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Florida Adopts More Flexible Uniform Fiduciary Income and Principal Act for Trusts By Sarah Gaymon, CPA

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Posted on June 10, 2025 by Sarah Gaymon

Florida laws relating to the fiduciary administration of trusts, estates and life estates with succeeding beneficiaries became more attractive on Jan. 1, 2025, with the enactment of the Florida Uniform Fiduciary Income and Principal Act (FIPA). The law provides fiduciaries with more flexibility in trust administration and aims to make Florida an even more appealing destination for wealthy individuals to create and settle trusts spanning multiple generations.

With the enactment of FIPA, fiduciaries now have enhanced statutory guidance to support the effective administration of long-term trusts in Florida. The legislation allows greater flexibility for tailoring trusts and estates to meet the unique needs of today’s families, while also granting fiduciaries the discretionary authority to adapt trust administration over time. This ability to respond to changing circumstances and evolving beneficiary needs helps reduce the potential for conflicts and disputes among beneficiaries.

Background

In 2018, the National Uniform Law Commission introduced the Uniform Fiduciary and Income and Principal Act (UFIPA) as a new, more flexible model for trustees to invest for maximum total return of income and principal growth, allocate trust and estate receipts and disbursement between principal and interest and use their discretion to accumulate income or invade principal when advantageous to further the trust’s purposes. Florida lawmakers and members of the state’s legal, accounting and banking professionals worked for five years to incorporate many of the modernized law into Florida Statute 728, Principal and Income. Today, the state is the eighth in the nation to adopt this legislation.

Florida’s new FIPA applies: 1) when the state is the principal place of administration for a trust or estate, including situations when a trustee relocates to Florida (unless the governing document specifies otherwise); or 2) when a trust or estate’s income-producing assets are located in Florida. It may also apply to trusts established outside the state if the trustee moves to Florida, if trust assets are transferred into the state, or if a governing document settled outside of the state indicates that the trust shall be administered under Florida law.

Power to Adjust

Historically, many trusts were drafted with one or two generations in mind, providing clear distinctions between income distributions and discretionary distributions of principal to beneficiaries. However, many of today’s modern trusts extend across multiple generations, lack language differentiating income from discretionary allocations, and often include multiple classes of beneficiaries requesting distributions from the trust simultaneously.

To address these changes, the FIPA grants fiduciaries the power to adjust between income and principal at their discretion, provided that such adjustments do not conflict with the trust’s governing document. In doing so, fiduciaries are allowed to administer a trust or estate impartially and in the best interests of the beneficiaries. This power to adjust is also befitting of today’s more commonly used modern portfolio theory (MPT) of investing, for which fiduciaries rely on a diverse portfolio investment strategy that seeks to yield maximum returns for an acceptable level of risk rather than focusing on each individual investment.

The new law also specifies various circumstances when a fiduciary may not exercise the power to adjust. This includes times when doing so would create adverse tax consequences, change the amount payable to a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets, reduce an amount permanently set aside for a charitable purpose, cause a person to be treated as the owner of all or part of the trust for federal income tax purposes, cause all or part of the value of the trust assets to be included in the gross estate of an individual for federal real estate tax purposes or cause an individual to be treated as making a gift for federal gift tax purposes. Under many of these circumstances, the law grants the fiduciary the authority to delegate these adjustment powers to a co-fiduciary, which must be recorded appropriately and communicated to the beneficiaries. Generally, this action is permanent unless the appointment or release of appointment specifies a particular period, including one measured by an individual’s life or the lives of multiple individuals.

When administering a trust, fiduciaries should first look for direction from the governing document, whether that is a trust agreement or a will. However, these documents cannot anticipate every possible scenario or outline every applicable rule. This is where state law plays a crucial role, filling in the gaps and providing essential guidance to support fiduciaries in the administration process. Many governing documents are silent on specific allocation between income and principal. The FIPA provides direction specifically in the allocation of trust income and principal, which can significantly impact the distributions beneficiaries are entitled to receive and the amounts they ultimately obtain.

Unitrusts

Another offshoot of the rise in MPT is the use of unitrusts, for which beneficiaries receive a fixed and predictable percentage of the trust’s total asset value (valuation base) each year rather than the actual income the trust generates. Unitrusts are not new to Florida. They have been allowable under state law since 2002, and the FIPA expands on existing rules.

Under the new law, fiduciaries have the power to convert an income trust to a unitrust (and vice versa), adopt a unitrust policy and change the percentage or method used to calculate a unitrust amount (the net income of the trust) when doing so will help the fiduciaries administer the trust or estate impartially. In each of these circumstances, the fiduciary must consider how their actions will affect the original terms of the trust, including the mix of assets, adjustments to income and principal, trust liquidity, income preservation and appreciation, and the expected tax consequences on both the trust and its beneficiaries.

According to Florida law, the unitrust rate set by the fiduciary must be within the federal tax safe harbor, which ranges from at least 3 percent to not more than 5 percent. While trust settlors may deviate from this range, they should proceed with caution. Among the risks of specifying a rate outside of the safe harbor are that gain could be recognized on appreciated assets or valuable generation-skipping transfer (GST) tax exemptions could be lost by the trust.

The unitrust policy must provide the method for determining the fair market value of an asset for the purpose of determining the unitrust amount, including the date and frequency of valuing the asset and the methods used to determine the amount of the trust’s net fair market value, including asset appraisals and the reasonable known liabilities of the trust. In valuing the trust, the following property must be excluded: 1) property held in an estate; 2) asset specifically given to a beneficiary and the return on investment on such property, which return on investment must be distributable to the beneficiary; and 3. any residential property or any tangible personal property that, as of the first business day of the current valuation year, one or more current beneficiaries of the trust have or have had the right to occupy or have or have had the right to possess or control, other than their capacity as trustee of the trust.

A great deal of effort often goes into establishing a trust to build wealth for future generations; however, the ongoing administration of the trust is equally important and should not be overlooked.

About the Author: Sarah Gaymon, CPA, is a director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she works with entrepreneurs and high-net-worth families to plan for tax-efficient wealth preservation and multi-generational wealth transfers. She can be reached at the CPA firm’s West Palm Beach, Fla., office at (561) 361-2050 or info@bpbcpa.com.