Heller on Year-End Planning

Amy E. Heller (Weil, Gotshal & Manges LLP) has written Year-EndPlanning to Minimize Florida Intangible Personal Property Tax Liability NoLonger Necessary for the latestissue of the Real Property and Probate eReport.

The article is reproduced below:

For the first time in decades,year-end planning to avoid the Florida Intangible Personal Property Tax (the“Intangibles Tax”) will not be necessary for Florida residents and their tax advisors.This past summer, Florida Governor Jeb Bush signed legislation repealing theIntangibles Tax, effective January 1, 2007. Intangibles Tax liabilities for2006 and prior tax years are unaffected by the repeal.

Subject to certain exceptions, theIntangibles Tax is an annual tax on the market value, as of January 1 of thetax year, of stocks, bonds and other intangible personal property owned,managed or controlled by a person domiciled in Florida. For 2006, each taxpayer is entitledto an annual exemption of the first $250,000 of the value of property otherwisesubject to the tax. Thereafter, the rate of the Intangibles Tax is 0.5 mils perdollar (e.g., $5 per $10,000) of taxable intangible personal property. The rateof the Intangibles Tax was significantly reduced over the decade preceding therepeal.

In order to avoid the IntangiblesTax, many Florida residents created irrevocable trusts to hold their intangible assets,frequently near the end of a calendar year as January 1 of the next yearapproached. Following numerous Florida Technical Assistance Advisements issuedin response to inquiries regarding the use of such trusts, the FloridaDepartment of Revenue amended the Florida Administrative Code in 1998 toprovide “safe harbor” requirements that, if met, would enable trusts to avoidthe Intangibles Tax. Trusts meeting the safe harbor requirements popularlybecame known as Florida intangible tax trusts(“FLINTs”) and Florida intangible tax exempt trusts(“FLITEs”). Now that that the Intangibles Tax has been repealed, FLINTs and FLITEs will no longer be essential tools of Florida estate planners.

What about existing FLINTs and FLITEs? If a FLINT or a FLITE wasestablished as part of a broader estate plan, and not just to minimize exposureto the Intangibles Tax, it may make sense for the trust to be retained in itspresent form. If, however, a FLINT or a FLITE is no longer desirable or is no longer desirable in its existingform, it may be possible to amend the trust pursuant to an amendment powerincluded in the trust agreement. Depending on the terms of the trust, it mayalso be possible for trust assets to be distributed to a beneficiary (e.g., thesettlor or the settlor’s spouse) or for the settlor to exercise a limited powerof appointment over trust assets in favor of individuals or other trusts,thereby effectively terminating the FLINT or FLITE.