What should Florida trustees know about the Stanford Ponzi scheme case ? I’m not just talking about investment losses, or trust losses. I’m talking about what Palm Beach trustees and trustees of Florida trusts might want to take away from the recent US Supreme Court decision. You — a Palm Beach Trustee or a Ft. Lauderdale Trustee —- may have to sue someone else who caused harm to your Florida trust or who harmed your Florida trust beneficiaries. Here’s what the US Supreme Court said about recovery investment losses from that Ponzi schemer and here’s what every Florida trustee should know about Florida Trusts, the Florida Trust code and Palm Beach Probate.
US SUPREME COURT SAYS YOU CAN SUE THIRD PARTIES — INCLUDING LAWYERS
The Supreme Court opened the door for investors who lost money due to the fraud committed by Ponzi schemer Stanford to seek return of their losses from third parties. This could include law firms, banks, intermediaries, or anyone whose work assisted the Ponzi scheme or whose work helped, in essence, continue the fraud.
Palm Beach lawyers —those who actually try cases and who go to trial — and not those Palm Beach lawyers who settle everything — know to look for third parties as potential defendants. Did others have a hand in assisting with the fraud ? Who helped with the Ponzi scheme ? If a third party knew or should have known about the fraud, or the investment scheme, or the Ponzi scheme, they may — or may not — have had a duty to do something. This is what good Palm Beach litigation attorneys seek to analyze: causation and damages.
TRUSTEES SHOULD CONSIDER ACTS OF PRIOR TRUSTEES
Florida trustees’ conduct is governed by the Florida Trust Code just like executors —Florida personal representatives — of Florida estates are governed by rules of the Florida Probate Code. Everyone, it seems, has been involved in a Palm Beach Probate, right? Well the rules for a Florida trustee require you, a Florida trustee, to do a few things:
- investigate/consider the acts of the prior trustee.
- sue the prior trustee if the former trustee did something bad
- sue third parties who may be responsible for harming your Florida trust or your trust beneficiaries
- analyze the Florida trust which you are in charge of
- DON’T assume that what the prior Florida trustee did was proper — it may not be and it’s your job to fix it
- DON’T invest trust assets like your Florida trustee did “just because” or “because” you assume the former trustee knew what they were doing –they may not have had a clue how to invest trust assets under the Florida Trust Code or Florida’s prudent investor rule
- DON’T invest trust assets assuming that everything is OK with the beneficiaries, or that’s how THEY want the trust invested. It’s YOUR JOB to invest the trust assets prudently — not the trust beneficiaries’. Get the trust beneficiaries’ input, communicate, discuss risk tolerance and needs of the trust portfolio and the beneficiaries’ needs….. but don’t let them call the shots. The trust creator put you in charge, not the beneficiaries. Letting the trust bene’s call the shots can amount to an improper delegation of trust investment functions.
REMEMBER: if a Florida revocable trust becomes irrevocable because the trust creator died, you , as the successor trustee, have duties to provide a notice of trust and other relevant information as well as Florida trust accountings. You will work, or should work, hand in hand with the personal representative of the Florida estate –the estate executor who is running the estate.
In the course of your work as a trustee, consider if anyone has harmed the trust and who may be –or who is –responsible. You just might have to make a federal case out of it.