The Short Answer

In Florida, a revocable trust is usually “tax-neutral” during your lifetime because it is commonly treated as your own property for income and estate tax purposes. An irrevocable trust can change who is treated as the owner for tax purposes, which may create estate-tax planning opportunities, but it can also create new income-tax consequences and long-term rigidity that are hard to unwind.

What Florida Law Says

Florida trust law recognizes that irrevocable trusts are often drafted around federal transfer-tax concepts (estate tax, GST tax, marital and charitable deductions). When those federal tax concepts change or are unclear, Florida courts can be asked to interpret an irrevocable trust’s tax-driven formula provisions to better match the settlor’s intent. This matters because the tax results of an irrevocable trust often depend on precise drafting and how the trust’s provisions interact with federal tax rules.

The Statute

The primary law governing this issue is Fla. Stat. § 736.04114.

This statute establishes that, for a trust that is not revocable, a Florida court may construe tax-formula and tax-minimization provisions (including references to the estate tax exemption, GST exemption, and marital/charitable deductions) to define shares or beneficiaries consistent with the settlor’s intent when a disposition occurs during the statute’s applicable period.

Why You Should Speak with an Attorney

While the general tax concepts are straightforward, choosing between a revocable and irrevocable trust for multi-state real estate is rarely simple. Legal outcomes often depend on:

• Strict Deadlines: If an irrevocable trust’s tax provisions don’t operate as intended, fixing the problem may require time-sensitive court involvement and can be complicated once a “disposition” has occurred under the trust’s tax-driven terms. See Fla. Stat. § 736.04114.
• Burden of Proof: The tax treatment often turns on what rights you retain (control, beneficial enjoyment, distribution powers, reimbursement provisions, etc.). Proving the intended tax characterization can require careful drafting and documentation, especially when real estate is involved across multiple states.
• Exceptions: Irrevocable trusts can be drafted to be “grantor” or “non-grantor” for income tax purposes, and trustee/beneficiary powers can unintentionally trigger adverse transfer-tax results. Florida law also contains tax-sensitive limits on discretionary powers intended to avoid estate inclusion problems. See Fla. Stat. § 736.0814.

For your situation—funding a trust with residential properties in multiple states—the tax analysis is only one piece. Deeding/titling, homestead considerations, and coordinating Florida planning with other states’ real estate rules can create expensive mistakes if handled without counsel.

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Disclaimer: This article provides general information under Florida law and does not create an attorney-client relationship. Laws change frequently. For legal advice specific to your situation, please consult with a licensed attorney.