1997 Florida Probate and Trust Legislation: House Bills 1411 and 719

The 1997 Legislature passed two bills of interest to probate and trust

practitioners and judges. The more significant legislation was House Bill

1411, an omnibus bill governing a large number of topics. The other bill,

House Bill 719, pertains to professional guardians. The complete text of each

bill can be obtained at the Florida Legislature's web page.

The following is a general summary of the various provisions of House Bills

1411 and 719. It is not intended as a comprehensive review. There are many

details (especially to the estate tax apportionment provisions of H.B. 1411)

not included in this summary.

House Bill 1411

House Bill 1411 was principally the work product of the Real Property,

Probate, and Trust Law Section of The Florida Bar, with additional input from

the Trust Division of the Florida Bankers Association. It passed on May 2, the

final day of the 1997 regular session. On May 14, the legislation was sent to

the Governor, who had 15 days in which to sign the bill, allow it to become

law without his signature, or veto it. The Governor allowed the bill to become

law without his signature. Under Article III, Section 9 of the Florida

Constitution, the bill becomes law sixty days after adjournment sine die of

the 1997 session, which is July 1, 1997. The paragraph numbers below

correspond to the section numbers of the bill. The effective date of each

provision is set forth below. Most of the changes will be effective upon

becoming law.

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Rule Against Perpetuities. The rule against perpetuities (section

689.225) is revised to correct a technical deficiency in the Uniform

Statutory Rule Against Perpetuities, which would have the effect of

causing certain generation skipping trusts to lose their grandfathering

from the federal generation-skipping transfer tax. The Uniform Rule

originally permitted a trust to last for the greater of (i) lives in being

plus 21 years, or (ii) 90 years. The IRS subsequently took the position

that for GST tax purposes, the maximum perpetuities period for a trust

must be limited to either one of these two alternatives, and that the

perpetuities period cannot be defined as the longer of these two

alternatives. The 1997 legislation provides that if a trust is drafted to

state that the perpetuities period will be the longer of those two

alternatives, the maximum period of duration cannot exceed lives in being

plus 21 years no matter what the trust language provides. It is still

possible to draft a trust that will last for a fixed period of time (up to

90 years), and even if that fixed period of time in the actual course of

events turns out to be longer than the period measured by lives in being

plus 21 years, the trust will not violate the rule, and it will also be

respected by the IRS for GST tax purposes ó but only if the trust makes

no reference to lives in being. (See example 6 in Treas. Reg. ß26.2601-1(b)(1)(v)(D).)

The amendment will be effective upon becoming law.

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Durable Powers of Attorney. The durable power of attorney statute

(section 709.08) is amended to state that a not for profit corporation can

serve as an attorney in fact under a durable power of attorney, but only

if it had qualified as a court-appointed guardian prior to January 1,

1996. The amendment does not allow not for profit corporations to act as

attorney in fact if they do not meet this test. Prior to this amendment,

only individuals and financial institutions could serve as attorneys in

fact under a durable power. Although not stated in the statute, the

amendment is intended to grandfather in a particular situation that arose

in Hillsborough County. The amendment will be effective upon becoming law.

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Probate Claims. The probate claims statute (section 733.707) is amended

to increase the preference for funeral expenses from $3,000 to $6,000.

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The statute is also amended to insert the definition of "right of

revocation" over a trust, for purposes of identifying which trusts

are subject to claims and expenses of administration of the probate

estate. That definition had been erroneously deleted when the current

trust claims legislation was enacted in 1995. In addition to the obvious

definition of a right of revocation, the term also includes any trust over

which the decedent had the right to withdraw or appoint the principal of

the trust to or for the decedent's benefit. It does not matter in what

capacity the decedent possessed that right. Thus, for example, if a

decedent created an irrevocable trust in which the decedent and his family

were discretionary beneficiaries, and the decedent served as trustee, the

decedent has a "right of revocation" over the trust and thus the

irrevocable trust is liable for unpaid claims and expenses of

administration from the probate proceeding. Similarly, even in an

irrevocable trust where the decedent is not a direct beneficiary, if the

decedent is the trustee and has the power to make distributions that would

discharge the decedent's legal support obligations, the decedent has a

"right of revocation." The amendment will be effective upon

becoming law.

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Trust Execution Requirements. The trust execution statute (section

737.111) is amended to clarify that it is only the settlor (not the

trustee) who must execute the trust instrument with the formalities

required for execution of a will, in the case of trusts which have

testamentary aspects. The statute...