New Florida Laws Improve Trust Planning and Administration

Two new Florida statutes passed in the summer of 2021 make the Sunshine State a more attractive option for estate planning and asset protection. As these laws will greatly expand the state’s directed trust laws, it is recommended to consult with a Florida trust attorney to find out how the changes may affect your current trust, or any future trust you may decide to create to pass on your assets.

The Florida Uniform Directed Trust Act (FUDTA)

A directed trust is one in which a third party (known as a trust protector or director) is designated to provide direction to the trustee in administration matters. While Florida previously allowed directed trusts, the FUDTA follows other states in codifying and expanding the director’s duties and liabilities.

As directed trusts have become more common in Florida, there was a need for a clear mechanism that allowed a trustee to delegate responsibility for the administration of the trust. The statute went into effect in January 2022, and some of the most important changes it made to Florida laws include:

• Defining the Role of the Trust Director. Previously, trust directors were considered co-trustees under Florida law. While the duties and limitations can still be explicitly stipulated within the trust, the law more clearly defines the legal and fiduciary duties of the trust director and trustees. This has the potential to reduce trustee fees and to allow non-trustees to take a more active role in managing the trust without subjecting themselves to liability.
• Reducing the Liability of Trustees. The law limits the liability trustees can face when they are acting in accordance with the trust director’s directives. The law also puts the trust director under the jurisdiction of the Florida court system, and imposes a statute of limitations for actions against trust directors.

The Community Property Trust Act (CPTA)

In community property states, such as California, Nevada and Texas, each spouse is considered to own a portion of any of the assets acquired during the marriage. While Florida is not one of these states, the CPTA will allow married couples to create community property trusts. The law will apply to both revocable and irrevocable trusts, and will allow couples to elect to treat their assets as community property for tax benefits. These types of trusts are especially recommended for couples who have moved to Florida from community property states.

The requirements for setting up a community trust under the new law include:

• Express Declaration. The trust must explicitly state that it is a community property trust.
• Appointed Trustee. A party that is qualified to serve as a trustee in the state of Florida must be appointed. In general, this means an individual that resides in the state, or a company that has been authorized by the state to serve as a trustee.
• Proper Execution. The trust must be properly executed and signed in accordance with Florida law.
• Include a Statutory Warning. At the beginning of the trust, there must be conspicuous language that warns each spouse of the legal implications of signing the agreement. The wording should closely mirror the language used in the CPTA and advise each party to individually seek competent legal advice.

Is it Time to Make Amendments to Your Trust?

It is important to think carefully before amending your current trust to take advantage of the new statutes, and to weigh the pros and cons. For instance, it may not be ideal to transfer assets to a community property trust in a marriage that is unstable. A Florida estate planning attorney will be able to assess your situation and advise what, if any, amendments would be in the best interests of both parties.