Trustees have several obligations under the Trust code and also additional obligations as set forth in the Trust Agreement. Some of these obligations can be distilled into general concepts or general obligations of the Trustee to the beneficiaries. Fundamentally understand that the relationship between Trustee and beneficiaries is a fiduciary relationship. That is the highest form of care under Florida law and requires all actions to be done for the benefit of the beneficiaries. The duties and powers of a trustee are usually derived from the terms of the trust itself. However, in addition to the terms of the trust, the Florida Trust Code states the enumerated duties and powers of a trustee. Florida Statutes §736.0801-736.0817 highlight the duties and powers that a trustee owes to beneficiaries of a trust.
736.0801: Duty to administer the trust.
Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this code.
A trustee, upon accepting their role as trustee, shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this code. As discussed earlier, oftentimes the trust will have provisions as to how the trust shall be administered and what duties and obligations the trustee is empowered with. But as the statute states, a trustee must always follow the trust code upon administering the trust.
736.0802: Duty of loyalty
(1) As between a trustee and the beneficiaries, a trustee shall administer the trust solely in the interests of the beneficiaries.
(2) Subject to the rights of persons dealing with or assisting the trustee as provided in s. 736.1016, a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee’s own personal account or which is otherwise affected by a conflict between the trustee’s fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless:
(a) The transaction was authorized by the terms of the trust;
(b) The transaction was approved by the court;
(c) The beneficiary did not commence a judicial proceeding within the time allowed by s. 736.1008;
(d) The beneficiary consented to the trustee’s conduct, ratified the transaction, or released the trustee in compliance with s. 736.1012;
(e) The transaction involves a contract entered into or claim acquired by the trustee when that person had not become or contemplated becoming trustee;
(f) The transaction was consented to in writing by a settlor of the trust while the trust was revocable;
(g) The transaction is one by a corporate trustee that involves a money market mutual fund, mutual fund, or a common trust fund described in s. 736.0816(3); or
(h) With regard to a trust that is administered by a family trust company, licensed family trust company, or foreign licensed family trust company operating under chapter 662, the transaction is authorized by s. 662.132(4)–(8).
(3)(a) A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if the sale, encumbrance, or other transaction is entered into by the trustee with:
1. The trustee’s spouse;
2. The trustee’s descendants, siblings, parents, or their spouses;
3. An officer, director, employee, agent, or attorney of the trustee; or
4. A corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee’s best judgment.
So transactions entered into for the Trustee for his or her own benefit are voidable unless these five set of contingencies occurred which is generally some prior authorization or ratification. The duty of loyalty is arguably the most important fiduciary duty that a trustee owes to the beneficiaries of a trust. It has been said that this duty is the duty that all other fiduciary duties of the trustee stem from. A trustee shall administer the trust solely in the interests of the beneficiaries. This means that a trustee cannot engage in self-dealing behavior or create a conflict in any way between the trustee’s fiduciary duties and the trustee’s own personal interests. In broad terms, if the self-dealing or benefit was not authorized by the beneficiaries, the trust agreement or the Court, it may very likely be a breach of trust which would allow the transactions to be voidable.
Some transactions are so beyond what a trustee is supposed to undertake they are presumed to be invalid. See 3(a) above. Those transactions are presumed to be invalid which is a critical shift in the burden required when litigating these issues. When examining the validity of presumptively voidable transactions the Court will analyze whether the fairness of the transaction is such that it would have also occurred at similar terms with an independent party. In other words, whether it was an arm’s length transaction.
As set forth by the 4th DCA in Bronstein v. Bronstein:
“A trustee’s powers, however, are constrained by a duty of loyalty. Section 736.0802(1), Florida Statutes (2019), provides that “[a]s between a trustee and the beneficiaries, a trustee shall administer the trust solely in the interests of the beneficiaries.” While a trustee may pay from the trust costs and attorney’s fees incurred in any proceeding the beneficiaries may contest those fees and costs. See § 736.0802(10), Fla. Stat. (2019). “A trustee has the burden of proving the necessity of all expenses incurred by him or her, including attorneys’ fees.” In re Guardianship of Bloom, 295 So. 3d at 1259 (quoting Ortmann v. Bell, 100 So. 3d 38, 46 (Fla. 2d DCA 2011)). “When a trustee seeks to charge a trust corpus with an expense incurred by him, including attorney fees, the burden of proof is upon the trustee to demonstrate that the expense was reasonably necessary and that such expense was incurred for the benefit of the trust, and not for his own benefit nor the benefit of others.” Barnett v. Barnett, 340 So. 2d 548, 550 (Fla. 1st DCA 1976) (emphasis added); accord Ortmann.”
332 So. 3d 510.
If a trust has two or more beneficiaries, the trustee shall act impartially in administering the trust property, giving due regard to the beneficiaries’ respective interests.
If a trust has two or more beneficiaries, the trustee shall act impartially in administering the trust property, giving due regard to the beneficiaries’ respective interests. This means that the trustee must act fairly towards all of the beneficiaries and treat them equally. However, a settlor of a trust can put provisions into the trust to give trustees discretion as to how much trust income to give to each beneficiary. But if a trust, for example, says that all beneficiaries shall receive trust income equally, then the trustee must honor the intent of the settlor of the trust and treat the beneficiaries equally, fairly, and impartially.
736.0804 Prudent administration
A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill and caution.
736.0813 Duty to inform and account
The trustee shall keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration.
(1) The trustee’s duty to inform and account includes, but is not limited to, the following:
(a) Within 60 days after acceptance of the trust, the trustee shall give notice to the qualified beneficiaries of the acceptance of the trust, the full name and address of the trustee, and that the fiduciary lawyer-client privilege in s. 90.5021 applies with respect to the trustee and any attorney employed by the trustee.
(b) Within 60 days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, the trustee shall give notice to the qualified beneficiaries of the trust’s existence, the identity of the settlor or settlors, the right to request a copy of the trust instrument, the right to accountings under this section, and that the fiduciary lawyer-client privilege in s. 90.5021 applies with respect to the trustee and any attorney employed by the trustee.
(c) Upon reasonable request, the trustee shall provide a qualified beneficiary with a complete copy of the trust instrument.
(d) A trustee of an irrevocable trust shall provide a trust accounting, as set forth in s. 736.08135, from the date of the last accounting or, if none, from the date on which the trustee became accountable, to each qualified beneficiary at least annually and on termination of the trust or on change of the trustee. Notwithstanding s. 736.0105(2)(s) or the duties under this paragraph, if a family trust company, licensed family trust company, or foreign licensed family trust company, as defined in s. 662.111, is a trustee of an irrevocable trust, the terms of the trust may permit for accounting to the qualified beneficiaries only at the termination of the trust; upon the removal, resignation, or other event resulting in a trustee ceasing to serve as a trustee; or upon demand of a qualified beneficiary or the representative of a qualified beneficiary. This paragraph may not be construed to prohibit a trustee that is a family trust company, licensed family trust company, or foreign licensed family trust company from voluntarily accounting to the qualified beneficiaries annually or at other times selected by such trustee.
(e) Upon reasonable request, the trustee shall provide a qualified beneficiary with relevant information about the assets and liabilities of the trust and the particulars relating to administration.
This is a big one that we see. The Trustee has a duty to provide information and transparency. If the Trustee has not provided or refuses to provide information it will very likely be a breach of trust. The above referenced statute highlights some requirements of a trustee:
Duty to Inform and Account includes:
(a) Provide notice of the acceptance of the trust, trustee’s full name and address, and the application of the fiduciary lawyer-client privilege within 60 days of accepting the trust.
(b) Notify qualified beneficiaries of the trust’s existence, identity of the settlor(s), right to request a copy of the trust instrument, right to accountings, and the fiduciary lawyer-client privilege within 60 days of knowledge that a trust has become irrevocable.
(c) Provide a complete copy of the trust instrument upon reasonable request by a qualified beneficiary.
(d) For irrevocable trusts, provide trust accounting at least annually, on trust termination, or on a change of trustee, as specified in s. 736.08135. Exception applies to certain family trust companies as defined in s. 662.111.
(e) Provide relevant information about the trust’s assets, liabilities, and administration upon reasonable request by a qualified beneficiary.
What are the Consequences to Failing to Adhere to the Obligations of a Trustee under Florida Law?
If a Trustee fails to fulfill his or her obligations under the Florida Trust code or the Trust agreement they can have significant liability. This would be in the form of a judgment for damages to the Trust assets and attorney fees. A claim for breach of fiduciary duty under Florida law has three elements: (1) existence of a fiduciary duty; (2) breach of that duty; and (3) damage proximately caused by the breach. Gracey v. Eaker, 837 So. 2d 348, 353 (Fla. 2002); Whittington v. Whittington, No. 6:19-CV-1631-Orl-40DCI, 2020 WL 8224607, at 2(M.D. Fla. Dec. 4, 2020).
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-Brice Zoecklein, Esq.
Disclaimer: The information contained in this blog/website is for informational purposes only and provides general information about the law but not specific advice. This information should not be used as a substitute for advice from competent legal counsel as laws change and the facts in your specific case need to be analyzed.
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