Florida Banking November 2021

TRUST BANKING

A PREVIEW OF THE 2022 LEGISLATIVE SESSION: TRUST AND WEALTH MANAGEMENT DIVISION

BY KENNETH PRATT, FBA SENIOR VICE PRESIDENT OF GOVERNMENT AFFAIRS

E very legislative session, the FBA Trust and Wealth Management Division stays active by proposing, amending or defeating new legislative concepts to help trust bankers serve their clientele. In the last four years, FBA’s Trust Legislative Committee, led by Sasha Klein, has tackled several significant policy issues. In that time, we have seen Florida become a leader on issues such as electronic wills/notaries, directed trusts, trust attorney fees and trustee employee/director liability, to name just a few. The 2022 Legislative Session, which begins on January 11, 2022, will be no different. The FBA’s Trust and Wealth Management Division will continue working to update and structure Florida’s laws to make our state an attractive state to situs or manage trust business. Several items are already on the horizon for the FBA in 2022: Handling Virtual Currency While there is a great deal of recent financial buzz regarding virtual assets like Bitcoin and Coinbase, the volatility and elusiveness of this market remains a challenge. One of the major unanswered questions for trust bankers is how best for trust companies to go about safely guarding these assets. The first real challenge, though, is being aware of their actual existence. Several trust companies are now incorporating intake forms which require that testators list their virtual assets and that they provide the trust company with the key to these virtual wallets for safekeeping. The industry must also push for assistance in determining how these accounts might be handled by regulators. The Office of the Comptroller of the Currency and, more recently, Florida’s Office of Financial Regulation, have drafted regulatory guidance, giving trust bankers the green light and

some guardrails of what safe custody looks like. However, Florida’s legislature doesn’t seem quite ready to dive right into resolving some of the issues surrounding virtual currencies. The only expected 2022 legislative proposal is one that failed last year, which would have added and better clarified the definition of virtual currencies in Florida law and determined when those currencies may be regulated under Florida’s money services business statutes. While we are not expecting the legislative conversation to go beyond this proposal in 2022, this issue is one which will remain with us for years to come. Overruling the Kearney Case In 2019, a Florida court issued a ruling, Kearney v. Travelers , an unpublished opinion which allowed a creditor to reach a debtor’s IRA because the court found that the IRA had been pledged in a blanket security pledge and no longer enjoyed the creditor or tax protection of section 222.21, F.S. After the decision in Kearney , the Real Property Probate and Trust Law Section of the Florida Bar (RPPTL) reached out to FBA to discuss legislatively reversing the holding in the case. Originally, the proposal was very broad in its approach to solving the Kearney issue, including some who believed that an IRA should never be able to be pledged as an asset. However, after two years of studying the issue and last year’s failed attempt at passing a bill that all stakeholders could agree to, the RPPTL division has put forth a proposal which has been narrowed. The proposal would simply include language in Florida’s Uniform Commercial Code which requires that IRAs be specifically listed if a legal pledge of these assets is made to a creditor. As drafted, the new law would be remedial and thus able to be applied retroactively to pledges made prior to the law’s passage.

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