FL Trust Rule Statements

Question 1

Creation of an intervivos trust requires: (i) the intent to establish a trust, and (ii) delivery of the subject matter of the trust with the intent to pass title to the trustee immediately.

Whatever kinds of inter vivos trust yous choose to establish, they all have the following three things in common:

1. A testator a/k/a settlor – you or you and your spouse if you set up the trust jointly
2. A trustee – the person, bank, etc. you designate to manage the trust assets and distribute its income
3. A beneficiary – the person (including yourself), charity, group, organization, etc. you designate to receive the trust income and ultimately its remaining assets

Answer 1

Methods of creating trust.—A trust may be created by:

1. Transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect on the settlor’s death;
2.  Declaration by the owner of property that the owner holds identifiable property as trustee; or
3. Exercise of a power of appointment in favor of a trustee.

You can set up a variety of inter vivos trusts including the following types:

1. Revocable trust: one that you can change or alter later
2. Irrevocable trust: one that you cannot change or alter later
3. Special needs trust: set up to benefit your disabled child, grandchild, etc.
4. Charitable trust: one you set up to benefit your favorite charity
5. Spendthrift trust: one you set up to benefit someone, but not allow him or her to sell or pledge its assets until (s)he reaches the age you specify
6. Pet trust: one you set up to provide care for your pet(s) after you die.

Question 2

Gift Causa Mortis: The Causa Mortis doctrine comes from the old common law meaning a gift made while on one’s death bed where death was imminent. The doctrine also utilizes the gift doctrine from the common law where there must be some physical transfer. If the person survives, the gift is returned.

Answer 2

A gift causa mortis is a gift that is made under an immediate apprehension of death,

usually from a known peril, which is revocable if a donor does not die. Like an inter

vivos gift, a gift causa mortis must be evidenced by intent, delivery, and acceptance.

Question 3

Trusts of Land - Must be in writing to meet Statute of Frauds, The statute of frauds bars the enforcement of certain types of contracts unless they are in writing and signed by the party (or legally authorized representative of party) against whom enforcement is sought.

In a Florida Land Trust, real estate is conveyed from the grantor/owner to a trustee who then holds BOTH legal and equitable title to the property. … This document is recorded in the official records of the county where the real property is situated.

Answer 3

Trusts that seek to transfer ownership interests in real estate are subject to Florida’s statute of frauds. … A court may order the creation of a constructive trust if it is necessary to preserve the trust property from acts in bad faith, such as fraud, duress, or undue influence.

Also, the creation of a trust of land requires conveyance of legal title to the trustee by a deed that contains words of conveyance, even if the Settlor names himself as a trsutee

Question 4

Statute of Frauds

Under Florida Law, some common contracts where the statute of frauds applies are as follows:

1. Contracts involving real estate transactions. 725.01, Fla. Stat. (2014).
2. This includes the sale of land, easements, and mortgages.
3. Contracts that cannot be performed within a one (1) year time period. 725.01, Fla. Stat. (2014).
4. The one (1) year time period refers to the time required for performance of the contract. This does not apply to contracts with an infinite duration.
5. Contracts to pay the debts of another. 725.01, Fla. Stat. (2014).
6. Leases with a time period greater than one (1) year. 725.01, Fla. Stat. (2014).
7. Guarantees by health care providers for any guarantee, warranty, or assurance as to the results of certain medical procedures. 725.01, Fla. Stat. (2014).
8. Contracts for the sale of goods valued at $500.00 or more. 672.201, Fla. Stat. (2014).

Some commonplace transactions, such as leases for a period more than one (1) year or contracts involving real estate, are subject to the statute of frauds and all terms must be in writing. This rule applies to the original agreement and any subsequent amendments or modifications. In order to avoid a statute of frauds issue, you should always work with an experienced Florida business attorney to ensure all agreements comply with the Statute of Frauds and all other requirements of state law. Even if the statute of frauds does not apply to a transaction, it is better to have a written contract just in case any disagreement arises in the future. If you have any questions, feel free to contact Abigail D. Edelstein at (407) 862-9449.

Answer 4

Some commonplace transactions, such as leases for a period more than one (1) year or contracts involving real estate, are subject to the statute of frauds and all terms must be in writing. This rule applies to the original agreement and any subsequent amendments or modifications. Even if the statute of frauds does not apply to a transaction, it is better to have a written contract just in case any disagreement arises in the future.

Question 5

After 2007- The settlor may revoke or amend the trust unless the terms of a trust expressly provide that the trust is irrevocable.

A revocable trust is a document (the “trust agreement”) created by you to manage your assets during your lifetime and distribute the remaining assets after your death. The person who creates a trust is called the “grantor” or “settlor.” The person responsible for the management of the trust assets is the “trustee.” You can serve as trustee, or you may appoint another person, bank or trust company to serve as your trustee. The trust is “revocable” since you may modify or terminate the trust during your lifetime, as long as you are not incapacitated.

During your lifetime the trustee invests and manages the trust property. Most trust agreements allow the grantor to withdraw money or assets from the trust at any time, and in any amount. If you become incapacitated, the trustee is authorized to continue to manage your trust assets, pay your bills, and make investment decisions. This may avoid the need for a court-appointed guardian of your property. This is one of the advantages of a revocable trust.

Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement. The trustee’s responsibilities at your death are discussed below.

Your assets, such as bank accounts, real estate and investments, must be formally transferred to the trust before your death to get the maximum benefit from the trust. This process is called “funding” the trust and requires changing the ownership of the assets to the trust. Assets that are not properly transferred to the trust may be subject to probate. However, certain assets should not be transferred to a trust because income tax problems may result. You should consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership.

Answer 5

HOW DOES A REVOCABLE TRUST AVOID PROBATE?

A revocable trust avoids probate by effecting the transfer of assets during your lifetime to the trustee. This avoids the need to use the probate process to make the transfer after your death. The trustee has immediate authority to manage the trust assets at your death; appointment by the court is not necessary.

The “funding” of a revocable trust is critical to successfully avoid probate. Those persons who do not fully fund their trusts often need both a probate administration for the non-trust assets as well as a trust administration to completely distribute the assets. Because the revocable trust may not completely avoid probate, a simple “pour over” will is needed to transfer any probate assets to the trust after death.

Question 6

An irrevocable Trust in Florida is a trust agreement among a settlor, trustee, and beneficiaries that cannot be revoked or amended. So basically, once the trust is made and finished, it cannot be changed. Whether you are the trustmaker yourself, the settlor, the trustee, or the beneficiary. You may not amend or change anything in your trust once it is completed and notarized. You may only change an irrevocable trust in unusual circumstances.

Property held in an irrevocable trust is usually protected from the creditors of an individual beneficiary. Florida irrevocable trust laws are found in Chapter 736, Florida Statutes, and in common law and court decisions interpreting the laws.

Answer 6

Under Florida law, if the irrevocable trust has any testamentary provisions, then the trust must be executed with the same formalities of a will. That means the trust must be signed in the presence of two witnesses and a notary. Typically the trust will have a self-proving affidavit as well.

Trusts may also be created in the terms of a valid will. These types of trusts are known as testamentary trusts. Wills containing testamentary trusts often also contain pour-over provisions, which dispose of the testator’s property in accordance with an administrative probate process as a part of the probate estate upon the occurrence of certain conditions specified in the will. Testamentary trusts are also required to conform to certain Florida laws that govern wills. Testamentary trust distributions may still be subject to state-level estate taxes or federal estate taxes.

Question 7

Spendthrift Provision in Trust

Florida courts have consistently held that a beneficiary’s interest in an irrevocable trust established for his benefit by another person is protected from the beneficiary’s creditors so long as the trust agreement includes a spendthrift provision. A spendthrift clause typically states that a beneficiary may not assign or convey his beneficial interest. This type of trust language is called “spendthrift” because it is supposed to prevent a careless beneficiary from squandering his or her inheritance. Florida courts have held that if the trustmaker prohibits the beneficiary from assigning his beneficial interest voluntarily then the beneficiary’s creditors cannot force the assignment to pay the beneficiary’s debts.

Answer 7

Florida’s trust laws provide that a spendthrift provision must expressly restrain both voluntary and involuntary transfers of a beneficiary’s trust interest. Unless both types of transfers are prohibited in the trust agreement, the spendthrift provision will not meet the statutory requirements for creditor protection against a beneficiary’s creditors. After a trustee makes a distribution from a spendthrift trust to a beneficiary, the money in the beneficiary’s hands is no longer protected from the beneficiary’s creditors.

Question 8

RULE: A trustee must administer the trust in good faith, in accordance with the trust terms and purposes and in the interests of the beneficiaries. A trustee must act with fairness as it relates to the trust beneficiaries; the beneficiaries must be treated impartially. For example, a trustee cannot give preferential treatment toward the current income beneficiaries to the detriment of the remainder beneficiaries.

The elements of a cause of action against the trustee for breach of fiduciary duty are: 1) the existence of a duty; 2) breach of that duty; and 3) damages flowing from the breach of that duty.

One primary duty of a trustee is the duty of loyalty. A trustee shall administer the trust solely in the interests of the beneficiaries; not for his or her own personal advantage. Self-dealing by a trustee is strictly prohibited by Florida law. A trustee cannot assume an individual position antagonistic to the interests of the beneficiaries. The Florida Trust Code expressly prohibits a trustee’s engaging in a sale, encumbrance or other transaction involving trust property which will benefit the trustee, or which is otherwise affected by a conflict between the trustee’s fiduciary duties to the beneficiaries and the trustee’s own, personal interests. Such a transaction is voidable by the beneficiaries unless the transaction was approved by the court; expressly authorized by the trust agreement; or consummated with the consent of the beneficiaries.

Answer 8

SURCHARGE ACTION: f it is believed that the trustee has breached their fiduciary duty as trustee, a surcharge action may be filed against the trustee seeking to impose personal liability on a fiduciary for breach of trust through either intentional or negligent conduct. A “surcharge” is defined as a charge against a fiduciary to compensate a beneficiary for the breach of fiduciary duty. Surcharge is also defined as the amount that a court may charge a fiduciary that has breached their fiduciary duty.

A surcharge action may be warranted if the trustee or successor trustee breached their fiduciary duty to administer the trust, and/or breached their duty of loyalty, impartiality, prudent administration, and control and protection of the trust property.

Can also REPLACE Trustee for failure to adhere to terms of trust or for self-dealing

Question 9

Trustee’s Duty of Care

The duty of care is most likely what people mean when they want to know what exactly are the functions of a trustee. Florida statute 736.0803 sets forth the broad standard for a trustee, which is the prudent person standard. The law states, “A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust.” A trustee is held to a different standard if he or she has special skills or expertise, such as if the trustee is an accountant or a financial analyst. Florida law states that a trustee with special skills or expertise must use the skills and be held to a higher standard.

A trustee is also allowed to delegate duties and the powers of the trustee. The law states “that a trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances, including investment functions.” The delegation will be proper as long as the trustee exercises reasonable care and skill in selecting an agent and establishing the scope of the delegation. The trustee must also make sure to review the agent’s actions periodically.

Answer 9

The trustee must take control of the trust property and take reasonable steps to protect the trust property. These duties also include the obligation to keep clear, distinct, and accurate records of the administration of the trust. There is also a duty to keep trust funds separate from the trustee’s property, which means that all trust assets must be held in separate accounts from the trustee’s personal assets. The trustee is also required to defend the trust from creditors or claims by other people.

Question 10

As it relates to communicating with the beneficiaries, a trustee is under a statutory obligation to keep the beneficiaries reasonably informed of the trust and its administration, and to provide annual accountings. (F.S. 736.0813).

A trustee has a statutory duty to keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration. The Florida Trust Code defines “qualified beneficiary” as a living beneficiary who is a current distributee or permissible distributee of trust income or principle; would be a distributee or permissible distributee of trust income or principal if the interests of the current distributees or permissible distributees terminated without causing the trust to terminate; or would be a distributee or permissible distribute of trust income or principal if the trust terminated immediately in accordance with its terms.

Answer 10

A trustee owes the following duties to inform and account to all qualified beneficiaries:

1. Within 60 days of acceptance of the trust, the trustee must give notice of the acceptance of the trust; the full name and address of the trustee; and that the attorney-client privilege applies with respect to the trustee and any attorney employed by the trustee;
2. 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 annual accountings; and that the attorney-client privilege applies with respect to the trustee and any attorney employed by the trustee;
3. The trustee must provide a qualified beneficiary with a complete copy of the trust instrument, upon reasonable request;
4. A trustee of an irrevocable trust shall provide a trust accounting to each qualified beneficiary at least annually, and on termination of the trust or on change of the trustee;
5. A trustee must provide a qualified beneficiary with relevant information about the assets and liabilities of the trust, and the particulars relating to administration, upon reasonable request.

Question 11

Florida’s Prudent Investor Rule (“Florida’s Prudent Investor Act or PIA,” F.S. § 518.11) requires a “fiduciary” to invest prudently considering the purposes, terms, distribution requirements, and other circumstances of the trust.

(a) The fiduciary has a duty to invest and manage investment assets as a prudent investor would considering the purposes, terms, distribution requirements, and other circumstances of the trust. This standard requires the exercise of reasonable care and caution and is to be applied to investments not in isolation, but in the context of the investment portfolio as a whole and as a part of an overall investment strategy that should incorporate risk and return objectives reasonably suitable to the trust, guardianship, or probate estate
(b)  No specific investment or course of action is, taken alone, prudent or imprudent. The fiduciary may invest in every kind of property and type of investment, subject to this section. The fiduciary’s investment decisions and actions are to be judged in terms of the fiduciary’s reasonable business judgment regarding the anticipated effect on the investment portfolio as a whole under the facts and circumstances prevailing at the time of the decision or action. The prudent investor rule is a test of conduct and not of resulting performance.
(c)  The fiduciary has a duty to diversify the investments unless, under the circumstances, the fiduciary believes reasonably it is in the interests of the beneficiaries and furthers the purposes of the trust, guardianship, or estate not to diversify.
(d)  The fiduciary has a duty, within a reasonable time after acceptance of the trust, estate, or guardianship, to review the investment portfolio and to make and implement decisions concerning the retention and disposition of original preexisting investments in order to conform to the provisions of this section. The fiduciary’s decision to retain or dispose of an asset may be influenced properly by the asset’s special relationship or value to the purposes of the trust, estate, or guardianship, or to some or all of the beneficiaries, consistent with the trustee’s duty of impartiality, or to the ward.
(e)  The fiduciary has a duty to pursue an investment strategy that considers both the reasonable production of income and safety of capital, consistent with the fiduciary’s duty of impartiality and the purposes of the trust, estate, or guardianship. Whether investments are underproductive or overproductive of income shall be judged by the portfolio as a whole and not as to any particular asset.
(f)  The circumstances that the fiduciary may consider in making investment decisions include, without limitation, the general economic conditions, the possible effect of inflation, the expected tax consequences of investment decisions or strategies, the role each investment or course of action plays within the overall portfolio, the expected total return, including both income yield and appreciation of capital, and the duty to incur only reasonable and appropriate costs. The fiduciary may, but need not, consider related trusts, estates, and guardianships, and the income available from other sources to, and the assets of, beneficiaries when making investment decisions.

Answer 11

. If the fiduciary has special skills, or is named fiduciary on the basis of representations of special skills or expertise, the fiduciary is under a duty to use those skills.

Under this statute trustees aren’t expected to be investment geniuses, just prudent. In this context being “prudent” = exercising “reasonable business judgment regarding the anticipated effect on the investment portfolio as a whole under the facts and circumstances prevailing at the time of the decision or action.” In other words, if the trustee exercises “reasonable business judgment” and takes all the steps a reasonable investor would take to properly manage his investment portfolio, it doesn’t matter if the trust’s stocks crater in value, he’s done his job and can’t be sued for damages. The linked-to case above tests this basic proposition.

Question 12

Charitable Trusts in Florida. To qualify as a charitable trust, the benefiting party must be a charity pursuant to section 501(c)(3) of the Internal Revenue Code. Such entity must operate solely for religious, educational, and other charitable purposes whereby zero net earnings of the entity benefit any private shareholder or individual. Because donations to charitable organizations are tax deductible, a charitable trust serves as an easy way to provide for a charitable cause and achieve tax benefits.

Florida law encourages the use of charitable trusts and works to preserve the intent of any individual that seeks to provide for a charitable beneficiary through a trust. If the trust itself does not name a specific charity as a beneficiary, a court may select a charitable purpose or beneficiary. The court must consider the settlor’s intent wherever applicable when determining which charity will benefit under the trust.
**EXAM TIP ** CHARITABLE TRUSTS ARE NOT SUBECT TO THE RULE AGAINST PERPETUITIES and can be perpetual

Answer 12

Instead of creating a trust solely for the benefit of a charitable organization, many individuals name charities as beneficiaries to the remainder of the trust’s assets after the interests of other beneficiaries have terminated. For example, a trust may provide for one’s children, during their lifetimes, with the residuary of the trust going to a charity upon the passing of the children. This form of a trust is considered a split interest trust, in that it serves a purpose in addition to providing for a charitable purpose. Trusts can also be created to benefit one or more private foundations as well.

The trustee of a private foundation trust or a split interest trust owes fiduciary duties to both the settlor and the charitable beneficiaries. A trustee may not deprive the trust of any “tax exemption, deduction, or credit for tax purposes.” This section of the Code details the extent to which the trustee of a charitable trust must ensure that the trust is not subjected to unnecessary taxes under the Internal Revenue Code. The Florida Probate Code also provides that the trustee of a trust created solely for charitable purposes may amend the trust instrument, with the consent of the charitable organization(s), so that it complies with the Code In other situations, the trustee may amend the trust to comply for tax purposes with the consent of the state attorney.

Question 13

Modification or termination of uneconomic trust.—

(1)  After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than $50,000 may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.
(2)  Upon application of a trustee or any qualified beneficiary, the court may modify or terminate a trust or remove the trustee and appoint a different trustee if the court determines that the value of the trust property is insufficient to justify the cost of administration.
(3)  Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust. The trustee may enter into agreements or make such other provisions that the trustee deems necessary or appropriate to protect the interests of the beneficiaries and the trustee and to carry out the intent and purposes of the trust.
(4)  The existence of a spendthrift provision in the trust does not make this section inapplicable unless the trust instrument expressly provides that the trustee may not terminate the trust pursuant to this section.

Answer 13

OTHER BASES FOR TERMINATION:

1. After the trustmaker’s death, an irrevocable trust may be terminated in whole or part upon the unanimous agreement of the trustee and all “qualified beneficiaries”. “Qualified beneficiaries” are generally all beneficiaries who are current beneficiaries, intermediate beneficiaries, and first-line remainder beneficiaries, whether vested or contingent. AND No further purpose of the trust can be served.
2. By Judicial Decree IF - (a) in whole or in part if: The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impractical to fulfill; (b) 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 (c) A material purpose of the trust no longer exists.
3. For Fraud, Duress, Mistake or Undue Influence. If the trust was created as the result of any of these factors, it can be terminated. F.S. 736.0406
4. Merger of Interests. When legal and equitable interests of the trust have merged, it can be terminated.

Question 14

Cotrustees.—

(1)  Cotrustees who are unable to reach a unanimous decision may act by majority decision.
(2)  If a vacancy occurs in a cotrusteeship, the remaining cotrustees or a majority of the remaining cotrustees may act for the trust.
(3)  A cotrustee must participate in the performance of a trustee’s function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other provision of law, or other temporary incapacity or the cotrustee has properly delegated the performance of the function to another cotrustee.
(4)  If a cotrustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity, and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, the remaining cotrustee or a majority of the remaining cotrustees may act for the trust.
(5)  A cotrustee may not delegate to another cotrustee the performance of a function the settlor reasonably expected the cotrustees to perform jointly, except that a cotrustee may delegate investment functions to a cotrustee pursuant to and in compliance . A cotrustee may revoke a delegation previously made.
(6)  Except as otherwise provided in subsection (7), a cotrustee who does not join in an action of another cotrustee is not liable for the action. - Disagreement must be in writing.
(7)  Except as otherwise provided in subsection (9), each cotrustee shall exercise reasonable care to:
(a)  Prevent a cotrustee from committing a breach of trust.
(b)  Compel a cotrustee to redress a breach of trust.
(8)  A dissenting cotrustee who joins in an action at the direction of the majority of the cotrustees and who notifies any cotrustee of the dissent at or before the time of the action is not liable for the action.
(9)  If the terms of a trust provide for the appointment of more than one trustee but confer upon one or more of the trustees, to the exclusion of the others, the power to direct or prevent specified actions of the trustees, the excluded trustees shall act in accordance with the exercise of the power. Except in cases of willful misconduct on the part of the excluded trustee, an excluded trustee is not liable, individually or as a fiduciary, for any consequence that results from compliance with the exercise of the power. An excluded trustee does not have a duty or an obligation to review, inquire, investigate, or make recommendations or evaluations with respect to the exercise of the power. The trustee or trustees having the power to direct or prevent actions of the excluded trustees shall be liable to the beneficiaries with respect to the exercise of the power as if the excluded trustees were not in office and shall have the exclusive obligation to account to and to defend any action brought by the beneficiaries with respect to the exercise of the power.

Co-trustee is generally not liable for a breach of trust committeed by another trustee, but co-trustee cannot negligently disregard her own duties and fail to participate in the trust administration. Recours would be not to accept the co-trustee appointment or to resign.

Answer 14

Cotrustees.—

(1)  Cotrustees who are unable to reach a unanimous decision may act by majority decision.
(2)  If a vacancy occurs in a cotrusteeship, the remaining cotrustees or a majority of the remaining cotrustees may act for the trust.
(3)  A cotrustee must participate in the performance of a trustee’s function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other provision of law, or other temporary incapacity or the cotrustee has properly delegated the performance of the function to another cotrustee.
(4)  If a cotrustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity, and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, the remaining cotrustee or a majority of the remaining cotrustees may act for the trust.
(5)  A cotrustee may not delegate to another cotrustee the performance of a function the settlor reasonably expected the cotrustees to perform jointly, except that a cotrustee may delegate investment functions to a cotrustee pursuant to and in compliance with s. 518.112. A cotrustee may revoke a delegation previously made.
(6)  Except as otherwise provided in subsection (7), a cotrustee who does not join in an action of another cotrustee is not liable for the action.
(7)  Except as otherwise provided in subsection (9), each cotrustee shall exercise reasonable care to:
(a)  Prevent a cotrustee from committing a breach of trust.
(b)  Compel a cotrustee to redress a breach of trust.
(8)  A dissenting cotrustee who joins in an action at the direction of the majority of the cotrustees and who notifies any cotrustee of the dissent at or before the time of the action is not liable for the action.
(9)  If the terms of a trust provide for the appointment of more than one trustee but confer upon one or more of the trustees, to the exclusion of the others, the power to direct or prevent specified actions of the trustees, the excluded trustees shall act in accordance with the exercise of the power. Except in cases of willful misconduct on the part of the excluded trustee, an excluded trustee is not liable, individually or as a fiduciary, for any consequence that results from compliance with the exercise of the power. An excluded trustee does not have a duty or an obligation to review, inquire, investigate, or make recommendations or evaluations with respect to the exercise of the power. The trustee or trustees having the power to direct or prevent actions of the excluded trustees shall be liable to the beneficiaries with respect to the exercise of the power as if the excluded trustees were not in office and shall have the exclusive obligation to account to and to defend any action brought by the beneficiaries with respect to the exercise of the power. The provisions of s. 736.0808(2) do not apply if the person entrusted with the power to direct the actions of the excluded trustee is also a cotrustee.

Question 15

Beneficiaries have to be identifiable. Parol evidence is not admissible to show who the donor intended to benefit if provision in trust is unclear. For large class, reasonable efforts should be made to ID all qualified beneficiaries by research.

A presumably basic question, like “who’s a beneficiary?” can be the source of costly – yet avoidable – litigation. First, the testamentary document should explicitly define the client’s “children,” taking into account if any children are being disinherited and also the possibility of later-born children, adopted children and illegitimate children

Answer 15

Marital Relationships. The following rules apply to each person who is a beneficiary or a permissible appointee under this Trust Agreement and who is married to a descendant of mine. Such a person will cease to be a beneficiary and will be excluded from the class of permissible appointees upon: (a) the legal termination of the marriage to my descendant (whether before or after my death), or (b) the death of my descendant if a dissolution of marriage proceeding was pending when he or she died. The Trust will be administered as if that person had died upon the happening of the terminating event described above. If that person is not disqualified as provided above, he or she will remain a beneficiary (or permissible appointee), even if that person remarries after the death of my descendant.

Question 16

Cy Pres Doctrine - The cy-près doctrine is a legal doctrine which allows a court to amend a legal document to enforce it “as near as possible” to the original intent of the instrument, in situations where it becomes impossible, impracticable, or illegal to enforce it under its original terms.

Answer 16

Charitable Trusts - the cy-près doctrine allows a court to amend the terms of a charitable trust as closely as possible to the original intention of the testator or settlor to prevent the trust from failing. For example, in Jackson v. Phillips, (1867) 96 Mass. 539, the testator bequeathed to trustees money to be used to “create a public sentiment that will put an end to negro slavery in this country.” After slavery was abolished by the Thirteenth Amendment to the United States Constitution, the funds were applied cy-près to the “use of necessitous persons of African descent in the city of Boston and its vicinity.”

Question 17

Florida law recognizes three main types of trusts: express, resulting, and constructive.

1. An express trust is based on the settlor’s intent, which must be stated explicitly (usually written in the trust document). The settlor’s intent in achieving the purpose of the express trust is the controlling factor that a court will consider at all times when enforcing an express trust.
2. A resulting trust occurs if the property in an express trust is not fully allocated.
3. A court may order the creation of a constructive trust if it is necessary to preserve the trust property from acts in bad faith, such as fraud, duress, or undue influence. Constructive trusts are not based on settlor intent.

Answer 17

When interpreting the terms of the trust document, the court is limited to the terms as they are written in the trust document. The court is generally not permitted to consider any other outside evidence (extrinsic evidence). The words in the trust document are given their most common meaning. This is legally known as the plain meaning rule. However, if the meaning of terms in the trust document is unclear, outside evidence may be admitted to clarify their meaning. All express trusts in Florida are governed by the Florida Trust Code (FTC). In the event that a settlor’s property is not fully disposed of by the trust (e.g., when an express trust fails), a resulting trust may be created by a court based on the circumstances surrounding the trust.

Question 18

As previously mentioned, trustees are charged with specific duties relating to achieving the trust’s purpose. To qualify as a trustee, a person need only have legal capacity (usually interpreted to mean those who are 18 years and older and have not been declared legally insane or are under the supervision of a guardian ad litem). A trustee is not required to be a surviving spouse or loved one related to the settlor.

Answer 18

A trustee may accept the role by expressly agreeing to become a trustee or by beginning to perform the trustee’s duties. These duties generally include: management of trust assets, separation of trust property from nontrust property (earmarking), safekeeping trust property (e.g., purchasing insurance), distributing trust assets, paying trust debts, keeping accurate trust records, and making payments to the beneficiaries.

Question 19

The trust may specify the amount that a trustee is to be paid for performing trust duties. However, if the trust is silent as to trustee compensation, the trustee may be paid any amount that is necessary and reasonable given the unique circumstances of each trust administration. A trustee is also entitled to reimbursement from the trust funds for expenses incurred as a result of performing trust duties.

Answer 19

Trustee can reasonably delegate functions and pay a reasonable fee, but no self-dealing.

Question 20

A trust may fail if a trustee does not fulfill trust obligations or deviates from trust fiduciary duties. In which case, a trustee may also be removed from his or her position as a trustee.

Answer 20

A trust beneficiary may also request that the court remove a trustee. The court can also remove the trustee independently for cause. The trust may name alternative or successor trustees to replace a removed trustee. If the trust is silent as to successor trustees, the beneficiaries may unanimously appoint one. If neither option works, the court may also appoint a new trustee.

Question 21

A trust may terminate or end for many reasons, such as when the trust expires, the trust is revoked, or the trust purpose has been completely fulfilled. A trust may also terminate if the purpose of the trust becomes illegal, impossible, or wasteful to achieve. In this case, a court may act to modify or terminate a trust in a manner that conforms as closely as possible to the settlor’s intent. In other words, the court will determine an appropriate resolution of the trust according to the court’s interpretation of the settlor’s purpose in creating the trust. This process is called cy-pres. A trust may also terminate if a beneficiary dies before the fulfillment of the trust purpose.

Answer 21

The general rule is that if the trust document states grounds for trust termination, those terms control. However, the trust may also be modified or canceled if the settlor and all beneficiaries agree to the change. The trustee’s consent is not required. Upon the death of the settlor, the trustee and beneficiaries may agree to modify or terminate the trust unanimously. Also, a beneficiary’s interest depends on his or her survival until the time that trust property is to be completely distributed. If a beneficiary does not survive until such time, the gift is said to have lapsed. Florida has a so-called antilapse statute, which states that a lapsed gift will be distributed to the surviving relatives of the beneficiary in descending priority (per stirpes).

Question 22

Evidence of oral trust.—Except as required by s. 736.0403 (real property and testamentary trusts) 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.

Answer 22

Generally, oral trusts are held valid for Personal Property.

Question 23

736. 0704 Vacancy in trusteeship; appointment of successor.—
     (1)  A vacancy in a trusteeship occurs if:

• (a) A person designated as trustee declines the trusteeship;
• (b) A person designated as trustee cannot be identified or does not exist;
• (c) A trustee resigns;
• (d) A trustee is disqualified or removed;
• (e) A trustee dies; or
• (f) A trustee is adjudicated to be incapacitated.

(2)  If one or more cotrustees remain in office, a vacancy in a trusteeship need not be filled. A vacancy in a trusteeship must be filled if the trust has no remaining trustee.
(3)  A vacancy in a trusteeship of a noncharitable trust that is required to be filled must be filled in the following order of priority:

• (a) By a person named or designated pursuant to the terms of the trust to act as successor trustee.
• (b) By a person appointed by unanimous agreement of the qualified beneficiaries.
• (c) By a person appointed by the court.

(4) A vacancy in a trusteeship of a charitable trust that is required to be filled must be filled in the following order of priority:

• (a) By a person named or designated pursuant to the terms of the trust to act as successor trustee.
• (b) By a person selected by unanimous agreement of the charitable organizations expressly designated to receive distributions under the terms of the trust.
• (c) By a person appointed by the court.

(5) The court may appoint an additional trustee or special fiduciary whenever the court considers the appointment necessary for the administration of the trust, whether or not a vacancy in a trusteeship exists or is required to be filled.

Answer 23

A Trust does not fail for lack of a testator naming a successor trustee. The Court may appoint a successor upon petition to carry out the trust purposes.

First, a Trustee is the person or entity that protects and manages the assets in a trust. For a revocable living trust, that Trustee is usually the person that created the trust. … The successor trustee usually takes power when the person that created the trust either becomes incapacitated or has died.

In addition to fulfilling all other trustee fiduciary dutues, a successor trustee must keep the assets of each trust separate and keep his personal assets separate from the trust assets. This requires separate bank accounts, brokerage accounts, and safe deposit boxes for trust assets

Question 24

Before you can ask the court to modify or eliminate a trust, you must show that you have the right to do so. In other words, you need to show that you have the proper legal standing to contest it. Are you a beneficiary to this trust? If not, you may not have proper standing to bring legal action to contest it. Standing is ok for:

• named beneficiaries
• beneficiaries who would be a part of a class
• beneficiaries with life estates as well as remaindermen
• disinherited parties who would otherwise be part of will, and are contesting validity of will.
• Co-trustees, for violations / breaches of duties of other trustees
• Creditors?
• Charitable trust representatives

Answer 24

There is also a statute of limitations that applies. If you miss the cutoff for bringing a trust contest, then your request could be barred.

Question 25

Trust contests.—

(1)  In an action to contest the validity or revocation of all or part of a trust, the contestant has the burden of establishing the grounds for invalidity.
(2)  An action to contest the validity of all or part of a revocable trust, or the revocation of part of a revocable trust, may not be commenced until the trust becomes irrevocable by its terms or by the settlor’s death. If all of a revocable trust has been revoked, an action to contest the revocation may not be commenced until after the settlor’s death. This section does not prohibit such action by the guardian of the property of an incapacitated settlor.

Question 26

equirements for creation.—

(1) A trust is created only if:

• (a) The settlor has capacity to create a trust.
• (b) The settlor indicates an intent to create the trust.
• (c) The trust has a definite beneficiary or is:
  
  • 1. A charitable trust;
  • 2. A trust for the care of an animal, as provided in s. 736.0408; or
  • 3. A trust for a noncharitable purpose, as provided in s. 736.0409.
• (d) The trustee has duties to perform.
• (e) The same person is not the sole trustee and sole beneficiary.

(2)  A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.
(3)  A power of a trustee to select a beneficiary from an indefinite class is valid. If the power is not exercised within a reasonable time, the power fails and the property subject to the power passes to the persons who would have taken the property had the power not been conferred.

Answer 26

Trusts created in other jurisdictions; formalities required for revocable trusts.—

(1)  A trust not created by will is validly created if the creation of the trust complies with the law of the jurisdiction in which the trust instrument was executed or the law of the jurisdiction in which, at the time of creation, the settlor was domiciled.
(2)  Notwithstanding subsection (1):
(a)  No trust or confidence of or in any messuages, lands, tenements, or hereditaments shall arise or result unless the trust complies with the provisions of s. 689.05.
(b)  The testamentary aspects of a revocable trust, executed by a settlor who is a domiciliary of this state at the time of execution, are invalid unless the trust instrument is executed by the settlor with the formalities required for the execution of a will in this state

Question 27

Trust purposes.—A trust may be created only to the extent the purposes of the trust are lawful, not contrary to public policy, and possible to achieve.

Answer 27

Trust purposes.—A trust may be created only to the extent the purposes of the trust are lawful, not contrary to public policy, and possible to achieve.

History.—s. 4, ch. 2006-217; s. 4, ch. 2018-35.

736. 0405 Charitable purposes; enforcement.—
     (1)  A trust may be created for charitable purposes. Charitable purposes include, but are not limited to, the relief of poverty; the advancement of arts, sciences, education, or religion; and the promotion of health, governmental, or municipal purposes.
     (2)  If the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary, the court may select one or more charitable purposes or beneficiaries. The selection must be consistent with the settlor’s intent to the extent such intent can be ascertained.
     (3)  The settlor of a charitable trust, among others, has standing to enforce the trust.

Question 28

Effect of fraud, duress, mistake, or undue influence.— If the creation, amendment, or restatement of a trust is procured by fraud, duress, mistake, or undue influence, the trust or any part so procured is void. The remainder of the trust not procured by such means is valid if the remainder is not invalid for other reasons.

If the revocation of a trust, or any part thereof, is procured by fraud, duress, mistake, or undue influence, such revocation is void.

Answer 28

Reformation to correct mistakes.—Upon application of a settlor or any interested person, the court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intent if it is proved by clear and convincing evidence that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. In determining the settlor’s original intent, the court may consider evidence relevant to the settlor’s intent even though the evidence contradicts an apparent plain meaning of the trust instrument.

Question 29

Rights of beneficiary’s creditor or assignee.—Except as provided in s. 736.0504, to the extent a beneficiary’s interest is not subject to a spendthrift provision, the court may authorize a creditor or assignee of the beneficiary to reach the beneficiary’s interest by attachment of present or future distributions to or for the benefit of the beneficiary or by other means. The court may limit the award to such relief as is appropriate under the circumstances.

Answer 29

Even with spendthrift provision, there are three cases where a creditor may reach the trust’s assets:

1. Payment of court-ordered child support or alimony;
2. Payment to anyone who “provided services for the protection of a beneficiary’s interest in the trust”; and
3. Payment of any claim, such as a tax lien, held by the federal government or the State of Florida.

Question 30

Creditors’ claims against settlor.—

(1)  Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:
(a)  The property of a revocable trust is subject to the claims of the settlor’s creditors during the settlor’s lifetime to the extent the property would not otherwise be exempt by law if owned directly by the settlor.
(b)  With respect to an irrevocable trust, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor’s benefit. If a trust has more than one settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor’s interest in the portion of the trust attributable to that settlor’s contribution.
(c)  Notwithstanding the provisions of paragraph (b), the assets of an irrevocable trust may not be subject to the claims of an existing or subsequent creditor or assignee of the settlor, in whole or in part, solely because of the existence of a discretionary power granted to the trustee by the terms of the trust, or any other provision of law, to pay directly to the taxing authorities or to reimburse the settlor for any tax on trust income or principal which is payable by the settlor under the law imposing such tax.

Question 31

Trustee’s duty to pay expenses and obligations of settlor’s estate.—

(1)  A trustee of a trust described in s. 733.707(3) shall pay to the personal representative of a settlor’s estate any amounts that the personal representative certifies in writing to the trustee are required to pay the expenses of the administration and obligations of the settlor’s estate. Payments made by a trustee, unless otherwise provided in the trust instrument, must be charged as expenses of the trust without a contribution from anyone. The interests of all beneficiaries of such a trust are subject to the provisions of this subsection; however, the payments must be made from assets, property, or the proceeds of the assets or property that are included in the settlor’s gross estate for federal estate tax purposes and may not be made from assets proscribed in s. 733.707(3) or death benefits described in s. 733.808(4) unless the trust instrument expressly refers to s. 733.808(4) and directs that it does not apply.
(2)  Unless a settlor provides by will, or designates in a trust described in s. 733.707(3) funds or property passing under the trust to be used as designated, the expenses of the administration and obligations of the settlor’s estate must be paid from the trust in the following order:
(a)  Property of the residue of the trust remaining after all distributions that are to be satisfied by reference to a specific property or type of property, fund, or sum.
(b)  Property that is not to be distributed from specified or identified property or a specified or identified item of property.
(c)  Property that is to be distributed from specified or identified property or a specified or identified item of property.(3) Trust distributions that are to be satisfied from specified or identified property must be classed as distributions to be satisfied from the general assets of the trust and not otherwise disposed of in the trust instrument on the failure or insufficiency of funds or property from which payment should be made, to the extent of the insufficiency. Trust distributions given for valuable consideration abate with other distributions of the same class only to the extent of the excess over the value of the consideration until all others of the same class are exhausted. Except as provided in this section, trust distributions abate equally and ratably and without preference or priority between real and personal property. When a specified or identified item of property that has been designated for distribution in the trust instrument or that is charged with a distribution is sold or taken by the trustee, other beneficiaries shall contribute according to their respective interests to the beneficiary whose property has been sold or taken. Before distribution, the trustee shall determine the amounts of the respective contributions and such amounts must be paid or withheld before distribution is made.

Answer 31

(4)  The trustee shall pay the expenses of trust administration, including compensation of trustees and attorneys of the trustees, before and in preference to the expenses of the administration and obligations of the settlor’s estate.
(5)  Nonresiduary trust dispositions shall abate pro rata with nonresiduary devises pursuant to the priorities specified in this section and s. 733.805, determined as if the beneficiaries of the will and trust, other than the estate or trust itself, were taking under a common instrument.

Question 32

Limitation on action contesting validity of revocable trust.—

An action to contest the validity of a trust that was revocable at the settlor’s death is barred, if not commenced within the earlier of:

(1)  The time as provided in chapter 95; or
(2)  Six months after the trustee sent the person a copy of the trust instrument and a notice informing the person of the trust’s existence, of the trustee’s name and address, and of the time allowed for commencing a proceeding.

Answer 32

Notice of trust.—

(1)  Upon the death of a settlor of a trust described in s. 733.707(3), the trustee must file a notice of trust with the court of the county of the settlor’s domicile and the court having jurisdiction of the settlor’s estate.
(2)  The notice of trust must contain the name of the settlor, the settlor’s date of death, the title of the trust, if any, the date of the trust, and the name and address of the trustee.
(3)  If the settlor’s probate proceeding has been commenced, the clerk shall notify the trustee in writing of the date of the commencement of the probate proceeding and the file number.
(4)  The clerk shall file and index the notice of trust in the same manner as a caveat unless there exists a probate proceeding for the settlor’s estate, in which case the notice of trust must be filed in the probate proceeding and the clerk shall send a copy to the personal representative.
(5)  The clerk shall send a copy of any caveat filed regarding the settlor to the trustee, and the notice of trust to any caveator, unless there is a probate proceeding pending and the personal representative and the trustee are the same.
(6)  Any proceeding affecting the expenses of the administration or obligations of the settlor’s estate prior to the trustee filing a notice of trust are binding on the trustee.
(7)  The trustee’s failure to file the notice of trust does not affect the trustee’s obligation to pay expenses of administration and obligations of the settlor’s estate as provided in s. 733.607(2).

Question 33

The Rule Against Perpetuities requires that a property interest must vest in a person or persons entitled to the property no later than lives in being plus 21 years, or 90 years. This act modifies the Rule Against Perpetuities, as it relates to trusts, by substituting 360 years for 90 years. Accordingly, this act allows a trust to remain in existence for up to 360 years before the trust must terminate and its assets distributed among the beneficiaries. This act also provides that the Rule Against Perpetuities is the sole expression of any rule against perpetuities or
remoteness in vesting, and that no common law Rule against perpetuities or remoteness in vesting shall exist.

Answer 33

This act further modifies trust law by providing for judicial and nonjudicial modification of a trust; allowing reimbursement of costs and attorney’s fees in any action for modification or termination of a trust; providing that an action to contest the validity of a trust may not be commenced until the trust becomes irrevocable; clarifying the statutory provisions that prohibit a killer from receiving trust proceeds as a result of the victim’s death; and creating a presumption of death applicable to trust administration that is similar to the presumption found
in the probate code.