Florida Looks to Become the Preferred Destination for Family Trust Companies

In 2014, the Florida Legislature passed the Florida Family Trust Company Act, which established a structure for the formation, operation, and regulation of Family Trust Companies (“FTCs”). An FTC is a corporation or limited liability company, exclusively owned by one or more family members, that provides trust services to a related group of people. FTCs can serve as trustees and provide other fiduciary duties, such as investment advisory, wealth management, and administrative services. There are many advantages of forming a FTC, including:

  • Increased flexibility and control over asset management
  • Greater protection of family privacy
  • Increased liability protection for fiduciaries
  • Continuity of the trustee upon death, resignation, or removal of a decision maker
  • The ability to integrate the younger generation into the family wealth management

In Florida, there are two types of FTCs: licensed or unlicensed.  The management structure for both licensed and unlicensed FTCs are dependent on whether the FTC is a corporation or an LLC.  Moreover, there is no requirement that FTCs become licensed, but there are advantages for doing so. For instance, licensed FTCs have an increased number of designated relatives, and qualify for the “investment advisor” exemption from SEC regulation.

Under the Act, Florida’s Office of Financial Responsibility (“OFR”) is responsible for regulating FTCs. To become licensed, an FTC must apply to the OFR. Both licensed and unlicensed FTCs must be registered with the OFR.  Every FTC is required to make initial and annual filings with the OFR to operate in Florida. In addition, FTCs are subject to scheduled examination by the OFR every 18 months.  Even more, the OFR has authority to examine an FTC any time it deems it necessary to investigate potential violations of the Act.

There have been criticisms to Florida’s FTC scheme due to both the intensive regulation of unlicensed FTCs, as well as the limited regulations on licensed FTCs. Recently, the Florida legislature introduced the Glitch Bill (SB 80) to remedy the shortcomings of the Florida Family Trust Company Act. The major changes include:

  • Increases the period between mandatory examinations of licensed FTCs from 18 months to 36 months
  • Eliminates mandatory examinations of unlicensed or foreign FTCs
  • Increases the time for FTCs to renew a license or registration from 30 days after the end of each year to 45 days
  • Limits the role of the OFR in regulating unlicensed or foreign licensed FTCs to ensuring services are being provided to family members and not the general public
  • Requires the OFR to conduct initial verification of FTC licensure applicant’s management structure is in compliance with the Act

Currently the Glitch Bill has received approval by all three reviewing committees.  If passed, the amended statutes should allow Florida to become more competitive with other states that have enacted FTC legislation.  With its already favorable tax and trust laws, Florida is poised to become the premier destination for individuals seeking to form FTCs.

Forming a FTC in Florida can involve many complex and challenging considerations.  Therefore, it is strongly recommended that you discuss forming a FTC with an experienced attorney.  If you are looking for an experienced and qualified Florida attorney, please do not hesitate to contact the attorneys at Chepenik Trushin LLP, who are ready, willing, and able to assist you with your Family Trust Company and estate planning needs.