Florida Statutes 738.706 – Adjustments between principal and income because of taxes
Current as of: 2023 | Check for updates
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(1) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from:
(a) Elections and decisions, other than those described in paragraph (b), that the fiduciary makes from time to time regarding tax matters;
Terms Used In Florida Statutes 738.706
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Beneficiary: means , in the case of a decedent's estate, an heir or devisee and, in the case of a trust, an income beneficiary or a remainder beneficiary. See Florida Statutes 738.102
- Fiduciary: A trustee, executor, or administrator.
- Fiduciary: means a personal representative or a trustee. See Florida Statutes 738.102
- Income: means money or property that a fiduciary receives as current return from a principal asset. See Florida Statutes 738.102
- Marital deduction: The deduction(s) that can be taken in the determination of gift and estate tax liabilities because of the existence of a marriage or marital relationship.
- Principal: means property held in trust for distribution to a remainder beneficiary when the trust terminates. See Florida Statutes 738.102
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
(b) An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust; or
(c) The ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate, trust, or a beneficiary.
(2) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting such amount for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust, or beneficiary are decreased, each estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement shall equal the increase in the estate tax to the extent the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust, or beneficiary whose income taxes are reduced shall be the same as such estate’s, trust’s, or beneficiary’s proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.