Bill Text: FL S1050 | 2012 | Regular Session | Enrolled


Bill Title: Fiduciaries

Spectrum: Bipartisan Bill

Status: (Engrossed - Dead) 2012-03-07 - Ordered enrolled -SJ 958 [S1050 Detail]

Download: Florida-2012-S1050-Enrolled.html
       ENROLLED
       2012 Legislature                                  CS for SB 1050
       
       
       
       
       
       
                                                             20121050er
    1  
    2         An act relating to fiduciaries; amending s. 701.04,
    3         F.S.; requiring a mortgage holder to provide certain
    4         information within a specified time relating to the
    5         unpaid loan balance due under a mortgage if a
    6         mortgagor, a record title owner of the property, a
    7         fiduciary or trustee lawfully acting on behalf of a
    8         record title owner, or any person lawfully authorized
    9         to act on behalf of a mortgagor or record title owner
   10         of the property makes a written request under certain
   11         circumstances; allowing financial institutions to
   12         release certain mortgagor information to specified
   13         persons without penalty; amending s. 738.102, F.S.;
   14         defining the term “carrying value”; amending s.
   15         738.103, F.S.; providing for application; amending s.
   16         738.104, F.S.; deleting a provision authorizing a
   17         trustee to release the power to adjust between
   18         principal and income if the trustee desires to convert
   19         the form of certain trusts; limiting the power to
   20         adjust a trust; deleting a provision that provides for
   21         construction and application relating to the
   22         administration of trusts in this state or under this
   23         state’s law; amending s. 738.1041, F.S.; defining the
   24         term “average fair market value” and revising
   25         definition of the term “unitrust amount”; deleting a
   26         duplicative provision relating to conclusive
   27         determinations of the terms of a unitrust; revising
   28         provisions relating to an express total return
   29         unitrust; amending s. 738.105, F.S.; substituting the
   30         term “trustee” for “fiduciary” with respect to
   31         judicial control of discretionary powers; amending s.
   32         738.201, F.S.; revising provisions relating to the
   33         determination and distribution of net income; amending
   34         s. 738.202, F.S.; revising provisions relating to
   35         distributions to residuary and remainder
   36         beneficiaries; amending ss. 738.301, 738.302, and
   37         738.303, F.S.; substituting the term “fiduciary” for
   38         “trustee” to clarify that provisions apply to all
   39         fiduciaries; amending s. 738.401, F.S.; substituting
   40         the term “fiduciary” for “trustee” to clarify that
   41         provisions apply to all fiduciaries; revising how
   42         distributions from entities are allocated between
   43         income and principal; amending ss. 738.402, 738.403,
   44         738.501, 738.502, 738.503, 738.504, and 738.601, F.S.;
   45         substituting the term “fiduciary” for “trustee” to
   46         clarify that provisions apply to all fiduciaries;
   47         amending s. 738.602, F.S.; substituting the term
   48         “fiduciary” for “trustee” to clarify that provisions
   49         apply to all fiduciaries; revising provisions relating
   50         to allocations to trusts; amending s. 738.603, F.S.;
   51         substituting the term “fiduciary” for “trustee” to
   52         clarify that provisions apply to all fiduciaries;
   53         revising provisions relating to the allocation between
   54         income and principal when liquidating assets; amending
   55         ss. 738.604, 738.605, 738.606, 738.607, 738.608,
   56         738.701, 738.702, 738.703, and 738.704, F.S.;
   57         substituting the term “fiduciary” for “trustee” to
   58         clarify that provisions apply to all fiduciaries;
   59         amending s. 738.705, F.S.; substituting the term
   60         “fiduciary” for “trustee” to clarify that provisions
   61         apply to all fiduciaries; revising the method for
   62         allocating income taxes between income and principal;
   63         amending s. 738.801, F.S.; clarifying the
   64         apportionment of expenses between tenants and
   65         remaindermen; providing an effective date.
   66  
   67  Be It Enacted by the Legislature of the State of Florida:
   68  
   69         Section 1. Section 701.04, Florida Statutes, is amended to
   70  read:
   71         701.04 Cancellation of mortgages, liens, and judgments.—
   72         (1) Within 14 days after receipt of the written request of
   73  a mortgagor, a record title owner of the property, a fiduciary
   74  or trustee lawfully acting on behalf of a record title owner, or
   75  any other person lawfully authorized to act on behalf of a
   76  mortgagor or record title owner of the property, the holder of a
   77  mortgage shall deliver or cause the servicer of the mortgage to
   78  deliver to the person making the request mortgagor at a place
   79  designated in the written request an estoppel letter setting
   80  forth the unpaid balance of the loan secured by the mortgage.,
   81         (a) If the mortgagor, or any person lawfully authorized to
   82  act on behalf of the mortgagor, makes the request, the estoppel
   83  letter must include an itemization of the including principal,
   84  interest, and any other charges properly due under or secured by
   85  the mortgage and interest on a per-day basis for the unpaid
   86  balance.
   87         (b) If a record title owner of the property, or any person
   88  lawfully authorized to act on behalf of a mortgagor or record
   89  title owner of the property, makes the request:
   90         1. The request must include a copy of the instrument
   91  showing title in the property or lawful authorization.
   92         2. The estoppel letter may include the itemization of
   93  information required under paragraph (a), but must at a minimum
   94  include the total unpaid balance due under or secured by the
   95  mortgage on a per-day basis.
   96         3. The mortgagee or servicer of the mortgagee acting in
   97  accordance with a request in substantial compliance with this
   98  paragraph is expressly discharged from any obligation or
   99  liability to any person on account of the release of the
  100  requested information, other than the obligation to comply with
  101  the terms of the estoppel letter.
  102         (c) A mortgage holder may provide the financial information
  103  required under this subsection to a person authorized under this
  104  subsection to request the financial information notwithstanding
  105  s. 655.059.
  106         (2) Whenever the amount of money due on any mortgage, lien,
  107  or judgment has been shall be fully paid to the person or party
  108  entitled to the payment thereof, the mortgagee, creditor, or
  109  assignee, or the attorney of record in the case of a judgment,
  110  to whom the such payment was shall have been made, shall execute
  111  in writing an instrument acknowledging satisfaction of the said
  112  mortgage, lien, or judgment and have the instrument same
  113  acknowledged, or proven, and duly entered of record in the book
  114  provided by law for such purposes in the official records of the
  115  proper county. Within 60 days after of the date of receipt of
  116  the full payment of the mortgage, lien, or judgment, the person
  117  required to acknowledge satisfaction of the mortgage, lien, or
  118  judgment shall send or cause to be sent the recorded
  119  satisfaction to the person who has made the full payment. In the
  120  case of a civil action arising out of the provisions of this
  121  section, the prevailing party is shall be entitled to attorney
  122  attorney’s fees and costs.
  123         (3)(2) Whenever a writ of execution has been issued,
  124  docketed, and indexed with a sheriff and the judgment upon which
  125  it was issued has been fully paid, it is shall be the
  126  responsibility of the party receiving payment to request, in
  127  writing, addressed to the sheriff, return of the writ of
  128  execution as fully satisfied.
  129         Section 2. Present subsections (3) through (13) of section
  130  738.102, Florida Statutes, are renumbered as subsections (4)
  131  through (14), respectively, and a new subsection (3) is added to
  132  that section, to read:
  133         738.102 Definitions.—As used in this chapter, the term:
  134         (3) “Carrying value” means the fair market value at the
  135  time the assets are received by the fiduciary. For the estates
  136  of decedents and trusts described in s. 733.707(3), after the
  137  grantor’s death, the assets are considered received as of the
  138  date of death. If there is a change in fiduciaries, a majority
  139  of the continuing fiduciaries may elect to adjust the carrying
  140  values to reflect the fair market value of the assets at the
  141  beginning of their administration. If such election is made, it
  142  must be reflected on the first accounting filed after the
  143  election. For assets acquired during the administration of the
  144  estate or trust, the carrying value is equal to the acquisition
  145  costs of the asset.
  146         Section 3. Subsection (3) is added to section 738.103,
  147  Florida Statutes, to read:
  148         738.103 Fiduciary duties; general principles.—
  149         (3) Except as provided in s. 738.1041(9), this chapter
  150  pertains to the administration of a trust and is applicable to
  151  any trust that is administered in this state or under its law.
  152  This chapter also applies to any estate that is administered in
  153  this state unless the provision is limited in application to a
  154  trustee, rather than a fiduciary.
  155         Section 4. Subsections (5) and (11) of section 738.104,
  156  Florida Statutes, are amended to read:
  157         738.104 Trustee’s power to adjust.—
  158         (5)(a) A trustee may release the entire power to adjust
  159  conferred by subsection (1) if the trustee desires to convert an
  160  income trust to a total return unitrust pursuant to s. 738.1041.
  161         (b) A trustee may release the entire power to adjust
  162  conferred by subsection (1) or may release only the power to
  163  adjust from income to principal or the power to adjust from
  164  principal to income if the trustee is uncertain about whether
  165  possessing or exercising the power will cause a result described
  166  in paragraphs (3)(a)-(e) or paragraph (3)(g) or if the trustee
  167  determines that possessing or exercising the power will or may
  168  deprive the trust of a tax benefit or impose a tax burden not
  169  described in subsection (3).
  170         (c) A release under this subsection may be permanent or for
  171  a specified period, including a period measured by the life of
  172  an individual. Notwithstanding anything contrary to this
  173  subsection, a release of the power to adjust pursuant to
  174  paragraph (a) shall remain effective only for as long as the
  175  trust is administered as a unitrust pursuant to s. 738.1041.
  176         (11) This section shall be construed as pertaining to the
  177  administration of a trust and is applicable to any trust that is
  178  administered either in this state or under Florida law.
  179         Section 5. Section 738.1041, Florida Statutes, is amended
  180  to read:
  181         738.1041 Total return unitrust.—
  182         (1) For purposes of this section, the term:
  183         (a) “Average fair market value” means the average of the
  184  fair market values of assets held by the trust at the beginning
  185  of the current and each of the 2 preceding years, or for the
  186  entire term of the trust if there are less than 2 preceding
  187  years, and adjusted as follows:
  188         1. If assets have been added to the trust during the years
  189  used to determine the average, the amount of each addition is
  190  added to all years in which such addition was not included.
  191         2. If assets have been distributed from the trust during
  192  the years used to determine the average, other than in
  193  satisfaction of the unitrust amount, the amount of each
  194  distribution is subtracted from all years in which such
  195  distribution was not included.
  196         (b)(a) “Disinterested person” means a person who is not a
  197  related or subordinate party” as defined in s. 672(c) of the
  198  United States Internal Revenue Code, 26 U.S.C. ss. 1 et seq., or
  199  any successor provision thereof, with respect to the person then
  200  acting as trustee of the trust and excludes the grantor and any
  201  interested trustee.
  202         (c)(b) “Fair market value” means the fair market value of
  203  the assets held by the trust as otherwise determined under this
  204  chapter, reduced by all known noncontingent liabilities.
  205         (d)(c) “Income trust” means a trust, created by either an
  206  inter vivos or a testamentary instrument, which directs or
  207  permits the trustee to distribute the net income of the trust to
  208  one or more persons, either in fixed proportions or in amounts
  209  or proportions determined by the trustee and regardless of
  210  whether the trust directs or permits the trustee to distribute
  211  the principal of the trust to one or more such persons.
  212         (e)(d) “Interested distributee” means a person to whom
  213  distributions of income or principal can currently be made and
  214  who has the power to remove the existing trustee and designate
  215  as successor a person who may be a related or subordinate
  216  party,” as defined in the Internal Revenue Code, 26 U.S.C. s.
  217  672(c), with respect to such distributee.
  218         (f)(e) “Interested trustee” means an individual trustee to
  219  whom the net income or principal of the trust can currently be
  220  distributed or would be distributed if the trust were then to
  221  terminate and be distributed, any trustee whom an interested
  222  distributee has the power to remove and replace with a related
  223  or subordinate party as defined in paragraph (d), or an
  224  individual trustee whose legal obligation to support a
  225  beneficiary may be satisfied by distributions of income and
  226  principal of the trust.
  227         (g) “Related or subordinate party” has the same meaning as
  228  provided in 26 U.S.C. s. 672(c) of the Internal Revenue Code, or
  229  any successor provision thereof.
  230         (h)(f) “Unitrust amount” means the amount determined by
  231  multiplying the average fair market value of the assets as
  232  calculated defined in paragraph (a) (b) by the percentage
  233  calculated under paragraph (2)(b).
  234         (2) A trustee may, without court approval, convert an
  235  income trust to a total return unitrust, reconvert a total
  236  return unitrust to an income trust, or change the percentage
  237  used to calculate the unitrust amount or the method used to
  238  determine the fair market value of the trust if:
  239         (a) The trustee adopts a written statement regarding trust
  240  distributions which that provides:
  241         1. In the case of a trust being administered as an income
  242  trust, that future distributions from the trust will be unitrust
  243  amounts rather than net income, and indicates the manner in
  244  which the unitrust amount will be calculated and the method in
  245  which the fair market value of the trust will be determined.
  246         2. In the case of a trust being administered as a total
  247  return unitrust, that:
  248         a. Future distributions from the trust will be net income
  249  rather than unitrust amounts; or
  250         b. The percentage used to calculate the unitrust amount or
  251  the method used to determine the fair market value of the trust
  252  will be changed, and indicates the manner in which the new
  253  unitrust amount will be calculated and the method in which the
  254  new fair market value of the trust will be determined;
  255         (b) The trustee determines the terms of the unitrust under
  256  one of the following methods:
  257         1. A disinterested trustee determines, or if there is no
  258  trustee other than an interested trustee, the interested trustee
  259  appoints a disinterested person who, in its sole discretion but
  260  acting in a fiduciary capacity, determines for the interested
  261  trustee:
  262         a. The percentage to be used to calculate the unitrust
  263  amount, provided the percentage used is not greater than 5
  264  percent nor less than 3 percent;
  265         b. The method to be used in determining the fair market
  266  value of the trust; and
  267         c. Which assets, if any, are to be excluded in determining
  268  the unitrust amount; or
  269         2. The interested trustee or disinterested trustee
  270  administers the trust such that:
  271         a. The percentage used to calculate the unitrust amount is
  272  50 percent of the applicable federal rate as defined in the
  273  Internal Revenue Code, 26 U.S.C. s. 7520, in effect for the
  274  month the conversion under this section becomes effective and
  275  for each January thereafter; however, if the percentage
  276  calculated exceeds 5 percent, the unitrust percentage is shall
  277  be 5 percent and if the percentage calculated is less than 3
  278  percent, the unitrust percentage is shall be 3 percent; and
  279         b. The fair market value of the trust shall be determined
  280  at least annually on an asset-by-asset basis, reasonably and in
  281  good faith, in accordance with the provisions of s. 738.202(5),
  282  except the following property shall not be included in
  283  determining the value of the trust:
  284         (I) Any residential property or any tangible personal
  285  property that, as of the first business day of the current
  286  valuation year, one or more current beneficiaries of the trust
  287  have or have had the right to occupy, or have or have had the
  288  right to possess or control, (other than in his or her capacity
  289  as trustee of the trust), and instead the right of occupancy or
  290  the right to possession and control is shall be deemed to be the
  291  unitrust amount with respect to such property; however, the
  292  unitrust amount must shall be adjusted to take into account
  293  partial distributions from or receipt into the trust of such
  294  property during the valuation year;.
  295         (II) Any asset specifically given to a beneficiary and the
  296  return on investment on such property, which return on
  297  investment shall be distributable to the such beneficiary; or.
  298         (III) Any asset while held in a decedent’s testator’s
  299  estate;
  300         (c) The trustee sends written notice of its intention to
  301  take such action, along with copies of the such written
  302  statement regarding trust distributions and this section, and,
  303  if applicable, the determinations of either the trustee or the
  304  disinterested person to:
  305         1. The grantor of the trust, if living.
  306         2. All living persons who are currently receiving or
  307  eligible to receive distributions of income from of the trust.
  308         3. All living persons who would receive distributions of
  309  principal of the trust if the trust were to terminate at the
  310  time of the giving of such notice (without regard to the
  311  exercise of any power of appointment,) or, if the trust does not
  312  provide for its termination, all living persons who would
  313  receive or be eligible to receive distributions of income or
  314  principal of the trust if the persons identified in subparagraph
  315  2. were deceased.
  316         4. All persons acting as advisers or protectors of the
  317  trust.
  318  
  319  Notice under this paragraph shall be served informally, in the
  320  manner provided in the Florida Rules of Civil Procedure relating
  321  to service of pleadings subsequent to the initial pleading.
  322  Notice may be served on a legal representative or natural
  323  guardian of a person without the filing of any proceeding or
  324  approval of any court;
  325         (d) At least one person receiving notice under each of
  326  subparagraphs (c)2. and 3. is legally competent; and
  327         (e) No person receiving such notice objects, by written
  328  instrument delivered to the trustee, to the proposed action of
  329  the trustee or the determinations of the disinterested person
  330  within 60 days after service of such notice. An objection under
  331  this section may be executed by a legal representative or
  332  natural guardian of a person without the filing of any
  333  proceeding or approval of any court.
  334         (3) If a trustee desires to convert an income trust to a
  335  total return unitrust, reconvert a total return unitrust to an
  336  income trust, or change the percentage used to calculate the
  337  unitrust amount or the method used to determine a fair market
  338  value of the trust but does not have the ability to or elects
  339  not to do it under subsection (2), the trustee may petition the
  340  circuit court for such order as the trustee deems appropriate.
  341  In that event, the court, in its own discretion or on the
  342  petition of such trustee or any person having an income or
  343  remainder interest in the trust, may appoint a disinterested
  344  person who, acting in a fiduciary capacity, shall present such
  345  information to the court as is shall be necessary for the court
  346  to make a determination hereunder.
  347         (4) All determinations made pursuant to sub-subparagraph
  348  (2)(b)2.b. shall be conclusive if reasonable and made in good
  349  faith. Such determination shall be conclusively presumed to have
  350  been made reasonably and in good faith unless proven otherwise
  351  in a proceeding commenced by or on behalf of a person interested
  352  in the trust within the time provided in s. 736.1008. The burden
  353  will be on the objecting interested party to prove that the
  354  determinations were not made reasonably and in good faith.
  355         (4)(5) Following the conversion of an income trust to a
  356  total return unitrust, the trustee:
  357         (a) Shall treat the unitrust amount as if it were net
  358  income of the trust for purposes of determining the amount
  359  available, from time to time, for distribution from the trust.
  360         (b) May allocate to trust income for each taxable year of
  361  the trust, or portion thereof:
  362         1. Net short-term capital gain described in the Internal
  363  Revenue Code, 26 U.S.C. s. 1222(5), for such year, or portion
  364  thereof, but only to the extent that the amount so allocated
  365  together with all other amounts allocated to trust income, as
  366  determined under the provisions of this chapter without regard
  367  to this section and s. 738.104, for such year, or portion
  368  thereof, does not exceed the unitrust amount for such year, or
  369  portion thereof.
  370         2. Net long-term capital gain described in the Internal
  371  Revenue Code, 26 U.S.C. s. 1222(7), for such year, or portion
  372  thereof, but only to the extent that the amount so allocated
  373  together with all other amounts, including amounts described in
  374  subparagraph 1., allocated to trust income for such year, or
  375  portion thereof, does not exceed the unitrust amount for such
  376  year, or portion thereof.
  377         (5)(6) In administering a total return unitrust, the
  378  trustee may, in its sole discretion but subject to the
  379  provisions of the governing instrument, determine:
  380         (a) The effective date of the conversion.
  381         (b) The timing of distributions, including provisions for
  382  prorating a distribution for a short year in which a
  383  beneficiary’s right to payments commences or ceases.
  384         (c) Whether distributions are to be made in cash or in kind
  385  or partly in cash and partly in kind.
  386         (d) If the trust is reconverted to an income trust, the
  387  effective date of such reconversion.
  388         (e) Such other administrative issues as may be necessary or
  389  appropriate to carry out the purposes of this section.
  390         (6)(7) Conversion to a total return unitrust under the
  391  provisions of this section does shall not affect any other
  392  provision of the governing instrument, if any, regarding
  393  distributions of principal.
  394         (7)(8) Any trustee or disinterested person who in good
  395  faith takes or fails to take any action under this section is
  396  shall not be liable to any person affected by such action or
  397  inaction, regardless of whether such person received written
  398  notice as provided in this section or and regardless of whether
  399  such person was under a legal disability at the time of the
  400  delivery of such notice. Such person’s exclusive remedy is shall
  401  be to obtain, under subsection (8) (9), an order of the court
  402  directing the trustee to convert an income trust to a total
  403  return unitrust, to reconvert from a total return unitrust to an
  404  income trust, or to change the percentage used to calculate the
  405  unitrust amount. If a court determines that the trustee or
  406  disinterested person has not acted in good faith in taking or
  407  failing to take any action under this section, the provisions of
  408  s. 738.105(3) applies apply.
  409         (8)(9) If a majority in interest of either the income or
  410  remainder beneficiaries of an income trust has delivered to the
  411  trustee a written objection to the amount of the income
  412  distributions of the trust, and, if the trustee has failed to
  413  resolve the objection to the satisfaction of the objecting
  414  beneficiaries within 6 months after from the receipt of such
  415  written objection, then the objecting beneficiaries may petition
  416  the court in accordance with subsection (3).
  417         (9)(10) This section pertains shall be construed as
  418  pertaining to the administration of a trust and is applicable to
  419  any trust that is administered either in this state or under
  420  Florida law unless:
  421         (a) The governing instrument reflects an intention that the
  422  current beneficiary or beneficiaries are to receive an amount
  423  other than a reasonable current return from the trust;
  424         (b) The trust is a trust described in the Internal Revenue
  425  Code, 26 U.S.C. s. 170(f)(2)(B), s. 642(c)(5), s. 664(d), s.
  426  2702(a)(3), or s. 2702(b);
  427         (c) One or more persons to whom the trustee could
  428  distribute income have a power of withdrawal over the trust:
  429         1. That is not subject to an ascertainable standard under
  430  the Internal Revenue Code, 26 U.S.C. s. 2041 or s. 2514, and
  431  exceeds in any calendar year the amount set forth in the
  432  Internal Revenue Code, 26 U.S.C. s. 2041(b)(2) or s. 2514(e); or
  433         2. A power of withdrawal over the trust that can be
  434  exercised to discharge a duty of support he or she possesses; or
  435         (d) The governing instrument expressly prohibits use of
  436  this section by specific reference to the section. A provision
  437  in the governing instrument that, “The provisions of section
  438  738.1041, Florida Statutes, as amended, or any corresponding
  439  provision of future law, may shall not be used in the
  440  administration of this trust,” or similar words reflecting such
  441  intent are shall be sufficient to preclude the use of this
  442  section; or
  443         (e) The trust is a trust with respect to which a trustee
  444  currently possesses the power to adjust under s. 738.104.
  445         (10)(11) The grantor of a trust may create an express total
  446  return unitrust that which will be become effective as provided
  447  in the trust instrument document without requiring a conversion
  448  under this section.
  449         (a) An express total return unitrust created by the grantor
  450  of the trust is shall be treated as a unitrust under this
  451  section only if the terms of the trust instrument document
  452  contain all of the following provisions:
  453         1.(a) That distributions from the trust will be unitrust
  454  amounts and the manner in which the unitrust amount will be
  455  calculated; and the method in which the fair market value of the
  456  trust will be determined.
  457         2.(b) The percentage to be used to calculate the unitrust
  458  amount, provided the percentage used is not greater than 5
  459  percent nor less than 3 percent.
  460         (b) The trust instrument may also contain provisions
  461  specifying:
  462         1.(c) The method to be used in determining the fair market
  463  value of the trust, including whether to use an average fair
  464  market value or the fair market value of the assets held by the
  465  trust at the beginning of the current year; or.
  466         2.(d) Which assets, if any, are to be excluded in
  467  determining the unitrust amount.
  468         (c) This section establishes the method of determining the
  469  fair market value of the trust if the trust instrument is silent
  470  as to subparagraph (b)1., and to specify those assets, if any,
  471  which are to be excluded in determining the unitrust amount if
  472  the trust instrument is silent as to subparagraph (b)2.
  473         Section 6. Subsections (1), (3), and (4) of section
  474  738.105, Florida Statutes, are amended to read:
  475         738.105 Judicial control of discretionary powers.—
  476         (1) A court may shall not change a trustee’s fiduciary’s
  477  decision to exercise or not to exercise a discretionary power
  478  conferred by this chapter unless the court determines that the
  479  decision was an abuse of the trustee’s fiduciary’s discretion. A
  480  court may shall not determine that a trustee fiduciary abused
  481  its discretion merely because the court would have exercised the
  482  discretion in a different manner or would not have exercised the
  483  discretion.
  484         (3) If a court determines that a trustee fiduciary has
  485  abused its discretion, the remedy is shall be to restore the
  486  income and remainder beneficiaries to the positions they would
  487  have occupied if the trustee fiduciary had not abused its
  488  discretion, in accordance with according to the following rules:
  489         (a) To the extent the abuse of discretion has resulted in
  490  no distribution to a beneficiary or a distribution that is too
  491  small, the court shall require the trustee fiduciary to
  492  distribute from the trust to the beneficiary an amount the court
  493  determines will restore the beneficiary, in whole or in part, to
  494  his or her appropriate position.
  495         (b) To the extent the abuse of discretion has resulted in a
  496  distribution to a beneficiary that is too large, the court shall
  497  restore the beneficiaries, the trust, or both, in whole or in
  498  part, to their appropriate positions by requiring the trustee
  499  fiduciary to withhold an amount from one or more future
  500  distributions to the beneficiary who received the distribution
  501  that was too large or requiring that beneficiary to return some
  502  or all of the distribution to the trust.
  503         (c) To the extent the court is unable, after applying
  504  paragraphs (a) and (b), to restore the beneficiaries or, the
  505  trust, or both, to the positions they would have occupied if the
  506  trustee fiduciary had not abused its discretion, the court may
  507  require the trustee fiduciary to pay an appropriate amount from
  508  its own funds to one or more of the beneficiaries or the trust
  509  or both.
  510         (4) Upon the filing of a petition by the trustee fiduciary,
  511  the court having jurisdiction over the trust or estate shall
  512  determine whether a proposed exercise or nonexercise by the
  513  trustee fiduciary of a discretionary power conferred by this
  514  chapter will result in an abuse of the trustee’s fiduciary’s
  515  discretion. If the petition describes the proposed exercise or
  516  nonexercise of the power and contains sufficient information to
  517  inform the beneficiaries of the reasons for the proposal, the
  518  facts upon which the trustee fiduciary relies, and an
  519  explanation of how the income and remainder beneficiaries will
  520  be affected by the proposed exercise or nonexercise of the
  521  power, a beneficiary who challenges the proposed exercise or
  522  nonexercise has the burden of establishing that such exercise or
  523  nonexercise will result in an abuse of discretion.
  524         Section 7. Subsections (1) through (4) of section 738.201,
  525  Florida Statutes, are amended to read:
  526         738.201 Determination and distribution of net income.—After
  527  a decedent dies, in the case of an estate, or after an income
  528  interest in a trust ends, the following rules apply:
  529         (1) A fiduciary of an estate or of a terminating income
  530  interest shall determine the amount of net income and net
  531  principal receipts received from property specifically given to
  532  a beneficiary under the rules in ss. 738.301-738.706 which apply
  533  to trustees and the rules in subsection (5). The fiduciary shall
  534  distribute the net income and net principal receipts to the
  535  beneficiary who is to receive the specific property.
  536         (2) A fiduciary shall determine the remaining net income of
  537  a decedent’s estate or a terminating income interest under the
  538  rules in ss. 738.301-738.706 which apply to trustees and by:
  539         (a) Including in net income all income from property used
  540  to discharge liabilities.
  541         (b) Paying from income or principal, in the fiduciary’s
  542  discretion, fees of attorneys, accountants, and fiduciaries;
  543  court costs and other expenses of administration; and interest
  544  on death taxes., but The fiduciary may pay those expenses from
  545  income of property passing to a trust for which the fiduciary
  546  claims an estate tax marital or charitable deduction under the
  547  Internal Revenue Code or comparable law of any state only to the
  548  extent the payment of those expenses from income will not cause
  549  the reduction or loss of the deduction.
  550         (c) Paying from principal all other disbursements made or
  551  incurred in connection with the settlement of a decedent’s
  552  estate or the winding up of a terminating income interest,
  553  including debts, funeral expenses, disposition of remains,
  554  family allowances, and death taxes and related penalties that
  555  are apportioned to the estate or terminating income interest by
  556  the will, the terms of the trust, or applicable law.
  557         (3) If A fiduciary shall distribute to a beneficiary who
  558  receives a pecuniary devise amount outright is also entitled to
  559  receive the interest or any other amount on the devise under the
  560  terms of provided by the will or, the terms of the trust, the
  561  fiduciary shall distribute the interest or other amount
  562  applicable law from net income determined under subsection (2)
  563  or from principal to the extent net income is insufficient. If a
  564  beneficiary is to receive a pecuniary amount outright from a
  565  trust after an income interest ends and no interest or other
  566  amount is provided for by the terms of the trust or applicable
  567  law, the fiduciary shall distribute the interest or other amount
  568  to which the beneficiary would be entitled under applicable law
  569  if the pecuniary amount were required to be paid under a will.
  570         (4) A fiduciary shall distribute the net income remaining
  571  after distributions required under subsections (1)-(3) by
  572  subsection (3) in the manner described in s. 738.202 to all
  573  other beneficiaries, including a beneficiary who receives a
  574  pecuniary amount in trust, even if the beneficiary holds an
  575  unqualified power to withdraw assets from the trust or other
  576  presently exercisable general power of appointment over the
  577  trust.
  578         Section 8. Section 738.202, Florida Statutes, is amended to
  579  read:
  580         738.202 Distribution to residuary and remainder
  581  beneficiaries.—
  582         (1) Each beneficiary described in s. 738.201(4) is entitled
  583  to receive a portion of the net income remaining after the
  584  application of s. 738.201(1)-(3), which is equal to the
  585  beneficiary’s fractional interest in undistributed principal
  586  assets, using carrying values as of the distribution date. If a
  587  fiduciary makes more than one distribution of assets to
  588  beneficiaries to whom this section applies, each beneficiary,
  589  including one who does not receive part of the distribution, is
  590  entitled, as of each distribution date, to the net income the
  591  fiduciary has received after the date of death or terminating
  592  event or earlier distribution date but has not distributed as of
  593  the current distribution date.
  594         (2) In determining a beneficiary’s share of net income, the
  595  following applies rules apply:
  596         (a) The beneficiary is entitled to receive a portion of the
  597  net income equal to the beneficiary’s fractional interest in the
  598  carrying value of the undistributed principal assets immediately
  599  before the distribution date, excluding the amount of unpaid
  600  liabilities including assets that later may be sold to meet
  601  principal obligations.
  602         (b) The beneficiary’s fractional interest in the
  603  undistributed principal assets shall be calculated: without
  604  regard to
  605         1. At the time the interest began and adjusted for any
  606  disproportionate distributions since the interest began;
  607         2. By excluding any liabilities of the estate or trust from
  608  the calculation;
  609         3. By also excluding property specifically given to a
  610  beneficiary and property required to pay pecuniary amounts not
  611  in trust; and.
  612         4.(c)The beneficiary’s fractional interest in the
  613  undistributed principal assets shall be calculated On the basis
  614  of the aggregate carrying value of those assets determined under
  615  subsection (1) as of the distribution date without reducing the
  616  value by any unpaid principal obligation.
  617         (c) If a disproportionate distribution of principal is made
  618  to any beneficiary, the respective fractional interests of all
  619  beneficiaries in the remaining underlying assets shall be
  620  recomputed by:
  621         1. Adjusting the carrying value of the principal assets to
  622  their fair market value before the distribution;
  623         2. Reducing the fractional interest of the recipient of the
  624  disproportionate distribution in the remaining principal assets
  625  by the fair market value of the principal distribution; and
  626         3. Recomputing the fractional interests of all
  627  beneficiaries in the remaining principal assets based upon the
  628  now restated carrying values.
  629         (d) The distribution date for purposes of this section may
  630  be the date as of which the fiduciary calculates the value of
  631  the assets if that date is reasonably near the date on which
  632  assets are actually distributed.
  633         (3) If a fiduciary does not distribute all of the collected
  634  but undistributed net income to each person as of a distribution
  635  date, the fiduciary shall maintain appropriate records showing
  636  the interest of each beneficiary in that net income.
  637         (4) A fiduciary may apply the provisions of rules in this
  638  section, to the extent the fiduciary considers appropriate, to
  639  net gain or loss realized after the date of death or terminating
  640  event or earlier distribution date from the disposition of a
  641  principal asset if this section applies to the income from the
  642  asset.
  643         (5) The carrying value or fair market value of trust assets
  644  shall be determined on an asset-by-asset basis and are shall be
  645  conclusive if reasonable and determined in good faith.
  646  Determinations of fair market value based on appraisals
  647  performed within 2 years before or after the valuation date are
  648  shall be presumed reasonable. The values value of trust assets
  649  are shall be conclusively presumed to be reasonable and
  650  determined in good faith unless proven otherwise in a proceeding
  651  commenced by or on behalf of a person interested in the trust
  652  within the time provided in s. 736.1008.
  653         (6) All distributions to a beneficiary shall be valued
  654  based on their fair market value on the date of distribution.
  655         Section 9. Subsection (4) of section 738.301, Florida
  656  Statutes, is amended to read:
  657         738.301 When right to income begins and ends.—An income
  658  beneficiary is entitled to net income from the date on which the
  659  income interest begins.
  660         (4) An income interest ends on the day before an income
  661  beneficiary dies or another terminating event occurs, or on the
  662  last day of a period during which there is no beneficiary to
  663  whom a fiduciary trustee may distribute income.
  664         Section 10. Subsections (1) and (2) of section 738.302,
  665  Florida Statutes, are amended to read:
  666         738.302 Apportionment of receipts and disbursements when
  667  decedent dies or income interest begins.—
  668         (1) A fiduciary trustee shall allocate an income receipt or
  669  disbursement other than one to which s. 738.201(1) applies to
  670  principal if the due date of the receipt or disbursement occurs
  671  before a decedent dies in the case of an estate or before an
  672  income interest begins in the case of a trust or successive
  673  income interest.
  674         (2) A fiduciary trustee shall allocate an income receipt or
  675  disbursement to income if the due date of the receipt or
  676  disbursement occurs on or after the date on which a decedent
  677  dies or an income interest begins and the due date is a periodic
  678  due date. An income receipt or disbursement shall be treated as
  679  accruing from day to day if the due date of the receipt or
  680  disbursement is not periodic or the receipt or disbursement has
  681  no due date. The portion of the receipt or disbursement accruing
  682  before the date on which a decedent dies or an income interest
  683  begins shall be allocated to principal and the balance shall be
  684  allocated to income.
  685         Section 11. Subsections (2) and (3) of section 738.303,
  686  Florida Statutes, are amended to read:
  687         738.303 Apportionment when income interest ends.—
  688         (2) When a mandatory income interest ends, the fiduciary
  689  trustee shall pay to a mandatory income beneficiary who survives
  690  that date, or the estate of a deceased mandatory income
  691  beneficiary whose death causes the interest to end, the
  692  beneficiary’s share of the undistributed income that is not
  693  disposed of under the terms of the trust unless the beneficiary
  694  has an unqualified power to revoke more than 5 percent of the
  695  trust immediately before the income interest ends. In the latter
  696  case, the undistributed income from the portion of the trust
  697  that may be revoked shall be added to principal.
  698         (3) When a fiduciary’s trustee’s obligation to pay a fixed
  699  annuity or a fixed fraction of the value of the trust’s assets
  700  ends, the fiduciary trustee shall prorate the final payment if
  701  and to the extent required by applicable law to accomplish a
  702  purpose of the trust or its grantor relating to income, gift,
  703  estate, or other tax requirements.
  704         Section 12. Section 738.401, Florida Statutes, is amended
  705  to read:
  706         738.401 Character of receipts.—
  707         (1) For purposes of this section, the term “entity” means a
  708  corporation, partnership, limited liability company, regulated
  709  investment company, real estate investment trust, common trust
  710  fund, or any other organization in which a fiduciary trustee has
  711  an interest other than a trust or estate to which s. 738.402
  712  applies, a business or activity to which s. 738.403 applies, or
  713  an asset-backed security to which s. 738.608 applies.
  714         (2) Except as otherwise provided in this section, a
  715  fiduciary trustee shall allocate to income money received from
  716  an entity.
  717         (3) Except as otherwise provided in this section, a
  718  fiduciary trustee shall allocate the following receipts from an
  719  entity to principal:
  720         (a) Property other than money.
  721         (b) Money received in one distribution or a series of
  722  related distributions in exchange for part or all of a trust’s
  723  or estate’s interest in the entity.
  724         (c) Money received in total or partial liquidation of the
  725  entity.
  726         (d) Money received from an entity that is a regulated
  727  investment company or a real estate investment trust if the
  728  money received distributed represents short-term or long-term
  729  capital gain realized within the entity.
  730         (e) Money received from an entity listed on a public stock
  731  exchange during any year of the trust or estate which exceeds 10
  732  percent of the fair market value of the trust’s or estate’s
  733  interest in the entity on the first day of that year. The amount
  734  to be allocated to principal must be reduced to the extent that
  735  the cumulative distributions from the entity to the trust or
  736  estate allocated to income does not exceed a cumulative annual
  737  return of 3 percent of the fair market value of the interest in
  738  the entity at the beginning of each year or portion of a year
  739  for the number of years or portion of years in the period that
  740  the interest in the entity has been held by the trust or estate.
  741  If a trustee has exercised a power to adjust under s. 738.104
  742  during any period the interest in the entity has been held by
  743  the trust, the trustee, in determining the total income
  744  distributions from that entity, must take into account the
  745  extent to which the exercise of that power resulted in income to
  746  the trust from that entity for that period. If the income of the
  747  trust for any period has been computed under s. 738.1041, the
  748  trustee, in determining the total income distributions from that
  749  entity for that period, must take into account the portion of
  750  the unitrust amount paid as a result of the ownership of the
  751  trust’s interest in the entity for that period.
  752         (4) If a fiduciary trustee elects, or continues an election
  753  made by its predecessor, to reinvest dividends in shares of
  754  stock of a distributing corporation or fund, whether evidenced
  755  by new certificates or entries on the books of the distributing
  756  entity, the new shares shall retain their character as income.
  757         (5) Money is received in partial liquidation:
  758         (a) To the extent the entity, at or near the time of a
  759  distribution, indicates that such money is a distribution in
  760  partial liquidation; or
  761         (b) To the extent If the total amount of money and property
  762  received in a distribution or series of related distributions
  763  from an entity that is not listed on a public stock exchange
  764  exceeds is greater than 20 percent of the trust’s or estate’s
  765  pro rata share of the entity’s gross assets, as shown by the
  766  entity’s year-end financial statements immediately preceding the
  767  initial receipt.
  768  
  769  This subsection does not apply to an entity to which subsection
  770  (7) applies.
  771         (6) Money may not is not received in partial liquidation,
  772  nor may money be taken into account in determining any excess
  773  under paragraph (5)(b), to the extent that the cumulative
  774  distributions from the entity to the trust or the estate
  775  allocated to income do not exceed the greater of: such money
  776  does not exceed the amount of income tax a trustee or
  777  beneficiary must pay on taxable income of the entity that
  778  distributes the money.
  779         (a) A cumulative annual return of 3 percent of the entity’s
  780  carrying value computed at the beginning of each period for the
  781  number of years or portion of years that the entity was held by
  782  the fiduciary. If a trustee has exercised a power to adjust
  783  under s. 738.104 during any period the interest in the entity
  784  has been held by the trust, the trustee, in determining the
  785  total income distributions from that entity, must take into
  786  account the extent to which exercise of the power resulted in
  787  income to the trust from that entity for that period. If the
  788  income of a trust for any period has been computed pursuant to
  789  s. 738.1041, the trustee, in determining the total income
  790  distributions from the entity for that period, must take into
  791  account the portion of the unitrust amount paid as a result of
  792  the ownership of the trust’s interest in the entity for that
  793  period; or
  794         (b) If the entity is treated as a partnership, subchapter S
  795  corporation, or a disregarded entity pursuant to the Internal
  796  Revenue Code of 1986, as amended, the amount of income tax
  797  attributable to the trust’s or estate’s ownership share of the
  798  entity, based on its pro rata share of the taxable income of the
  799  entity that distributes the money, for the number of years or
  800  portion of years that the interest in the entity was held by the
  801  fiduciary, calculated as if all of that tax was incurred by the
  802  fiduciary.
  803         (7) The following applies special rules shall apply to
  804  money moneys or property received by a private trustee as a
  805  distribution from an investment entity entities described in
  806  this subsection:
  807         (a) The trustee shall first treat as income of the trust
  808  all of the money or property received from the investment entity
  809  in the current year which would be considered income under this
  810  chapter if the trustee had directly held the trust’s pro rata
  811  share of the assets of the investment entity. For this purpose,
  812  all distributions received in the current year must be
  813  aggregated.
  814         (b) The trustee shall next treat as income of the trust any
  815  additional money or property received in the current year which
  816  would have been considered income in the prior 2 years under
  817  paragraph (a) if additional money or property had been received
  818  from the investment entity in any of those prior 2 years. The
  819  amount to be treated as income shall be reduced by any
  820  distributions of money or property made by the investment entity
  821  to the trust during the current and prior 2 years which were
  822  treated as income under this paragraph.
  823         (c) The remainder of the distribution, if any, is treated
  824  as principal.
  825         (d) As used in this subsection, the term:
  826         1. “Investment entity” means an entity, other than a
  827  business activity conducted by the trustee described in s.
  828  738.403 or an entity that is listed on a public stock exchange,
  829  which is treated as a partnership, subchapter S corporation, or
  830  disregarded entity pursuant to the Internal Revenue Code of
  831  1986, as amended, and which normally derives 50 percent or more
  832  of its annual cumulative net income from interest, dividends,
  833  annuities, royalties, rental activity, or other passive
  834  investments, including income from the sale or exchange of such
  835  passive investments.
  836         2. “Private trustee” means a trustee who is a natural
  837  person, but only if the trustee is unable to use the power to
  838  adjust between income and principal with respect to receipts
  839  from entities described in this subsection pursuant to s.
  840  738.104. A bank, trust company, or other commercial trustee is
  841  not considered a private trustee.
  842         (8) This section shall be applied before ss. 738.705 and
  843  738.706 and does not modify or change any of the provisions of
  844  those sections.
  845         (a) Moneys or property received from a targeted entity that
  846  is not an investment entity which do not exceed the trust’s pro
  847  rata share of the undistributed cumulative net income of the
  848  targeted entity during the time an ownership interest in the
  849  targeted entity was held by the trust shall be allocated to
  850  income. The balance of moneys or property received from a
  851  targeted entity shall be allocated to principal.
  852         (b) If trust assets include any interest in an investment
  853  entity, the designated amount of moneys or property received
  854  from the investment entity shall be treated by the trustee in
  855  the same manner as if the trustee had directly held the trust’s
  856  pro rata share of the assets of the investment entity
  857  attributable to the distribution of such designated amount.
  858  Thereafter, distributions shall be treated as principal.
  859         (c) For purposes of this subsection, the following
  860  definitions shall apply:
  861         1. “Cumulative net income” means the targeted entity’s net
  862  income as determined using the method of accounting regularly
  863  used by the targeted entity in preparing its financial
  864  statements, or if no financial statements are prepared, the net
  865  book income computed for federal income tax purposes, for every
  866  year an ownership interest in the entity is held by the trust.
  867  The trust’s pro rata share shall be the cumulative net income
  868  multiplied by the percentage ownership of the trust.
  869         2. “Designated amount” means moneys or property received
  870  from an investment entity during any year that is equal to the
  871  amount of the distribution that does not exceed the greater of:
  872         a. The amount of income of the investment entity for the
  873  current year, as reported to the trustee by the investment
  874  entity for federal income tax purposes; or
  875         b. The amount of income of the investment entity for the
  876  current year and the prior 2 years, as reported to the trustee
  877  by the investment entity for federal income tax purposes, less
  878  any distributions of moneys or property made by the investment
  879  entity to the trustee during the prior 2 years.
  880         3. “Investment entity” means a targeted entity that
  881  normally derives 50 percent or more of its annual cumulative net
  882  income from interest, dividends, annuities, royalties, rental
  883  activity, or other passive investments, including income from
  884  the sale or exchange of such passive investments.
  885         4. “Private trustee” means a trustee who is an individual,
  886  but only if the trustee is unable to utilize the power to adjust
  887  between income and principal with respect to receipts from
  888  entities described in this subsection pursuant to s. 738.104. A
  889  bank, trust company, or other commercial trustee shall not be
  890  considered to be a private trustee.
  891         5. “Targeted entity” means any entity that is treated as a
  892  partnership, subchapter S corporation, or disregarded entity
  893  pursuant to the Internal Revenue Code of 1986, as amended, other
  894  than an entity described in s. 738.403.
  895         6. “Undistributed cumulative net income” means the trust’s
  896  pro rata share of cumulative net income, less all prior
  897  distributions from the targeted entity to the trust that have
  898  been allocated to income.
  899         (d) This subsection shall not be construed to modify or
  900  change any of the provisions of ss. 738.705 and 738.706 relating
  901  to income taxes.
  902         (8) A trustee may rely upon a statement made by an entity
  903  about the source or character of a distribution, about the
  904  amount of profits of a targeted entity, or about the nature and
  905  value of assets of an investment entity if the statement is made
  906  at or near the time of distribution by the entity’s board of
  907  directors or other person or group of persons authorized to
  908  exercise powers to pay money or transfer property comparable to
  909  those of a corporation’s board of directors.
  910         Section 13. Section 738.402, Florida Statutes, is amended
  911  to read:
  912         738.402 Distribution from trust or estate.—A fiduciary
  913  trustee shall allocate to income an amount received as a
  914  distribution of income from a trust or an estate in which the
  915  trust has an interest other than a purchased interest and shall
  916  allocate to principal an amount received as a distribution of
  917  principal from such a trust or estate. If a fiduciary trustee
  918  purchases an interest in a trust that is an investment entity,
  919  or a decedent or donor transfers an interest in such a trust to
  920  a fiduciary trustee, s. 738.401 or s. 738.608 applies to a
  921  receipt from the trust.
  922         Section 14. Section 738.403, Florida Statutes, is amended
  923  to read:
  924         738.403 Business and other activities conducted by
  925  fiduciary trustee.—
  926         (1) If a fiduciary trustee who conducts a business or other
  927  activity determines that it is in the best interest of all the
  928  beneficiaries to account separately for the business or activity
  929  instead of accounting for the business or activity as part of
  930  the trust’s or estate’s general accounting records, the
  931  fiduciary trustee may maintain separate accounting records for
  932  the transactions of the such business or other activity, whether
  933  or not the assets of such business or activity are segregated
  934  from other trust or estate assets.
  935         (2) A fiduciary trustee who accounts separately for a
  936  business or other activity may determine the extent to which the
  937  net cash receipts of the such business or activity must be
  938  retained for working capital, the acquisition or replacement of
  939  fixed assets, and other reasonably foreseeable needs of the
  940  business or activity, and the extent to which the remaining net
  941  cash receipts are accounted for as principal or income in the
  942  trust’s or estate’s general accounting records. If a fiduciary
  943  trustee sells assets of the business or other activity, other
  944  than in the ordinary course of the business or activity, the
  945  fiduciary must trustee shall account for the net amount received
  946  as principal in the trust’s or estate’s general accounting
  947  records to the extent the fiduciary trustee determines that the
  948  amount received is no longer required in the conduct of the
  949  business.
  950         (3) Activities for which a fiduciary trustee may maintain
  951  separate accounting records include:
  952         (a) Retail, manufacturing, service, and other traditional
  953  business activities.
  954         (b) Farming.
  955         (c) Raising and selling livestock and other animals.
  956         (d) Management of rental properties.
  957         (e) Extraction of minerals and other natural resources.
  958         (f) Timber operations.
  959         (g) Activities to which s. 738.607 738.608 applies.
  960         Section 15. Section 738.501, Florida Statutes, is amended
  961  to read:
  962         738.501 Principal receipts.—A fiduciary trustee shall
  963  allocate to principal:
  964         (1) To the extent not allocated to income under this
  965  chapter, assets received from a donor transferor during the
  966  donor’s transferor’s lifetime, a decedent’s estate, a trust with
  967  a terminating income interest, or a payor under a contract
  968  naming the trust, estate, or fiduciary its trustee as
  969  beneficiary.
  970         (2) Money or other property received from the sale,
  971  exchange, liquidation, or change in form of a principal asset,
  972  including realized profit, subject to this section.
  973         (3) Amounts recovered from third parties to reimburse the
  974  trust or estate because of disbursements described in s.
  975  738.702(1)(g) or for other reasons to the extent not based on
  976  the loss of income.
  977         (4) Proceeds of property taken by eminent domain; however,
  978  but a separate award made for the loss of income with respect to
  979  an accounting period during which a current income beneficiary
  980  had a mandatory income interest is income.
  981         (5) Net income received in an accounting period during
  982  which there is no beneficiary to whom a fiduciary trustee may or
  983  shall distribute income.
  984         (6) Other receipts as provided in ss. 738.601-738.608.
  985         Section 16. Section 738.502, Florida Statutes, is amended
  986  to read:
  987         738.502 Rental property.—If To the extent a fiduciary
  988  trustee accounts for receipts from rental property pursuant to
  989  this section, the fiduciary trustee shall allocate to income an
  990  amount received as rent of real or personal property, including
  991  an amount received for cancellation or renewal of a lease. An
  992  amount received as a refundable deposit, including a security
  993  deposit or a deposit that is to be applied as rent for future
  994  periods, must shall be added to principal and held subject to
  995  the terms of the lease and is not available for distribution to
  996  a beneficiary until the fiduciary’s trustee’s contractual
  997  obligations have been satisfied with respect to that amount.
  998         Section 17. Subsections (1), (2), and (3) of section
  999  738.503, Florida Statutes, are amended to read:
 1000         738.503 Obligation to pay money.—
 1001         (1) An amount received as interest, whether determined at a
 1002  fixed, variable, or floating rate, on an obligation to pay money
 1003  to the fiduciary trustee, including an amount received as
 1004  consideration for prepaying principal, shall be allocated to
 1005  income without any provision for amortization of premium.
 1006         (2) Except as otherwise provided herein, a fiduciary
 1007  trustee shall allocate to principal an amount received from the
 1008  sale, redemption, or other disposition of an obligation to pay
 1009  money to the fiduciary trustee.
 1010         (3) The increment in value of a bond or other obligation
 1011  for the payment of money bearing no stated interest but payable
 1012  at a future time in excess of the price at which it was issued
 1013  or purchased, if purchased after issuance, is distributable as
 1014  income. If the increment in value accrues and becomes payable
 1015  pursuant to a fixed schedule of appreciation, it may be
 1016  distributed to the beneficiary who was the income beneficiary at
 1017  the this time of increment from the first principal cash
 1018  available or, if none is available, when the increment is
 1019  realized by sale, redemption, or other disposition. If When
 1020  unrealized increment is distributed as income but out of
 1021  principal, the principal must shall be reimbursed for the
 1022  increment when realized. If, in the reasonable judgment of the
 1023  fiduciary trustee, exercised in good faith, the ultimate payment
 1024  of the bond principal is in doubt, the fiduciary trustee may
 1025  withhold the payment of incremental interest to the income
 1026  beneficiary.
 1027         Section 18. Subsections (1) and (2) of section 738.504,
 1028  Florida Statutes, are amended to read:
 1029         738.504 Insurance policies and similar contracts.—
 1030         (1) Except as otherwise provided in subsection (2), a
 1031  fiduciary trustee shall allocate to principal the proceeds of a
 1032  life insurance policy or other contract in which the trust,
 1033  estate, or fiduciary its trustee is named as beneficiary,
 1034  including a contract that insures the trust, estate, or
 1035  fiduciary its trustee against loss for damage to, destruction
 1036  of, or loss of title to a trust or estate asset. The fiduciary
 1037  trustee shall allocate dividends on an insurance policy to
 1038  income if the premiums on the policy are paid from income and to
 1039  principal if the premiums are paid from principal.
 1040         (2) A fiduciary trustee shall allocate to income the
 1041  proceeds of a contract that insures the fiduciary trustee
 1042  against loss of occupancy or other use by an income beneficiary,
 1043  loss of income, or, subject to s. 738.403, loss of profits from
 1044  a business.
 1045         Section 19. Section 738.601, Florida Statutes, is amended
 1046  to read:
 1047         738.601 Insubstantial allocations not required.—If a
 1048  fiduciary trustee determines that an allocation between
 1049  principal and income required by s. 738.602, s. 738.603, s.
 1050  738.604, s. 738.605, or s. 738.608 is insubstantial, the
 1051  fiduciary trustee may allocate the entire amount to principal
 1052  unless one of the circumstances described in s. 738.104(3)
 1053  applies to the allocation. This power may be exercised by a
 1054  cofiduciary under cotrustee in the circumstances described in s.
 1055  738.104(4) and may be released for the reasons and in the manner
 1056  described in s. 738.104(5). An allocation is presumed to be
 1057  insubstantial if:
 1058         (1) The amount of the allocation would increase or decrease
 1059  net income in an accounting period, as determined before the
 1060  allocation, by less than 10 percent; or
 1061         (2) The value of the asset producing the receipt for which
 1062  the allocation would be made is less than 10 percent of the
 1063  total value of the trust or estate trust’s assets at the
 1064  beginning of the accounting period.
 1065         Section 20. Section 738.602, Florida Statutes, is amended
 1066  to read:
 1067         738.602 Payments from deferred compensation plans,
 1068  annuities, and retirement plans or accounts.—
 1069         (1) As used in For purposes of this section, the term:
 1070         (a) “Fund” means a private or commercial annuity, an
 1071  individual retirement account, an individual retirement annuity,
 1072  a deferred compensation plan, a pension plan, a profit-sharing
 1073  plan, a stock-bonus plan, an employee stock-ownership plan, or
 1074  another similar arrangement in which federal income tax is
 1075  deferred.
 1076         (b) “Income of the fund” means income that is determined
 1077  according to subsection (2) or subsection (3).
 1078         (c) “Nonseparate account” means a fund for which the value
 1079  of the participant’s or account owner’s right to receive
 1080  benefits can be determined only by the occurrence of a date or
 1081  event as defined in the instrument governing the fund.
 1082         (d) “Payment” means a distribution from a fund that a
 1083  fiduciary trustee may receive over a fixed number of years or
 1084  during the life of one or more individuals because of services
 1085  rendered or property transferred to the payor in exchange for
 1086  future payments. The term includes a distribution made in money
 1087  or property from the payor’s general assets or from a fund
 1088  created by the payor or payee.
 1089         (e) “Separate account” means a fund holding assets
 1090  exclusively for the benefit of a participant or account owner
 1091  and:
 1092         1. The value of such assets or the value of the separate
 1093  account is ascertainable at any time; or
 1094         2. The administrator of the fund maintains records that
 1095  show receipts and disbursements associated with such assets.
 1096         (2)(a) For a fund that is a separate account, income of the
 1097  fund shall be determined:
 1098         1. As if the fund were a trust subject to the provisions of
 1099  ss. 738.401-738.706; or
 1100         2. As a unitrust amount calculated by multiplying the fair
 1101  market value of the fund as of the first day of the first
 1102  accounting period and, thereafter, as of the last day of the
 1103  accounting period that immediately precedes the accounting
 1104  period during which a payment is received by the percentage
 1105  determined in accordance with s. 738.1041(2)(b)2.a. The
 1106  fiduciary trustee shall determine such percentage as of the
 1107  first month that the fiduciary’s trustee’s election to treat the
 1108  income of the fund as a unitrust amount becomes effective. For
 1109  purposes of this subparagraph, “fair market value” means the
 1110  fair market value of the assets held in the fund as of the
 1111  applicable valuation date determined as provided in this
 1112  subparagraph. The fiduciary trustee is not liable for good faith
 1113  reliance upon any valuation supplied by the person or persons in
 1114  possession of the fund. If the fiduciary trustee makes or
 1115  terminates an election under this subparagraph, the fiduciary
 1116  trustee shall make such disclosure in a trust disclosure
 1117  document that satisfies the requirements of s. 736.1008(4)(a).
 1118         (b) The fiduciary may trustee shall have discretion to
 1119  elect the method of determining the income of the fund pursuant
 1120  to this subsection and may change the method of determining
 1121  income of the fund for any future accounting period.
 1122         (3) For a fund that is a nonseparate account, income of the
 1123  fund is a unitrust amount determined by calculating the present
 1124  value of the right to receive the remaining payments under 26
 1125  U.S.C. s. 7520 of the Internal Revenue Code as of the first day
 1126  of the accounting period and multiplying it by the percentage
 1127  determined in accordance with s. 738.1041(2)(b)2.a. The
 1128  fiduciary trustee shall determine the unitrust amount as of the
 1129  first month that the fiduciary’s trustee’s election to treat the
 1130  income of the fund as a unitrust amount becomes effective.
 1131         (4) Except for those trusts described in subsection (5),
 1132  the fiduciary trustee shall allocate to income the lesser of the
 1133  payment received from a fund or the income determined under
 1134  subsection (2) or subsection (3). Any remaining amount of the
 1135  payment shall be allocated to principal a payment from a fund as
 1136  follows:
 1137         (a) That portion of the payment the payor characterizes as
 1138  income shall be allocated to income, and any remaining portion
 1139  of the payment shall be allocated to principal.
 1140         (b) To the extent that the payor does not characterize any
 1141  portion of a payment as income or principal and the trustee can
 1142  ascertain the income of the fund by the fund’s account
 1143  statements or any other reasonable source, the trustee shall
 1144  allocate to income the lesser of the income of the fund or the
 1145  entire payment and shall allocate to principal any remaining
 1146  portion of the payment.
 1147         (c) If the trustee, acting reasonably and in good faith,
 1148  determines that neither paragraph (a) nor paragraph (b) applies
 1149  and all or part of the payment is required to be made, the
 1150  trustee shall allocate to income 10 percent of the portion of
 1151  the payment that is required to be made during the accounting
 1152  period and shall allocate the balance to principal. If no part
 1153  of a payment is required to be made or the payment received is
 1154  the entire amount to which the trustee is entitled, the trustee
 1155  shall allocate the entire payment to principal. For purposes of
 1156  this paragraph, a payment is not “required to be made” to the
 1157  extent the payment is made because the trustee exercises a right
 1158  of withdrawal.
 1159         (5) For a trust that which, in order to qualify for the
 1160  estate or gift tax marital deduction under the Internal Revenue
 1161  Code or comparable law of any state, entitles the spouse to all
 1162  of the income of the trust, and the terms of the trust are
 1163  silent as to the time and frequency for distribution of the
 1164  income of the fund, then:
 1165         (a) For a fund that is a separate account, unless the
 1166  spouse directs the fiduciary trustee to leave the income of the
 1167  fund in the fund, the fiduciary trustee shall withdraw and pay
 1168  to the spouse, at least no less frequently than annually:
 1169         1. All of the income of the fund determined in accordance
 1170  with subparagraph (2)(a)1.; or
 1171         2. The income of the fund as a unitrust amount determined
 1172  in accordance with subparagraph (2)(a)2.
 1173         (b) For a fund that is a nonseparate account, the fiduciary
 1174  trustee shall withdraw and pay to the spouse, at least no less
 1175  frequently than annually, the income of the fund as a unitrust
 1176  amount determined in accordance with subsection (3).
 1177         (6) This section does not apply to payments to which s.
 1178  738.603 applies.
 1179         Section 21. Section 738.603, Florida Statutes, is amended
 1180  to read:
 1181         738.603 Liquidating asset.—
 1182         (1) For purposes of this section, the term “liquidating
 1183  asset” means an asset the value of which will diminish or
 1184  terminate because the asset is expected to produce receipts for
 1185  a period of limited duration. The term includes a leasehold,
 1186  patent, copyright, royalty right, and right to receive payments
 1187  for during a period of more than 1 year under an arrangement
 1188  that does not provide for the payment of interest on the unpaid
 1189  balance. The term does not include a payment subject to s.
 1190  738.602, resources subject to s. 738.604, timber subject to s.
 1191  738.605, an activity subject to s. 738.607, an asset subject to
 1192  s. 738.608, or any asset for which the fiduciary trustee
 1193  establishes a reserve for depreciation under s. 738.703.
 1194         (2) A fiduciary trustee shall allocate to income 5 10
 1195  percent of the receipts from the carrying value of a liquidating
 1196  asset and the balance to principal. Amounts allocated to
 1197  principal shall reduce the carrying value of the liquidating
 1198  asset, but not below zero. Amounts received in excess of the
 1199  remaining carrying value must be allocated to principal.
 1200         Section 22. Subsections (1), (3), and (4) of section
 1201  738.604, Florida Statutes, are amended to read:
 1202         738.604 Minerals, water, and other natural resources.—
 1203         (1) If To the extent a fiduciary trustee accounts for
 1204  receipts from an interest in minerals or other natural resources
 1205  pursuant to this section, the fiduciary trustee shall allocate
 1206  such receipts as follows:
 1207         (a) If received as nominal delay rental or nominal annual
 1208  rent on a lease, a receipt shall be allocated to income.
 1209         (b) If received from a production payment, a receipt shall
 1210  be allocated to income if and to the extent the agreement
 1211  creating the production payment provides a factor for interest
 1212  or its equivalent. The balance shall be allocated to principal.
 1213         (c) If an amount received as a royalty, shut-in-well
 1214  payment, take-or-pay payment, bonus, or delay rental is more
 1215  than nominal, 90 percent shall be allocated to principal and the
 1216  balance to income.
 1217         (d) If an amount is received from a working interest or any
 1218  other interest not provided for in paragraph (a), paragraph (b),
 1219  or paragraph (c), 90 percent of the net amount received shall be
 1220  allocated to principal and the balance to income.
 1221         (3) This chapter applies whether or not a decedent or donor
 1222  was extracting minerals, water, or other natural resources
 1223  before the interest became subject to the trust or estate.
 1224         (4) If a trust or estate owns an interest in minerals,
 1225  water, or other natural resources on January 1, 2003, the
 1226  fiduciary trustee may allocate receipts from the interest as
 1227  provided in this chapter or in the manner used by the fiduciary
 1228  trustee before January 1, 2003. If the trust or estate acquires
 1229  an interest in minerals, water, or other natural resources after
 1230  January 1, 2003, the fiduciary trustee shall allocate receipts
 1231  from the interest as provided in this chapter.
 1232         Section 23. Section 738.605, Florida Statutes, is amended
 1233  to read:
 1234         738.605 Timber.—
 1235         (1) If To the extent a fiduciary trustee accounts for
 1236  receipts from the sale of timber and related products pursuant
 1237  to this section, the fiduciary trustee shall allocate such the
 1238  net receipts as follows:
 1239         (a) To income to the extent the amount of timber removed
 1240  from the land does not exceed the rate of growth of the timber
 1241  during the accounting periods in which a beneficiary has a
 1242  mandatory income interest;
 1243         (b) To principal to the extent the amount of timber removed
 1244  from the land exceeds the rate of growth of the timber or the
 1245  net receipts are from the sale of standing timber;
 1246         (c) To or between income and principal if the net receipts
 1247  are from the lease of timberland or from a contract to cut
 1248  timber from land owned by a trust or estate by determining the
 1249  amount of timber removed from the land under the lease or
 1250  contract and applying the rules in paragraphs (a) and (b); or
 1251         (d) To principal to the extent advance payments, bonuses,
 1252  and other payments are not allocated pursuant to paragraph (a),
 1253  paragraph (b), or paragraph (c).
 1254         (2) In determining net receipts to be allocated pursuant to
 1255  subsection (1), a fiduciary trustee shall deduct and transfer to
 1256  principal a reasonable amount for depletion.
 1257         (3) This chapter applies whether or not a decedent or donor
 1258  transferor was harvesting timber from the property before the
 1259  property became subject to the trust or estate.
 1260         (4) If a trust or estate owns an interest in timberland on
 1261  January 1, 2003, the fiduciary trustee may allocate net receipts
 1262  from the sale of timber and related products as provided in this
 1263  chapter or in the manner used by the fiduciary trustee before
 1264  January 1, 2003. If the trust or estate acquires an interest in
 1265  timberland after January 1, 2003, the fiduciary trustee shall
 1266  allocate net receipts from the sale of timber and related
 1267  products as provided in this chapter.
 1268         Section 24. Subsection (1) of section 738.606, Florida
 1269  Statutes, is amended to read:
 1270         738.606 Property not productive of income.—
 1271         (1) If a marital deduction under the Internal Revenue Code
 1272  or comparable law of any state is allowed for all or part of a
 1273  trust the income of which must is required to be distributed to
 1274  the grantor’s spouse and the assets of which consist
 1275  substantially of property that does not provide the spouse with
 1276  sufficient income from or use of the trust assets, and if the
 1277  amounts the trustee transfers from principal to income under s.
 1278  738.104 and distributes to the spouse from principal pursuant to
 1279  the terms of the trust are insufficient to provide the spouse
 1280  with the beneficial enjoyment required to obtain the marital
 1281  deduction, the spouse may require the trustee to make property
 1282  productive of income, convert property within a reasonable time,
 1283  or exercise the power conferred by ss. 738.104 and 738.1041. The
 1284  trustee may decide which action or combination of actions to
 1285  take.
 1286         Section 25. Subsections (2) and (3) of section 738.607,
 1287  Florida Statutes, are amended to read:
 1288         738.607 Derivatives and options.—
 1289         (2) To the extent a fiduciary trustee does not account
 1290  under s. 738.403 for transactions in derivatives, the fiduciary
 1291  trustee shall allocate to principal receipts from and
 1292  disbursements made in connection with those transactions.
 1293         (3) If a fiduciary trustee grants an option to buy property
 1294  from the trust or estate whether or not the trust or estate owns
 1295  the property when the option is granted, grants an option that
 1296  permits another person to sell property to the trust or estate,
 1297  or acquires an option to buy property for the trust or estate or
 1298  an option to sell an asset owned by the trust or estate, and the
 1299  fiduciary trustee or other owner of the asset is required to
 1300  deliver the asset if the option is exercised, an amount received
 1301  for granting the option shall be allocated to principal. An
 1302  amount paid to acquire the option shall be paid from principal.
 1303  A gain or loss realized upon the exercise of an option,
 1304  including an option granted to a grantor of the trust or estate
 1305  for services rendered, shall be allocated to principal.
 1306         Section 26. Subsections (2) and (3) of section 738.608,
 1307  Florida Statutes, are amended to read:
 1308         738.608 Asset-backed securities.—
 1309         (2) If a trust or estate receives a payment from interest
 1310  or other current return and from other proceeds of the
 1311  collateral financial assets, the fiduciary trustee shall
 1312  allocate to income the portion of the payment which the payor
 1313  identifies as being from interest or other current return and
 1314  shall allocate the balance of the payment to principal.
 1315         (3) If a trust or estate receives one or more payments in
 1316  exchange for the trust’s or estate’s entire interest in an
 1317  asset-backed security during a single accounting period, the
 1318  fiduciary trustee shall allocate the payments to principal. If a
 1319  payment is one of a series of payments that will result in the
 1320  liquidation of the trust’s or estate’s interest in the security
 1321  over more than a single accounting period, the fiduciary trustee
 1322  shall allocate 10 percent of the payment to income and the
 1323  balance to principal.
 1324         Section 27. Section 738.701, Florida Statutes, is amended
 1325  to read:
 1326         738.701 Disbursements from income.—A fiduciary trustee
 1327  shall make the following disbursements from income to the extent
 1328  they are not disbursements to which s. 738.201(2)(a) or (c)
 1329  applies:
 1330         (1) One-half of the regular compensation of the fiduciary
 1331  trustee and of any person providing investment advisory or
 1332  custodial services to the fiduciary trustee.
 1333         (2) One-half of all expenses for accountings, judicial
 1334  proceedings, or other matters that involve both the income and
 1335  remainder interests.
 1336         (3) All of the other ordinary expenses incurred in
 1337  connection with the administration, management, or preservation
 1338  of trust property and the distribution of income, including
 1339  interest, ordinary repairs, regularly recurring taxes assessed
 1340  against principal, and expenses of a proceeding or other matter
 1341  that concerns primarily the income interest.
 1342         (4) Recurring premiums on insurance covering the loss of a
 1343  principal asset or the loss of income from or use of the asset.
 1344         Section 28. Subsection (1) of section 738.702, Florida
 1345  Statutes, is amended to read:
 1346         738.702 Disbursements from principal.—
 1347         (1) A fiduciary trustee shall make the following
 1348  disbursements from principal:
 1349         (a) The remaining one-half of the disbursements described
 1350  in s. 738.701(1) and (2).
 1351         (b) All of the trustee’s compensation calculated on
 1352  principal as a fee for acceptance, distribution, or termination
 1353  and disbursements made to prepare property for sale.
 1354         (c) Payments on the principal of a trust debt.
 1355         (d) Expenses of a proceeding that concerns primarily
 1356  principal, including a proceeding to construe the trust or will,
 1357  or to protect the trust, estate, or its property.
 1358         (e) Premiums paid on a policy of insurance not described in
 1359  s. 738.701(4) of which the trust or estate is the owner and
 1360  beneficiary.
 1361         (f) Estate, inheritance, and other transfer taxes,
 1362  including penalties, apportioned to the trust.
 1363         (g) Disbursements related to environmental matters,
 1364  including reclamation, assessing environmental conditions,
 1365  remedying and removing environmental contamination, monitoring
 1366  remedial activities and the release of substances, preventing
 1367  future releases of substances, collecting amounts from persons
 1368  liable or potentially liable for the costs of such activities,
 1369  penalties imposed under environmental laws or regulations and
 1370  other payments made to comply with those laws or regulations,
 1371  statutory or common law claims by third parties, and defending
 1372  claims based on environmental matters.
 1373         (h) Payments representing extraordinary repairs or expenses
 1374  incurred in making a capital improvement to principal, including
 1375  special assessments; however, a fiduciary trustee may establish
 1376  an allowance for depreciation out of income to the extent
 1377  permitted by s. 738.703.
 1378         Section 29. Subsection (2) of section 738.703, Florida
 1379  Statutes, is amended to read:
 1380         738.703 Transfers from income to principal for
 1381  depreciation.—
 1382         (2) A fiduciary trustee may transfer to principal a
 1383  reasonable amount of the net cash receipts from a principal
 1384  asset that is subject to depreciation but may not transfer any
 1385  amount for depreciation:
 1386         (a) Of that portion of real property used or available for
 1387  use by a beneficiary as a residence or of tangible personal
 1388  property held or made available for the personal use or
 1389  enjoyment of a beneficiary;
 1390         (b) During the administration of a decedent’s estate; or
 1391         (c) Under this section if the fiduciary trustee is
 1392  accounting under s. 738.403 for the business or activity in
 1393  which the asset is used.
 1394         Section 30. Subsections (1), (2), and (3) of section
 1395  738.704, Florida Statutes, are amended to read:
 1396         738.704 Transfers from income to reimburse principal.—
 1397         (1) If a fiduciary trustee makes or expects to make a
 1398  principal disbursement described in this section, the fiduciary
 1399  trustee may transfer an appropriate amount from income to
 1400  principal in one or more accounting periods to reimburse
 1401  principal or to provide a reserve for future principal
 1402  disbursements.
 1403         (2) Principal disbursements to which subsection (1) applies
 1404  include the following, but only to the extent the fiduciary
 1405  trustee has not been and does not expect to be reimbursed by a
 1406  third party:
 1407         (a) An amount chargeable to income but paid from principal
 1408  because the amount is unusually large.
 1409         (b) Disbursements made to prepare property for rental,
 1410  including tenant allowances, leasehold improvements, and
 1411  broker’s commissions.
 1412         (c) Disbursements described in s. 738.702(1)(g).
 1413         (3) If the asset the ownership of which gives rise to the
 1414  disbursements becomes subject to a successive income interest
 1415  after an income interest ends, a fiduciary trustee may continue
 1416  to transfer amounts from income to principal as provided in
 1417  subsection (1).
 1418         Section 31. Section 738.705, Florida Statutes, is amended
 1419  to read:
 1420         738.705 Income taxes.—
 1421         (1) A tax required to be paid by a fiduciary trustee based
 1422  on receipts allocated to income shall be paid from income.
 1423         (2) A tax required to be paid by a fiduciary trustee based
 1424  on receipts allocated to principal shall be paid from principal,
 1425  even if the tax is called an income tax by the taxing authority.
 1426         (3) A tax required to be paid by a fiduciary trustee on the
 1427  trust’s or estate’s share of an entity’s taxable income shall be
 1428  paid proportionately:
 1429         (a) From income to the extent receipts from the entity are
 1430  allocated to income; and
 1431         (b) From principal to the extent:
 1432         1. receipts from the entity are allocated to principal; and
 1433         2. The trust’s share of the entity’s taxable income exceeds
 1434  the total receipts described in paragraph (a) and subparagraph
 1435  1.
 1436         (c) From principal to the extent that the income taxes
 1437  payable by the trust or estate exceed the total receipts from
 1438  the entity.
 1439         (4) After applying subsections (1)-(3), the fiduciary shall
 1440  adjust income or principal receipts to the extent that the
 1441  trust’s or estate’s income taxes are reduced, but not
 1442  eliminated, because the trust or estate receives a deduction for
 1443  payments made to a beneficiary. The amount distributable to that
 1444  beneficiary as income as a result of this adjustment shall be
 1445  equal to the cash received by the trust or estate, reduced, but
 1446  not below zero, by the entity’s taxable income allocable to the
 1447  trust or estate multiplied by the trust’s or estate’s income tax
 1448  rate. The reduced amount shall be divided by the difference
 1449  between 1 and the trust’s or estate’s income tax rate in order
 1450  to determine the amount distributable to that beneficiary as
 1451  income before giving effect to other receipts or disbursements
 1452  allocable to that beneficiary’s interest. For purposes of this
 1453  section, receipts allocated to principal or income shall be
 1454  reduced by the amount distributed to a beneficiary from
 1455  principal or income for which the trust receives a deduction in
 1456  calculating the tax.
 1457         Section 32. Section 738.801, Florida Statutes, is amended
 1458  to read:
 1459         (Substantial rewording of section. See
 1460         s. 738.801, F.S., for present text.)
 1461         738.801 Apportionment of expenses; improvements.—
 1462         (1) For purposes of this section, the term:
 1463         (a) “Remainderman” means the holder of the remainder
 1464  interests after the expiration of a tenant’s estate in property.
 1465         (b) “Tenant” means the holder of an estate for life or term
 1466  of years in real property or personal property, or both.
 1467         (2) If a trust has not been created, expenses shall be
 1468  apportioned between the tenant and remainderman as follows:
 1469         (a) The following expenses are allocated to and shall be
 1470  paid by the tenant:
 1471         1. All ordinary expenses incurred in connection with the
 1472  administration, management, or preservation of the property,
 1473  including interest, ordinary repairs, regularly recurring taxes
 1474  assessed against the property, and expenses of a proceeding or
 1475  other matter that concerns primarily the tenant’s estate or use
 1476  of the property.
 1477         2. Recurring premiums on insurance covering the loss of the
 1478  property or the loss of income from or use of the property.
 1479         3. Any of the expenses described in subparagraph (b)3.
 1480  which are attributable to the use of the property by the tenant.
 1481         (b) The following expenses are allocated to and shall be
 1482  paid by the remainderman:
 1483         1. Payments on the principal of a debt secured by the
 1484  property, except to the extent the debt is for expenses
 1485  allocated to the tenant.
 1486         2. Expenses of a proceeding or other matter that concerns
 1487  primarily the title to the property, other than title to the
 1488  tenant’s estate.
 1489         3. Except as provided in subparagraph (a)3., expenses
 1490  related to environmental matters, including reclamation,
 1491  assessing environmental conditions, remedying and removing
 1492  environmental contamination, monitoring remedial activities and
 1493  the release of substances, preventing future releases of
 1494  substances, collecting amounts from persons liable or
 1495  potentially liable for the costs of such activities, penalties
 1496  imposed under environmental laws or regulations and other
 1497  payments made to comply with those laws or regulations,
 1498  statutory or common law claims by third parties, and defending
 1499  claims based on environmental matters.
 1500         4. Extraordinary repairs.
 1501         (c) If the tenant or remainderman incurred an expense for
 1502  the benefit of his or her own estate without consent or
 1503  agreement of the other, he or she must pay such expense in full.
 1504         (d) Except as provided in paragraph (c), the cost of, or
 1505  special taxes or assessments for, an improvement representing an
 1506  addition of value to property forming part of the principal
 1507  shall be paid by the tenant if the improvement is not reasonably
 1508  expected to outlast the estate of the tenant. In all other
 1509  cases, only a part shall be paid by the tenant while the
 1510  remainder shall be paid by the remainderman. The part payable by
 1511  the tenant is ascertainable by taking that percentage of the
 1512  total that is found by dividing the present value of the
 1513  tenant’s estate by the present value of an estate of the same
 1514  form as that of the tenant, except that it is limited for a
 1515  period corresponding to the reasonably expected duration of the
 1516  improvement. The computation of present values of the estates
 1517  shall be made by using the rate defined in 26 U.S.C. s. 7520,
 1518  then in effect and, in the case of an estate for life, the
 1519  official mortality tables then in effect under 26 U.S.C. s.
 1520  7520. Other evidence of duration or expectancy may not be
 1521  considered.
 1522         (3) This section does not apply to the extent it is
 1523  inconsistent with the instrument creating the estates, the
 1524  agreement of the parties, or the specific direction of the
 1525  taxing or other statutes.
 1526         (4) The common law applicable to tenants and remaindermen
 1527  supplements this section, except as modified by this section or
 1528  other laws.
 1529         Section 33. This act shall take effect January 1, 2013.

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