Trusts are a great way to protect assets for the future and should be a part of any estate plan where necessary. Butwhat is required to establish a trust? Few people realize that Florida is one of the last states that allow for oral trusts. Although these are highly unflavored and I do not recommend them the fact of the matter remains that in Florida Probate Law, an oral trust may be valid under Fla. Stat. 736.0407.
- Florida Trusts are governed by Chapter 736.
- Fla. Stat. 736.0407 states Except as required by s. 736.0403 or a law other than this code, a trust need not be evidenced by a trust instrument but the creation of an oral trust and its terms may be established only by clear and convincing evidence.
- The Trust need not be proven by clear and convincing evidence to be enforceable either.
- Oral trusts are becoming less and less common (and any Palm Beach Probate Attorney will tell you – that’s a good thing)
In The Florida Bar v. Wagner a disciplinary proceeding was brought against an attorney (Mr. Wagner) for lending one client’s trust funds to another client and being involved in business transactions between client and the attorney’s own corporation while acting as client’s attorney. Interesting the attorney had used an oral trust for the funds when they were originally deposited. The Court ultimately found that the co-mingling and conversion of funds constituted a violation of the rules and that an 18 month suspension would be appropriate.
- This case shows oral trusts act much in the same way as written trusts.
- The trust is not an entity it denotes a relationship (much like a contract does) betweena trustee (and at some point donor) and a beneficiary.
- So, an oral trust can be viewed much like an oral contract its not the existence itself that may be hard to prove, it’s the exact terms and specifications that will become difficult to ascertain.
- The trustee owes a fiduciary duty just as if it were a written trust.
- In fact, the only thing an oral trust cannot do in Florida is transfer or devise real property.
- One of the most common oral trusts occur when a trustee such as an attorney takes a check or some large distribution of funds for an individual but this is by no means the only example.
It is never recommended to rely on an oral trust. Such an important estate planning tool should be reduced to writing and you should use and experienced estate planning attorney to construct it. Reducing the terms to writing will save you a lot of trouble in the long term for example in defining what duty the fiduciary may owe you. Also, you will want in writing what happens when the beneficiaries die and/or what happens upon the death or disability of a trustee.