CEO 78-1 -- January 19, 1978
FULL AND PUBLIC DISCLOSURE
DISCLOSURE OF INTEREST IN TESTAMENTARY TRUST
To: (Name withheld at the person's request.)
Prepared by: Phil Claypool
The Sunshine Amendment, in s. 8(h)(1), Art. II, State Const., provides that full and public disclosure of financial interests means the filing of a sworn statement which includes identification of "each asset and liability in excess of $1,000 and its value . . . ." Property which can be alienated constitutes an asset and must be disclosed if its value exceeds $1,000. Where property is part of a testamentary trust qualified under the laws of another state, and where the will bequeathing such property was probated in that state, the nature of one's interest in the trust and the question of its alienability is governed by the laws of that state. If the property interest is alienable under the laws of that state, it constitutes an asset and therefore should be disclosed if its value exceeds $1,000. As to valuation of the property, the commission has recommended that the term "value" should mean the fair market value of an asset arrived at by a good-faith estimate of the reporting official. Where difficulty arises as to valuation because of the lack of an established market for interests, it is further recommended that the official consult U.S. Department of the Treasury regulations contained in Treas. Reg. s. 20.2031-10 which provide guidelines for an actuarial determination of the present value of future interests for purposes of federal estate taxation. In addition, the information provided in 34 Am. Jur.2d Federal Taxation s. 8981 (1978) may be of some assistance. Valuation of one's interest in a trust corpus according to the methods and tables provided by the Department of the Treasury is sufficient for purposes of full and public disclosure.
1. In making full and public disclosure of financial interests pursuant to s. 8, Art. II, State Const., am I required to disclose my interest in the testamentary trust established by my grandfather's will?
2. Assuming that my interest in the trust referred to above constitutes an "asset," how should it be valued?
In your letter of inquiry, you advise that you share in a testamentary trust which was qualified in 1977 under the laws of the State of Kansas following the death of your grandfather. Under the terms of the trust, generally, your grandmother is entitled to receive the income from the trust for the remainder of her life; you and your sister will receive an equal share of the trust corpus, provided that you both survive your grandmother. In the event that one of you predeceases your grandmother, the survivor will receive all of the trust corpus. In the event that both of you predecease your grandmother, a niece of your grandfather will receive the trust corpus, unless she also predeceases your grandmother, in which case the trust corpus will go to your children and your sister's children. Thus, if you survive your grandmother, you will receive either 50 percent or 100 percent of the trust corpus, depending upon whether your sister also survives your grandmother; and if you predecease your grandmother, you will receive nothing from the trust corpus.
The Sunshine Amendment, in s. 8(h)(1), Art. II, State Const., provides that full and public disclosure of financial interests means filing a sworn statement "identifying each asset and liability in excess of $1,000 and its value. . . ." Thus, the initial question is whether your interest in the trust constitutes an "asset." The term "assets" has been defined as
the property of a deceased person subject by law to the payment of his debts and legacies; the entire property of all sorts of a person, association, corporation, or estate applicable or subject to the payment of his or its debts. [Webster's New Collegiate Dictionary, p. 67 (1975).]
Black's Law Dictionary 151 (4th ed. 1968) speaks of assets in a general sense, as opposed to a bankruptcy, commercial law, or probate law sense, as follows:
The word, though more generally used to denote everything which comes to the representatives of a deceased person, yet is by no means confined to that use, but has come to signify everything which can be made available for the payment of debts, whether belonging to the estate of a deceased person or not. Hence we speak of the assets of a bank or other monied corporation, the assets of an insolvent debtor, and the assets of an individual or private copartnership; and we always use this word when we speak of the means which a party has, as compared with his liabilities or debts. Pelican v. Rock Falls, 81 Wis. 428, 51 N.W. 871.
Ballentine's Law Dictionary 99 (1969) defines "assets" to mean:
[T]he property of a natural person or a corporation, real or personal, corporeal or incorporeal, especially property which is subject to seizure under and sale under process for payment of debts.
These definitions give no specific answer to the question regarding your interest in the trust, but they do indicate that one's property interest will constitute an "asset" if it can be sold to be applied to the payment of one's debts, or, in other words, if it can be alienated. However, you have advised our staff in a telephone conversation that your grandfather's will was probated in the State of Kansas and that the trustees of the trust are located in Kansas, as is the corpus of the trust. Under these circumstances, it seems likely that the law of Kansas, the law of the state wherein the property is located, rather than the law of Florida, should apply in order to determine the exact nature of your interest in the trust, whether that interest is alienable. 89 C.J.S. Trusts s. 80, p. 870 (1955).
Being an agency of the State of Florida, we feel that we are unable to advise you as to the nature of your interest or its alienability under Kansas law, although we note that authorities have stated that even contingent remainders and executory interests are now fully transferable during one's lifetime by statute or by judicial decision in most of the states. Halbach, Vested and Contingent Remainders: A Premature Requiem for Distinctions Between Conditions Precedent and Subsequent, Perspectives of Law 152 (Pound ed. 1964). Should your interest be alienable under Kansas law, it would constitute an "asset" in our view, and therefore it should be disclosed if its value exceeds $1,000.
As to question 2, in the "Suggestions to Aid Public Officials in Making Full and Public Disclosure of Financial Interests," we have recommended that as to the value of assets, generally, the term "value" should mean the fair market value of an asset arrived at by a good-faith estimate of the reporting official. Where the asset is of such a complex nature as your interest in the trust specified in question 1, we still recommend that a good-faith estimate of the value of the interest would be sufficient, especially if the manner of valuation is noted on the form, for example, in a footnote. We adhere to this view because we do not believe that the disclosures required by the Sunshine Amendment were intended to necessitate one's retaining the services of appraisers, accountants, and attorneys in order to determine the precise value of an asset.
In this instance there no doubt will be some difficulty arriving at a value of your interest in the trust corpus because of the lack of any established market for such interests. It is chiefly for this reason that the United States Department of the Treasury has promulgated regulations which provide guidelines for an actuarial determination of the present value of future interests for purposes of federal estate taxation. Stephens, Maxfield and Lind, Federal Estate and Gift Taxation pp. 4-23 (3d ed. 1974). These regulations are contained in Treas. Reg. s. 20.2031-10. In addition, the information provided in 34 Am. Jur.2d Federal Taxation s. 8981 (1978) may be of some assistance. It is our view that valuation of your interest in the trust corpus according to the methods and tables provided by the Department of the Treasury would be sufficient for the purposes of full and public disclosure.
Please be advised that opinions of this commission which relate to s. 8, Art. II of the Florida Constitution are strictly advisory in nature; such opinions lack the legally binding effect of our opinions relating to the Code of Ethics for Public Officers and Employees under s. 112.322(3)(b), F. S.