In defending their work politicians often repeat a quote attributed to Otto von Bismarck: “If you like laws and sausages, you should never watch either one being made.”
Those words of wisdom apply with equal force to certain Florida trust legislation, as reported in an Orlando Sentinel investigative piece by Jeffrey Schweers entitled Florida leaders give more love to family trusts of the super-rich. (Full disclosure, I’m quoted in the article.) The article focuses on the following three changes to Florida’s trust laws:
- The 2020 adoption of new F.S. 736.08145 (HB 1089), a tax-planning provision involving irrevocable “grantor trusts”. I’ve previously written about this legislation.
- The 2022 amendment of F.S. 689.225 (HB 1001), which extends the maximum trust vesting period for most Florida trusts created on or after July 1, 2022, to 1,000 years. This legislation is all about luring more “dynasty trusts” to Florida.
- The 2022 adoption of new F.S. 662.1465 (SB 1304), which creates a public records exemption for court cases involving privately owned family trust companies. This last measure has received the most public attention, including opposition from the First Amendment Foundation.
If you make your living drafting trusts in Florida or advising the families that create them or litigating them in court, you’ll want to read this report. The back story on some of our trust legislation may not be pretty, but it’s certainly enlightening. Here’s an excerpt:
TALLAHASSEE — Florida has long been a tax haven, but new trust laws enacted over the past three years friendly to the heirs of the Walmart fortune and other families will make the state even more accommodating to the uber-rich looking to hide wealth and avoid taxes for generations to come.
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The money at stake is astronomical.
The largest transfer of intergenerational wealth is about to occur over the next few decades, with an estimated $30 trillion to $68 trillion to be handed down, said Juan C. Antunez, a real estate and trust lawyer in Miami. With a maximum 40% tax on inherited wealth over $12.9 million, there is a potential loss of as much as $27 trillion in federal tax revenue.
“The jurisdictional competition among U.S. states to capture as much of that trust business as possible is fierce, and for the bankers and professionals who make a living working with those trusts the stakes are high,” Antunez said. “How high? Think billions of dollars.”
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With these laws, Florida climbs up in the ranks of the dozen or so highly competitive states that are considered friendly to the trust industry, according to a study by the National Institute for Policy Studies. Currently, an estimated $5.6 trillion is held in trust and estate assets in the U.S.
“Trusts are one of the major mechanisms that ultra-high-net-worth families around the world use to cement their fortunes into hereditary wealth dynasties,” the study said. “One type of trust, the dynasty trust, is such a tool, as these trusts can last for centuries, or sometimes forever.”
Those enabling states have three common ingredients, the study said: Low or no taxes, secrecy and trust longevity. “These states pass laws to cut or abolish taxes or hide trust records from prying eyes,” the study said.