Breach of Trust

What Duties Does a Florida Trustee Owe? And Who Gets the Benefit of those Duties?

A Florida trust beneficiary has a lot of rights! It’s the Florida trustee’s job to protect and respect those Florida beneficiary rights. A Florida trustee must fulfill all of its fiduciary duties under Florida trust law in favor of the Florida trust beneficiaries. A Florida trustee owes fiduciary duties to trust beneficiaries: not to anyone else.

This is serious stuff. What happens if a Florida trustee doesn’t fulfill even just one of its fiduciary duties? A Florida trustee who does not fulfill its fiduciary duties, or who breaches its fiduciary duties, may be removed as trustee, suspended as trustee, or be fined in the form of a trust “surcharge.”

I’m going to first give you a bullet point summary of what duties, what fiduciary duties, a Florida trustee owes to trust beneficiaries under Florida trust law. If you’d like to read a more in-depth discussion of a Florida trustee’s fiduciary duties to its trust beneficiaries, you can read beyond the bullet points. References to “§” are to a specific Florida statute, or law, found in the Florida Trust Code. The Florida Trust Code is an entire Chapter of Florida Laws devoted to trusts, trustees and trust beneficiaries. Click here to view the Florida Trust Code. 

A Florida Trustee Owes the Following Duties to Trust Beneficiaries

• Carry out the intent of the trust creator § 736.0801
• Carry out the terms of the trust document § 736.0801
• A duty of loyalty § 736.0802
• To avoid conflicts of interest and acts of self-dealing
• A duty to be impartial § 736.0803
• A duty to be objective
• A duty of good faith and fair dealing § 736.0801
• To administer the trust in the interests of the beneficiaries and according to the Florida Trust Code § 736.0801
• Invest trust money and trust assets prudently, according to the Florida prudent investor rule § 736.0804
• Only incur reasonable expenses for the trust § 736.0805
• Provide relevant information about the Florida trust and the administration or management of the trust § 736.0813
• Keep the trust beneficiaries informed of the trust administration § 736.0813
• Inform the trust beneficiaries of your, the trustee’s, identity, name, and address § 736.0813
• To provide a complete copy of the trust document, including all amendments § 736.0813
• Disclose how much the trustee is taking in trustee compensation
• Disclose how much trust costs and expenses, including attorney’s fees, are being paid by the trustee to third parties
• Provide an in-depth, Florida trust code- required annual accounting § 736.08135
• Reveal all cash and property
• Reveal all transactions affecting the trust administration
• Reveal investment losses
• Reveal all receipts and pay outs
• Value the trust property
• Reveal what you paid for (the cost) of trust assets you purchased
• Disclose a suggested plan for distribution (“who gets what”) if the trust is ending or terminating § 736.08135
• To use special skills or expertise, if the Florida trustee has such skills or expertise § 736.0806
• To use reasonable care, skill and caution when delegating authority to a third party, such as when delegating trust investment functions to a bank § 736.0807
• Protect all trust property § 736.0809
• Keep clear, distinct and accurate records of trust administration § 736.0810
• Keep trustee property and money separate from the trustee’s own, personal, money-no commingling trust money with a trustee’s own finances. § 736.0810
• Put the name of the trust on all ownership records so the trust property is titled in the name of the trust § 736.0810
• Enforce rights, property interests and claims for the trust § 736.0811
• Collect all assets which belong to the trust, especially from a former trustee § 736.0812
• Sue a former trustee, or take action to protect the trust, if a former trustee committed a breach of trust, or a breach of fiduciary duty, or harmed the trust or the Florida trust property § 736.0812
• Only distribute trust “income” to those beneficiaries who may or must receive the trust income – – – and no one else
• Only distribute trust “principal” to those trust beneficiaries who may or must receive trust principal – – – and no one else

As you can see from the above bullet points, a Florida trustee owes trust beneficiaries of a trust which is governed by, or administered according to, Florida law, many duties. I’m going to discuss these duties in a very broad, plain English way, without any legal mumbo-jumbo, technical terms, or citations to specific Florida statutes, other than the above. If you want to read about specific Florida laws, you can read the Florida trust code which may be viewed online for free. Chapter 736 of Florida statutes is the Florida trust code. The Florida trust code is a set of laws, or statutes, which explain the duties and obligations of a Florida trustee, sets forth various procedures and time frames for trust matters, and also lists beneficiary rights to Florida trusts. Recognize that the 2013 Florida statutes do not contain new, recent changes to Florida trust law which occurred over the past six months. Be on the lookout for a new, complete set of 2014 Florida statutes and the updated 2014 Florida trust code. Until then, click here for the 2013 Florida trust code.

Finally, on the subject of Florida trust laws, be mindful that the Florida trust code is only one part of Florida trust law. Florida appellate court opinions, issued by Florida appellate courts about Florida trust cases and trials, explain Florida trust law, including the Florida trust code. Sometimes appellate courts will not just reference a Florida trust code, or prior Florida trust cases, but may also consider the restatement of trusts, articles by trust professionals and trust lawyers, and also trust cases from other states. Opinions of the Florida appellate courts may be read online for free at the website for each appellate court. The appellate court for Palm Beach County, Florida Martin County, Florida Broward County Florida is called the fourth District Court of Appeals.

So, what duties does a Florida trustee owe?

First of all, a Florida trustee owes duties to all the trust beneficiaries – – not just some of the trust beneficiaries. Trust beneficiaries may include those persons who are entitled to receive the income from the trust or who may receive distributions of principal, such as cash or real estate or other capital assets. A Florida trust beneficiary who is entitled to the income is referred to as a “income beneficiary.” A Florida beneficiary who may receive distributions of money or principal of the Florida trust is referred to as a “principal beneficiary.” A beneficiary to whom income from the Florida trust must be distributed to is often referred to as a “mandatory income beneficiary” or “mandatory income bene” for short. A beneficiary of a Florida trust to whom a trustee may, but is not obligated or required to, distribute income or principal, may be referred to as in “discretionary beneficiary.”

In many senses, Florida law does not discriminate between discretionary, or permissible beneficiaries, and a mandatory beneficiary. Florida trust law requires the trustee to exercise its fiduciary duties for the benefit of all beneficiaries. But note, that while a Florida trustee must treat all beneficiaries fairly, objectively and with a duty of loyalty, the trust document may call for unequal treatment, or trust payments, to the various beneficiaries.

A beneficiary whose life is used as a timeframe for measuring may be referred to as a “lifetime beneficiary.” So, for example, a Florida trust may state that “during the lifetime of the widow, the Florida trustee shall distribute all the income to the widow, at least annually, and the trustee may, but is not obligated to, distribute principal to or for the benefit of the widow’s health, education, maintenance, and support.” In this example, the Florida widow is referred to as a mandatory income beneficiary and she is also a permissible, or, discretionary, principal beneficiary. The Florida widow is also a lifetime beneficiary.

Wondering what constitutes “income”? And what assets are “principal”? You need to read chapter 738 of the Florida statutes. Chapter 738 of the Florida statutes is the Florida trust code’s principal and income act. Florida’s principal and income act defines what “trust income” is and what “trust principal” for all trust matters is. Of course, the trust document itself could define what income is and what is principal. Generally, a trust document may control the administration of the trust anyway it wants, as long as it’s not offensive or against Florida’s public policy. When the trust document is silent, or does not address an issue, then we fall back to the Florida trust code and Florida trust law. Does the Florida trust principal and income act really matter to a trust beneficiary? It sure does. Here’s an easy example of why it matters to trust beneficiaries. Trustees are entitled to reasonable compensation. In addition to trustee compensation, there are going to be other expenses and costs associated with the administration or management of the Florida trust. Whose trust share do you deduct those costs and expenses from? The income beneficiary’s share? The remainder beneficiary’s share? The answer lies in the trust document, or if it’s not addressed in the trust document, then in the Florida trust principal and income act, chapter 738.

In many Florida trusts, there are often sole, lifetime beneficiaries, meaning that the Florida trustee may not distribute any trust money to anyone other than the lifetime beneficiary. A beneficiary, who receives income or principal after the death of a prior beneficiary, or after a particular of that, is often referred to as a Florida “remainder beneficiary.”

An income beneficiary, or a lifetime beneficiary, and a remainder beneficiary must all be treated fairly by the Florida trustee, even though the beneficiaries’ interests in the trust may be different.

A Florida trustee has a duty to carry out the intent of the trust creator, as set forth in the trust document. Towards this end, the Florida trustee should rely on the plain meaning, the clear meaning of the language in the trust document. If there’s a disagreement on what the trust document says, the Florida trustee has a duty to interpret the trust document reasonably. That cannot be done, or if it may be helpful, the Florida trustee may seek to get a declaration from a Florida trust court, also referred to as a Florida probate court. A Florida probate court judge would then interpret the trust document and rule as a matter of law, by telling everyone what the trust document says and means. But one thing is very clear under Florida trust law: the Florida trustee owes its fiduciary duties to all the beneficiaries. And while the Florida trustee may hire a Florida trust lawyer to assist and advise the Florida trustee, the Florida trustee should be taking direction from its beneficiaries, the trust document, and its trust lawyer. The only other person that a trustee may listen to, or should listen to, is a trust court judge in Florida.