The Uniform Trust Code (UTC) was introduced in 2004 as an attempt to codify the principles of US trust law and create a uniform statutory code nationwide. While many states have adopted the new law, most law regulating the creation and administration is governed at the state level.
In this article, you will find out whether Florida law recognizes trusts from other states.
Florida Trust Creation – The Fundamentals
A trust is a fiduciary relationship in which the trust maker (referred to as “trustor” or “settlor”) transfers the ownership of assets to a trustee. The trustee holds nominal ownership of the trust assets on behalf of one or multiple beneficiaries designated by the trustor.
There are two types of Florida trusts – revocable trusts and irrevocable trusts. A revocable trust can be modified, amended, or even revoked at any time during the trustor’s lifetime.
Once the trustor dies, the trust becomes irrevocable, and the trustee must administer and execute the assets according to the provisions in the trust agreement.
An irrevocable trust has stricter requirements, as it does not accept modifications, amendments, or any changes without court intervention. Once the trust instrument is signed by the trustor, it is not possible to change its provisions.
Due to its lack of flexibility, irrevocable trusts are used for specific estate planning strategies, such as special needs trusts, dynasty trusts, or charitable trusts. Florida law has specific statutory requirements for the creation of trusts. Within state jurisdiction, the validity of a trust depends on:
- Whether the trustor has the legal capacity to create a trust
- Whether the trust fulfills the purpose for which it was created
- Whether the trust has designated beneficiaries
- Whether the trustee upholds his or her fiduciary duty to the trust
As provided by Florida Statutes §736.0402(1)(e), a Florida trust is only valid if “the same person is not the sole trustee and sole beneficiary.”
Considering the assets held in the trust are not considered part of the trustor’s estate, it is possible to fund a trust to avoid probate. Please note that only assets titled in the trustor’s sole name are subject to court-supervised probate.
After the trustor’s death, the trustee is responsible for executing the assets held in the trust according to the provisions in the trust instrument. The trustee is responsible for administering and distributing the assets to their rightful beneficiaries without court supervision.
Does Florida Recognizes Trusts from Other States? – As Provided by Law
The state of Florida recognizes the validity of trusts created in other states, as long as the trust was properly drafted and executed under the laws of the state of formation.
Florida Statutes §736.0403(1) provides that “a trust not created by will is validly created if the creation of the trust complies with the law of the jurisdiction in which the trust instrument was executed or the law of the jurisdiction in which, at the time of creation, the settlor was domiciled.”
Many new residents prefer to transfer the trust’s situs (tax jurisdiction) to Florida, as the state offers several tax advantages for trust owners. It is fundamental to consult with an experienced attorney to identify the best approach for each case.