicality over uniformity. • Entity Distribution Rules — Fla. Stat. § 738.401 Florida maintains its detailed and objective rules governing distributions from private and public entities, which differ from UFIPA’s broader discretionary framework. For example, capital distributions exceeding specific thresholds — such as 20% of an entity’s gross assets for private entities or 10% of the fiduciary’s fair market value interest in public entities — require a portion to be allocated to both income and principal. Florida continues to use a lookback rule to allocate between income and principal on capital distributions; however, FIPA introduces a limitation on the lookback period. Fiduciaries only need to look at the cumulative annual return (or flow through income tax) for the current accounting period and the prior two accounting periods instead of the unlimited look back of the prior act. The new limited 3-year lookback period makes this rule a little easier for fiduciaries to follow and administer, providing clear guidance and preventing beneficiaries from being disadvantaged due to long gaps in distributions.

• Life Estate Expense Apportionment — Fla. Stat. § 738.508 Florida’s unique treatment of life estates remains a vital provision under FIPA. Particularly relevant in a state where homestead laws often create life estates for surviving spouses, this rule ensures that expenses are fairly apportioned between life tenants and remaindermen. By addressing the allocation of costs such as taxes, maintenance, and insurance, this provision protects the interests of both parties and provides clarity for fiduciaries navigating the complexities of life estate management in Florida. These deviations from UFIPA demonstrate Florida’s commitment to preserving practical and equitable solutions tailored to its legal landscape. By maintaining these provisions while embracing the broader flexibility and modernization offered by UFIPA, FIPA strikes a balance between tradition and progress, ensuring the state remains a leader in trust and estate administration. FIPA brings significant benefits to trustees and fiduciaries, fostering a more flexible and modern approach to trust management. By prioritizing total return investment strategies, FIPA reduces tension between income and principal beneficiaries. Key provisions, such as the power to adjust and the refined unitrust framework, support the application of Modern Portfolio Theory, enabling fiduciaries to manage trusts with a comprehensive, balanced perspective. FIPA also streamlines trust administration by restructuring sections and aligning definitions with UFIPA, making its navigation easier for fiduciaries familiar with national standards. The updated unitrust provisions, in particular, offer enhanced clarity and simplicity, promoting efficient administration. Finally, FIPA provides a critical safeguard by presuming that fiduciary actions are fair and reasonable unless proven otherwise. This presumption protects fiduciaries acting in good faith while reinforcing FIPA’s emphasis on impartiality and equitable trust FIPA marks a significant milestone in Florida’s trust and estate administration laws. By balancing uniformity among jurisdictions with Florida-specific nuances, the Act ensures the state remains a premier jurisdiction for fiduciary services. Fiduciaries and practitioners must familiarize themselves with FIPA’s provisions to leverage its flexibility and comply with its mandates. As Florida continues to attract wealth and multi generational trusts, FIPA provides the tools necessary to navigate modern trust complexities effectively. What does FIPA mean for Trustees and Fiduciaries? administration. Conclusion

WWW.FLORIDABANKERS.COM FEBRUARY | MARCH 2025 — 15