Intangible Tax Trusts

There is currently an opportunity for Florida residents to avoid Florida's intangible tax. The strategy discussed below makes sense for almost anyone who is subject to a significant intangible tax.

The Florida intangible tax is generally imposed at the rate of .2% on the intangible personal property (including such items as accounts receivable, stocks and bonds) of Florida residents as of January 1 of each year. There are certain exemptions from the tax, such as interests in U.S. treasury bills and Florida bonds.

The Florida Statutes and Florida Administrative Code now provide that intangible assets held in certain trusts will be exempt from the tax. The provisions in these trusts can be very liberal – the grantor can be the only beneficiary and can be guaranteed that all trust property be distributed back to him or her after January 1. We believe that through the careful drafting of the trust instrument the goals of the trust can be accomplished, and the intangible tax eliminated, with minimal administrative complications.

It would be helpful, as an illustration, to describe a typical intangible tax trust. The trust would be created prior to January (sufficiently in advance of January 1 to arrange a transfer of assets by January 1). The trustee of the trust would be a non-Florida resident individual (such as a relative) or corporate trust company.

The grantor would receive the income and principal of the trust in the discretion of the trustee. At some point after January 1, the trustee could distribute the trust assets back to the grantor. Prior to the next January 1, the grantor could then recontribute those assets to the trust, to avoid the intangible tax for the next year.

If you have in excess of $2.5 million of intangible assets the intangible tax trust probably makes sense. Please call one of the above referenced Broad and Cassel estate planning attorneys if you have any questions or would like to further discuss the intangible tax trust.