Trust Termination in Florida: the Basics

People make trusts and liquidate them for a multitude of reasons. Some are to protect against creditors. Others colloquially called “spendthrift trusts” worry about wasteful heirs. Times change though, and sometimes a trust needs to be terminated. Maybe the circumstances has changed, maybe the current set up is inconsistent with the original purpose of the trust, either way at some point the question may arise: how do I terminate this pesky trust?

The authority for terminating a trust can be found in Florida Statutes, specifically, Florida Statute 736.04113 which is copied below in relevant part.

1.  Upon application of a trustee of a trust or any qualified beneficiary, a court at any time may modify the terms of a trust that is not then revocable in the manner provided in subsection (2) if:
   1. The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impractical to fulfill;
   2. Because of circumstances not anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair the accomplishment of a material purpose of the trust; or
   3. A material purpose of the trust no longer exists. 
2.   In modifying a trust under this section, a court may:
   1. Amend or change the terms of the trust, including terms governing distribution of the trust income or principal or terms governing the administration of the trust;
   2. Terminate the trust in whole or in part;
   3.  Direct or permit the trustee to do acts that are not authorized or that are prohibited by the terms of the trust; or
   4. Prohibit the trustee from performing acts that are permitted or required by the terms of the trust.
3. In exercising discretion to modify a trust under this section:
   1. The court shall consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and extrinsic evidence relevant to the proposed modification;
   2. The court shall consider spendthrift provisions as a factor in making a decision, but the court is not precluded from modifying a trust because the trust contains spendthrift provisions.  (emphasis added).

In plain terms then a beneficiary can petition the court, over the objection of a trustee (or other beneficiary) to terminare an irrevocable trust. In plain terms an irrevocable trust is one that traditionally cannot be modified or terminated without the permission of the beneficiary. In other words an irrevocable trust divests the rights of the grantor an all rights of ownership transfer to the beneficiary. A revocable trust would allow a grantor to modify without consent of the beneficiary.

Importantly normally a spendthrift provision will prohibit the beneficiary from accessing funds that are not in conformity with the trust’s charter. However under Florida law they have an opportunity to show a change in lifestyle and to rebut the presumption of a spendthrift. A beneficiary with such a desire should likely contact an experienced probate attorney rather than pursuing the matter without counsel.

Want to learn more about different types of trusts, termination of trusts and more? Check out our FAQ video bank at: http://www.pankauskilawfirm.com/