DeSantis Delivers An Estate Tax Savings Gift For Floridians

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“Behold the Florida Slate,

what he can now provide,

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If your spouse dies earlier,

Contributing spouse can be the beneficiary,

To make death less worse.

But will the contributing spouse shrink at heart,

More inclined to pull the beneficiary’s plug?

this and more,

We explore below.”

On May 10, Governor Ron DeSantis signed a new trust law, which includes a provision that would make certain spousal limited access trusts (“SLATs”) more attractive to residents of Florida who wish to contribute to them in the future. by allowing the spouses to become one. Beneficiaries of the trust in the event of the death of the beneficiary spouse1, This change contained in Florida statute 736.0505(3), as amended, effectively allows the Florida SLAT to be converted into an asset protection trust for the benefit of the contributing spouse after the death of the beneficiary spouse. .2,

For the purposes of this article, the contributing spouse to the SLAT is referred to as the “contributing spouse” and the beneficiary of the SLAT is referred to as the “beneficiary spouse.” Additionally, “asset protection trust jurisdiction” refers to states that allow the formation of self-appointed asset protection trusts and is abbreviated as “APT jurisdiction” throughout the article.

Tax Section of the Florida Bar, and Donna Longhouse, H. Special thanks to French Brown IV, Mark Brown, Brian Malek, Bill Lane Jr., Gerard “JJ” Wehle Jr., Drew LaGrande and Matthew Schmitzlein for all of them. The hard work and dedication in bringing about this positive change in Florida law and Brock Exline for his research on this matter.

I will present a free 25-minute webinar on these new laws and the SLAT as usual on Friday, May 27, 2022 at 4:00 p.m. EDT. Click here to register:, After registration, you will receive a confirmation email containing information about joining the webinar.

A SLAT is a trust created and funded by one spouse for the benefit of the other spouse that can be used to protect both spouses’ creditors and the assets of the trust from federal estate tax. .

SLAT has two important advantages:

(1) the creditors of the contributing spouse are unable to access the trust because the contributing spouse is not a beneficiary and,

(2) The creditors of the beneficiary spouse are unable to access the trust if any:

(a) a trustee separated from the beneficiary spouse, who has discretion as to whether and when the distribution will be made to the spouse, or

(b) If the beneficiary spouse acts as trustee, the spouse is limited to receiving what is reasonably necessary for health, education, maintenance and support.

The key design aspects of the SLAT are that while the trust can typically be used to pay half of the living costs of a married couple on behalf of the beneficiary spouse, the beneficiary spouse can control whether the trust will be paid for by the beneficiary spouse. How the assets pass on subsequent death, and trust assets can be kept in a creditor-protected manner and outside the federal estate tax system.

Despite the above benefits, many contributing spouses want the beneficiary to be a beneficiary of the trust in the event of the death of the spouse, or in other circumstances.

Under Florida law, creditors can access a trust that a settlor/contributor is a beneficiary about to the extent that a trustee has the power to make distributions to the settlor/contributor, regardless of whether those distributions are limited or not. Health education, maintenance, and support of the settlor/contributor. As a result, Floridians are willing to use the laws of APT jurisdictions, such as Nevada, South Dakota, Alaska, and Delaware, to create SLATs, as those jurisdictions have laws that allow the contributing spouse to receive benefits without trust property. allow to be able to do. be accessible to creditors.3

This is important not only for creditor protection purposes, but also for estate tax purposes. This is due to the fact that if a creditor of the contributing spouse can access a trust, the assets of the trust will be treated as owned by the contributing spouse for estate tax purposes, if either person is an irrevocable The trust establishes and can run the debt and the trust can profit from paying off that debt, then the assets of the trust are treated as owned by that individual for estate tax purposes.

This new Florida law, which will only apply to trusts entered into and funded after June 30, 2022, is just shy of leveling the playing field between Florida and APT jurisdictions, but it aims to provide a significant advantage that has not been available so far, specifically, allowing the contributory spouse to be added as a beneficiary of the SLAT after the death of the beneficiary spouse.

To qualify under amended Florida statute 736.0505(3), a trust must be one of the following:

1. a trust described in section 2523(e) of the Internal Revenue Code (a matrimonial deduction trust that provides spouses with spouses and common power of appointment),4

2. A trust for which the election described in section 2523(f) of the Internal Revenue Code has been made (lifetime QTIP

3. An irrevocable trust not otherwise described in subparagraph 1 or 2 in which:

(a) the settlor’s spouse is a qualified beneficiary for the lifetime of the settlor’s spouse (i.e. the settlor’s spouse must have a distribution or permissible distribution of trust income or principal during his or her lifetime)

(b) is never a qualified beneficiary during the lifetime of the settlor’s spouse (that is, the contributing spouse may not have a distribution or permissible distribution of trust income or principal during the lifetime of the beneficiary spouse); And

(c) transfers by the settlor to the trust are gifts in full under section 2511 of the Internal Revenue Code

As an example, let’s say a wealthy person keeps $5,000,000 in SLAT for benefits to his or her spouse and descendants with the goal of saving assets from creditors and the federal estate tax.

The trust is drafted so that the contributing spouse will receive an income tax bill for the income of the trust, therefore allowing the trust to be “disregarded” for income tax purposes. This will happen automatically if the beneficiary spouse is a trustee of the trust and has powers to make distributions, or the grantor reserves the right to replace the trust assets with assets of equal value.6

The primary concern of the contributing spouse in our example is that if the beneficiary spouse dies, they would like to be able to become the beneficiary of the trust.

The new Florida law addresses this concern, and the Florida case law and federal estate tax law appear to allow for this result.

On the other hand, the contributing spouse may wish to be “additive” back to the trust in other circumstances, such as:

(a) there is a divorce, (in the event if the trust was funded by the separate assets of the contributing spouse, the entire trust may be held to benefit the contributing spouse; may, if it is properly constituted in the APT jurisdiction, or if the trust is funded with property that shall be divided between the spouses as “marital property” because they were obtained by earnings during the marriage or otherwise was, then a trust duly constituted in the APT jurisdiction may permit the split into two separate trusts, one for the beneficiary spouse and the other for the contributing spouse).

(i) Authors commonly use the language “in the highly likely event of divorce” in our firm documents and “in the event of divorce almost impossible to imagine” in our personal property documents.

(b) If the contributing spouse hits hard financial times.

The new Florida statute only serves to address the issue of what happens if the beneficiary spouse precedes the contributing spouse. It does not entitle the contributing spouse back to the trust in the circumstances described in (a) or (b) above.

Another factor in determining whether to use Florida or APT jurisdiction to establish the SLAT is likely to be the “floating spouse.” Such a provision removes the original beneficiary spouse in case of divorce or death, while remarriage would add the new spouse as a beneficiary. However, due to the fact that under Florida law the new SLAT benefit is available only if the beneficiary spouse remains a beneficiary for his or her lifetime, a temporary spouse who upon divorce completely supersedes the original beneficiary spouse. removes, may serve to forfeit the availability of the new. Slate benefits.

A Florida trust (and an APT) may include a variation of a provision for a temporary spouse that reduces the original beneficiary spouse’s interest in the trust in case of divorce, and a contributor as an additional beneficiary. Adds to the future husband of the husband or wife. Why trust? This helps to level the playing field for Florida where the contributing spouse knows that he or she can remarry in the event of a divorce or substantial financial need and the trust is his or her next spouse ( and thereafter can benefit the spouse). After that) to reduce the expenses of the whole family.

Nevertheless, if the contributing spouse wishes to terminate her former spouse as a beneficiary upon divorce, it appears that Florida would not be an appropriate location for the trust and an APT jurisdiction may be desirable instead.

As with any new law and complex field, there will certainly be mistakes. The biggest mistakes we’ll probably see are as follows:

mistakes that will be made

1. These trusts shall be established in Florida and provided that…

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