CEO 83-3 -- January 27, 1983

FINANCIAL DISCLOSURE

DISCLOSURE OF INTEREST IN REAL PROPERTY OWNED BY TRUST OF WHICH ONE IS A LIFE BENEFICIARY

To: (Name withheld at the person's request.)

SUMMARY:

A disclosing person's interest as a life beneficiary in real property owned by two family trusts should be disclosed on his statement of financial interests filed under Section 112.3145, Florida Statutes, if that interest exceeds five percent of the value of the property, as determined by applying the appropriate guidelines of the Department of the Treasury. Section 112.3145(3)(c) requires the disclosure of the location or description of real property in this state owned directly or indirectly by the person reporting, when such person owns in excess of five percent of the value of the property. The terms "indirect" or "indirect interest" are defined in Section 112.312(1), Florida Statutes, to include equitable or beneficial interests in property.

QUESTION:

Are you, as a Community College Trustee and member of the State Community College Coordinating Board, required to disclose on your annual statement of financial interests your interest in real property owned by two family trusts of which you are a life beneficiary?

In your letter of inquiry you advise that you are a member of the Board of Trustees of Valencia Community College and a member of the State Community College Coordinating Board. You also advise that you are a trustee of two different family trusts, each of which owns real property. In addition, you have a substantial (in excess of 20%) percentage ownership as a life beneficiary of each of these trusts.

The Code of Ethics for Public Officers and Employees requires those persons subject to the financial disclosure law to include in their statements of financial interests

[t]he location or description of real property in this state, except for residences and vacation homes, owned directly or indirectly by the person reporting, when such person owns in excess of 5 percent of the value of such real property . . . . [Section 112.3145(3)(c), Florida Statutes (1981).]

The terms "indirect" or "indirect interest" are defined in Section 112.312(10), Florida Statutes, to mean

an interest in which legal title is held by another as trustee or other representative capacity, but the equitable or beneficial interest is held by the person required to file under this part.

Therefore, if your equitable or beneficial interest as a beneficiary in real property owned by the trusts is in excess of five percent of the value of that real property, the property must be disclosed in your statement of financial interests.

The difficulty in determining whether or not your interest in the property is worth in excess of five percent of its value lies in the fact that you are a life beneficiary. The Code of Ethics contains no direction for the valuation of such complex interests in property. In valuing interests in trusts for the purpose of making full financial disclosure under Article II, Section 8 of the Florida Constitution, we have suggested that the United States Department of the Treasury regulations which provide guidelines for the actuarial determination of such interests should be followed. See CEO 78-1. Similarly, we are of the opinion that these guidelines should be followed in valuing complex interests in real property for the purpose of the more limited disclosure required by Section 112.3145, Florida Statutes. Under the Treasury regulations, a life estate which depends on the duration of one individual's life is to be valued by applying the appropriate actuarial table to the value of the property itself, irrespective of the actual yield of the property. 34 Am. Jur. 2d Federal Taxation, paragraphs 8981 and 8982 (1983). For example, if your life interest in the trust were based upon the life of a male individual who is 81 years of age, the valuation table provides a multiplying factor of .25773. 33 Am. Jur. 2d Federal Taxation, paragraph 653, Table A(1), (1983). If your interest in the trust were twenty percent, that interest would amount to 5.1546 percent of the value of the property owned by the trust--in excess of five percent of the value of the property.

Accordingly, we find that your interest as a life beneficiary in real property owned by two family trusts should be disclosed on your statement of financial interests if that interest exceeds five percent of the value of the property, as determined by applying the appropriate guidelines of the Department of the Treasury.