HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 1093 Florida Uniform Fiduciary Income and Principal Act
SPONSOR(S): Judiciary Committee, Caruso
TIED BILLS: IDEN./SIM. BILLS: SB 1316
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Civil Justice Subcommittee 18 Y, 0 N Mawn Jones
2) Insurance & Banking Subcommittee 18 Y, 0 N Fletcher Lloyd
3) Judiciary Committee 21 Y, 0 N, As CS Mawn Kramer
SUMMARY ANALYSIS
A trust is a relationship in which one party, the “settlor,” gives another party, the “trustee,” the right to hold title
to the settlor’s property or assets for a third party’s benefit (“beneficiary”). Traditionally, many trust beneficiaries
were entitled to receive either income earned by trust investments (“income beneficiary”) or a share of trust
principal when an income interest ended (“remainder beneficiary”). In such a scenario, the trustee’s allocation
of receipts and expenditures to income or principal had a direct effect on a beneficiary’s financial interests, and
the financial interests of an income beneficiary were often at odds with those of the remainder beneficiary.
In 1931, the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) adopted the first
Uniform Principal and Income Act (“UPIA”), which, in pertinent part, governed the allocation of trust and estate
receipts and disbursements between income and principal where the terms of the trust did not provide for such
allocation. Forty-seven states, including Florida, subsequently adopted some form of the UPIA; Florida’s
version, known as the Florida Uniform Principal and Income Act (“FUPIA”), is codified in ch. 738, F.S.
However, in recent decades, the distinction between income and principal has become less important, for two
reasons. First, the “modern portfolio theory” allows trustees to invest for the maximum total return, whether the
return is in the form of income or principal growth. This has led to the rise in popularity of the “unitrust,” which
has reduced the likelihood that the financial interests of the income beneficiary and the remainder beneficiary
will be at odds, as such a trust allows the income beneficiary to receive income from the trust at a set
percentage of the trust’s fair market value while the remainder beneficiary receives a fair disbursement after
the income interest ends. Second, modern trusts are often drafted with more flexible terms, giving trustees
discretion to accumulate income or invade principal when advantageous to further the trust’s purposes.
In 2018, the NCCUSL adopted the Uniform Fiduciary Income and Principal Act (“UFIPA”) to account for these
more recent developments. In response to UFIPA’s adoption, the Real Property, Probate and Trust Law
Section of the Florida Bar convened a committee (“Committee”) to review UFIPA and consider whether Florida
should adopt the new model law. The Committee ultimately proposed a revision to FUPIA that would
incorporate UFIPA language wherever possible while preserving certain public policy choices found in existing
Florida law. This proposed revision is the Florida Uniform Fiduciary Income and Principal Act (“FUFIPA”).
CS/HB 1093 codifies FUFIPA into ch. 738, F.S., replacing FUPIA as the law governing the allocation of trust
and estate receipts and disbursements between principal and interest where a Florida trust does not provide its
own terms for such an allocation. FUFIPA would, in addition to modernizing trust law generally:
Allow for total-return investing under the “modern portfolio theory.”
Provide for the conversion of an existing trust into a unitrust.
Provide flexibility for more individualized estate planning.
Provide a governing law provision to reduce jurisdictional disputes.
The bill does not appear to have a fiscal impact on state or local governments.
The bill provides an effective date of January 1, 2025.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: h1093e.JDC
DATE: 2/14/2024
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Trusts
A trust is a relationship in which one party (the “settlor”)1 gives another party (the “trustee”) the right to
hold title to the settlor’s assets for a third party’s benefit (the “beneficiary”). A trust may be created and
take effect during a settlor’s lifetime (“a living trust”) or may be created by a will and take effect when
the settlor dies (“testamentary trust”).2 A trust may also be revocable (so that the terms may be
changed at any time before the settlor’s death) or irrevocable (so that the terms cannot be modified
after the trust’s creation absent consent of the beneficiaries).3 Most trusts are generally governed by
the Florida Trust Code, codified in chapter 736, F.S. However, additional provisions of Florida law may
apply if the trust has special attributes.
Uniform Fiduciary Income and Principal Act
Traditionally, many trust beneficiaries were entitled to receive either income earned by trust
investments (“income beneficiary”) or a share of trust principal when an income interest ended
(“remainder beneficiary”).4 In such a scenario, the trustee’s allocation of receipts and disbursements to
income or principal had a direct effect on a beneficiary’s financial interests, and, thus, the financial
interests of an income beneficiary were often at odds with those of the remainder beneficiary. 5
In 1931, the National Conference of Commissioners on Uniform State Laws, also known as the Uniform
Law Commission (“ULC”)6 adopted the first Uniform Principal and Income Act (“UPIA”), which, in
pertinent part, governed the allocation of trust and estate receipts and disbursements between income
and principal where the terms of the trust or will did not provide for such allocation or give the fiduciary
a discretionary power of administration. Forty-seven states, including Florida, subsequently adopted
some form of UPIA; Florida’s version, adopted in 2002 and known as the Florida Uniform Principal and
Income Act (“FUPIA”), is codified in ch. 738, F.S.
However, in recent decades, the distinction between income and principal has lost some significance,
for two reasons. First, the “modern portfolio theory” allows trustees to invest for the maximum total
return, whether the return is in the form of income or principal growth. 7 This has led to the rise in
popularity of the “unitrust,” which trust allows the income beneficiary to receive income from the trust at
a set percentage of the trust’s fair market value while the remainder beneficiary receives a fair
disbursement after the income interest ends, thereby reducing the likelihood that the financial interests
of the income beneficiary and the remainder beneficiary will be at odds. 8 In other words, under a
unitrust, both the income beneficiary and remainder beneficiary benefit from an increase in the value of
1 “Settlor” means a person, including a testator, who creates or contributes property to a trust. S. 736.0103(18), F.S.
2 See “inter vivos trust” and “testamentary trust,” Black's Law Dictionary (11th ed. 2019).
3 Greg Depersio, Investopedia (Apr. 30, 2023), Revocab le Trust v. Irrevocab le Trust: What’s the Difference,
https://www.investopedia.com/ask/answers/071615/what-difference-between-revocable-trust-and-living-trust.asp (last visited Feb. 14,
2024).
4 For example, a trust may require that all trust income be distributed to the settlor’s surviving spouse, but that trust princip al be held
and accumulated for the settlor’s surviving children, to be paid after the surviving spouse’s death. Uniform Law Commission, The
Uniform Fiduciary Income and Principal Act: A Summary, https://www.uniformlaws.org/viewdocument/enactment-kit-
74?CommunityKey=1105f9bb-eb93-4d4d-a1ab-a535ef73de0c&tab=librarydocuments (last visited Feb. 14, 2024).
5 Id.
6 The NCCUSL is an association of commissioners appointed by each state, the District of Columbia, the Commonwealth of Puerto
Rico, and the U.S. Virgin Islands, that discusses and debate s which areas of the law require uniformity among the states and territories
and drafts uniform acts accordingly. Legal Information Institute, National Conference of Commissioners on Uniform State Laws,
https://www.law.cornell.edu/wex/national_conference_of_commissioners_on_uniform_state_laws_(nccusl) (last visited Feb. 14, 2024).
7 Uniform Law Commission, supra note 4.
8 Id.; Rod Fluck, What is a Unitrust and Why is it Used, http://buteralaw.com/newsletters/estate/what-is-a-unitrust-and-why-is-it-used/
(last visited Feb. 14, 2024).
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a trust’s assets.9 Second, modern trusts are often drafted with more flexible terms, thereby giving
trustees discretion to accumulate income or invade principal when advantageous to further the trust’s
overall purposes.10
Thus, in 2018, the ULC adopted the Uniform Fiduciary Income and Principal Act (“UFIPA”) to account
for these developments, provide additional flexibility in tailoring individual trusts to meet a settlor’s
specific needs, provide for the conversion of older trusts into unitrusts, and provide a governing law
section to help avoid jurisdictional disputes.11 Seven states have since enacted some form of UFIPA. 12
In response to UFIPA’s adoption, the Real Property, Probate and Trust Law Section of the Florida Bar
convened a Principal and Income Committee (“Committee”) to review UFIPA and consider whether
Florida should adopt the new model law. The Committee ultimately proposed a revision to FUPIA,
known as the Florida Uniform Fiduciary Income and Principal Act (“FUFIPA”), that would incorporate
UFIPA language wherever possible while preserving certain public policy choices found in existing
Florida law that continue to make sense for the State.
Effect of Proposed Changes
CS/HB 1093 codifies FUFIPA into ch. 738, F.S., replacing FUPIA as the law governing the allocation of
trust and estate receipts and disbursements between principal and interest where a Florida trust does
not provide its own terms for such an allocation. FUFIPA would, in addition to modernizing Florida trust
law generally:
Allow for total-return investing under the “modern portfolio theory.”
Provide for the conversion of an older trust into a unitrust.
Provide flexibility for more individualized estate planning.
Provide a governing law provision to reduce jurisdictional disputes.
Definitions
The bill revises s. 738.102, F.S., to modify existing definitions and provide new definitions to
incorporate UFIPA terminology and concepts. Under the bill, the definitions of “accounting period,”
“income,” “mandatory income interest,” and “person” remain unchanged, while definitions for new
terms, including “court,” “estate,” “personal representative,” and “record,” were added without impacting
current policy. However, the bill modifies the following definitions in a substantive way:
“Beneficiary” is redefined to distinguish between current income beneficiaries and current
remainder beneficiaries, as well as to encompass persons holding life estates or term interests.
“Fiduciary” is broadened to apply not only to the personal representative and trustee, as under
current law, but also to those with a power to direct, those under a fiduciary’s delegation, and
those holding property for a successor beneficiary who may be impacted by principal or income
allocations.
“Income interest” is redefined as a right of a current income beneficiary and includes a current
beneficiary’s use of property held by a fiduciary.
“Net income” is broadened to include application to a unitrust and an income to principal
adjustment.
“Principal” is modified from meaning that which is distributed to a remainder beneficiary to that
which is held for distribution to, for production of income for, or for use by, a current or
successor beneficiary.
“Terms of the trust” is broadened to extend to wills, life estates, and term interests, and thus
more closely follows the definition of the term in the Florida Trust Code.
9 Fluck, supra note 8.
10 Uniform Law Commission, supra note 4.
11 Id.
12 These states are Arkansas, California, Colorado, Kansas, Utah, Virginia, and Washington State. Uniform Law Commission, Fiduciary
Income and Principal Act: Legislative Bill Tracking, https://www.uniformlaws.org/committees/community-
home?communitykey=1105f9bb-eb93-4d4d-a1ab-a535ef73de0c#LegBillTrackingAnchor (last visited Feb. 14, 2024).
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Additionally, the bill adds the following new definitions, which definitions modify Florida law in a
substantive way:
“Distribution,” meaning a payment or transfer by a fiduciary to a beneficiary in the beneficiary’s
capacity as a beneficiary, without consideration other than the beneficiary’s right to receive the
payment or transfer under the terms of the trust, will, life estate, or term interest.
“Independent person,” meaning a person that is not:
o For a trust, a qualified beneficiary; a settlor; an individual whose legal obligation to
support a beneficiary may be satisfied by a trust distribution; or any trustee whom an
interested distributee may remove and replace with a related or subordinate party.
o For an estate, a beneficiary; a spouse, parent, brother, sister, or issue of specified
persons; a corporation, partnership, limited liability company, or other entity in which
specified persons have voting control; or an employee of a specified person.
“Personal representative,” meaning an executor, administrator, successor personal
representative, special administrator, or person that performs substantially the same function
with respect to an estate under the law governing the person’s status.
“Record,” meaning information that is inscribed on a tangible medium or stored in an electronic
or other medium and is retrievable in perceivable form.
“Settlor,” meaning a person, including a testator, that creates or contributes property to a trust.
“Special tax benefit,” meaning the annual gift tax exclusion, 13 qualified subchapter S status,14
federal marital tax deduction,15 and generation-skipping transfer tax exemption.16
“Successive interest,” meaning the interest of a successor beneficiary.
“Successor beneficiary,” meaning a person entitled to receive income or principal or to use
property when an income interest or other current interest ends.
“Trust,” meaning an express trust, whether private or charitable, with additions to the trust,
wherever and however created, and a trust created or determined by judgment or decree under
which the trust is to be administered in the manner of an express trust.
“Trustee,” meaning a person, other than a personal representative, that owns or holds property
for the benefit of a beneficiary.
“Will,” meaning any testamentary instrument recognized by applicable law which makes a
legally effective disposition of an individual’s property, effective at the individual’s death, and
includes a codicil or other amendment to a testamentary instrument.
13 The Internal Revenue Service allows individuals to give away up to a specific amount of assets each year tax-free under the annual
gift tax exclusion. Jean Gordon Carter and Janice L. Davies, Gift Tax, the Annual Exclusion and Estate Planning,
https://www.actec.org/resource-center/video/gift-tax-the-annual-exclusion-and-estate-planning/ (last visited Feb. 14, 2024)
14
A trust with qualified subchapter S status is eligible to own stock in an S corporation. A settlor can use this type of trust to make a gift
of all or a part of the S corporation stock and retain voting power while the beneficiary receives the income and the tax burden.
Rebecca C. Bowen, Trusts as Eligib le Shareholders of an S Corporation, https://www.t-mlaw.com/commentary/trusts -as-eligible-
shareholders-of-an-s-corporation/ (last visited Feb. 14, 2024).
15 The Internal Revenue Service allows a spouse to leave property of unlimited value to his or her surviving spouse tax-free. Such
assets may be distributed by a direct transfer from the decedent to the surviving spouse or by an indirect transfer to a qualifying trust for
the surviving spouse’s benefit. Peter B. von Stein, Basic Estate Tax Planning for Married Couples: Opportunities for Use of Estate Tax
Exemptions, https://www.wardandsmith.com/articles/basic-estate-tax-planning-married-couples-use-estate-tax-exemptions (last visited
Feb. 14, 2024).
16 The generation-skipping transfer tax is a federal tax on a gift or an inheritance that prevents the donor from avoiding estate taxes by
skipping over children in favor of grandchildren. However, the Internal Revenue Service allows a person to give up to a certa in amount
to a qualified recipient to avoid