Florida Banking May 2023

TRUST BANKING

THE FLORIDA FAMILY TRUST TRIFECTA

BY KELLY O’KEEFE, SHAREHOLDER, AND HANNAH MURPHY, ASSOCIATE, STEARNS WEAVER MILLER

F ollowing a 2022 package of bills signed into law, Florida has officially staked its claim as the family-trust state. In the last several years, the Florida Legislature passed three laws making Florida a prime destination for family trust creation. Florida law now allows for: (1) 1,000-year dynasty trusts, (2) optional income tax reimbursement for trust settlors, and (3) public records exceptions for family trust companies. This “Florida Family Trust Trifecta” is sure to entice affluent families to Florida, and Florida’s

common law rule from England, the original RAP invalidated property interests that did not vest within 21 years after the death of an identifiable person alive at the time the interest was created. Courts created this rule to prevent people from attaching to their bequests eternal conditions, in order to keep the dead from exerting control over property long after they are gone. The following example demonstrates the consequences of the original RAP:

Grandpa, who only has one Grandson, wants to provide for his family’s education. To do so, he drafts a will that creates a testamentary trust after he dies. The terms of the trust provide that the trustee shall distribute funds only to pay for tuition, books, and technology used in school. Grandson, therefore, cannot waste Grandpa’s fortune on trips to Vegas. Thanks to the trust, Grandson gets a quality education and learns the value of hard work. After finishing graduate school, Grandson gets a great job,

banking industry will have an incredible opportunity to provide those families with the multitude of services that they require. 1,000-year Dynasty Trusts

“IN THE LAST SEVERAL YEARS,

THE FLORIDA LEGISLATURE

The first change in Florida law designed to draw more trust clients to Florida provides for the expansion of dynasty trusts. Section 689.225, Florida Statutes, the state’s Rule against Perpetuities, was amended in 2022 to extend the maximum trust vesting period to 1,000 years, thereby allowing settlors to protect family assets for generations. What is the rule against perpetuities? The statutory rule against perpetuities (RAP) states that interests in real or personal property that do not immediately vest are invalid unless the interest vests or terminates within 1,000 years after its creation. In other words, if a gift or bequest is conditional, it must become unconditional within 1,000 years, otherwise the conditions are declared invalid. Derived from a

PASSED THREE LAWS MAKING FLORIDA A PRIME DESTINATION FOR FAMILY-TRUST CREATION.”

gets married, and has a beautiful Daughter. After Grandson dies, thanks to the common-law RAP, Daughter only has to wait 21 years for the trust funds to be distributed. Then, she can spend all of Grandpa’s hard-earned money on trips to Cabo San Lucas, leaving nothing for the next generation. Grandpa wanted to make sure the money he made in his life was used for what he valued most — education. But the common-law RAP limited how long Grandpa could control his money after death.

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