Trusts Florida

Question 1

When may a court modify, reform, or terminate an irrevocable trust?

Answer 1

1) If not inconsistent with the settlor’s purpose where
* (a) trust has been fulfilled or become illegal or impossible,
* (b) compliance would defeat or substantially impair the material purpose, or
* (c) material purpose no longer exists;

2) When in the beneficiaries’ best interest
3) It determines that the value of the trust property is insufficient to justify the administration costs
4) To correct mistakes; or
5) To accomplish the settlor’s tax objectives

Question 2

What are the two circumstances in which a trust may be unfunded?

Answer 2

1. Pour-over trust
   * is typically funded at the time of the settlor’s death by a devise in the settlor’s will; and
2. Life insurance trust
   * trust property that consists of the trustee’s right to receive death benefits (e.g., proceeds from a life insurance policy, annuity, death benefit).

Question 3

Will a trust generally fail if it has no trust property?

Answer 3

Yes, a valid trust must generally contain some property that was owned by the settlor at the time the trust was created and was at that time transferred to the trust or to the trustee

Question 4

What are the fiduciary duties that a trustee owes to the settlor in Florida?

Answer 4

• Duty to administer the trust in good faith and in accordance with the trust terms and trust purposes,
• duty of loyalty,
• duty to be impartial,
• duty of reasonable care,
• duty to delegate,
• duty to take reasonable steps to take control of and protect the trust’s property,
• duty to separate and identify trust property,
• duty to keep a beneficiary reasonably informed of the trust and its administration,
• duty to account, and
• duty to address a breach by a former trustee

Question 5

A trust must name at least one

Answer 5

DEFINITE beneficiary

a beneficiary is definite, even if unborn at the time the trust is created, provided such beneficiary will be identifiable by the time the beneficiary’s interest must vest under the Rule Against Perpetuities

Question 6

When is the cy pres doctrine applied by a court to modify or terminate a trust?

Answer 6

When (i) a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful; and
(ii) trust property may be applied or distributed, in whole or in part, in a manner consistent with the settlor’s charitable purposes.

Question 7

Absent language within the trust instrument prescribing the method of revocation, what action is sufficient for a settlor to revoke a trust?

Answer 7

Any action manifesting the settlors intent to revoke

Question 8

How is a private express trust created?

Answer 8

A private express trust may be created by
(i) a transfer of property to another person as trustee either during the settlor’s lifetime or by will or disposition taking effect on the settlor’s death;
(ii) a declaration by the owner of property that the owner holds identifiable property as trustee; or
(iii) an exercise of a power of appointment in favor of a trustee

Question 9

When is a trustee personally liable to a third party for contract and tort claims?

Answer 9

Never UNLESS the trustee fails to **reveal her representative capacity **and to identify the trust estate in the contract.
A trustee is liable in tort only if she is personally at fault.

Question 10

When does the anti-lapse rule apply to Florida trusts?

Answer 10

Unless a contrary intent appears in the trust instrument, anti-lapse only applies to Florida trusts if the beneficiary is a grandparent, or a lineal descendant of a grandparent, of the settlor or testator.

Question 11

What claims against a beneficiary are not precluded by a spendthrift clause?

Answer 11

(i) support claims by a spouse, an ex-spouse, or a child of a beneficiary;
(ii) claims by a judgment creditor who has provided services for the protection of a beneficiary’s trust interest; and
(iii) claims of the federal government or the State of Florida

Question 12

What is a breach of trust?

Answer 12

A violation by a trustee of a duty that the trustee owes to a beneficiary

Question 13

What are the seven elements of a private express trust?

Answer 13

A private express trust is created when:
(i) a settlor,
(ii) who has capacity to create a trust,
(iii) clearly expresses a present intent to transfer ownership of, (iv) property to
(v) a trustee who has duties to perform,
(vi) for the benefit of one or more definite or ascertainable beneficiaries,
(vii) for a valid purpose.

Question 14

Trust property must be described by a

Answer 14

reasonable certainty

Question 15

When will a trust automatically terminate?

Answer 15

expires, is revoked, is properly distributed or when all purposes under the trust have been accomplished

Question 16

In Florida, can the same individual serve as sole trustee and sole beneficiary of a trust?

Answer 16

No

Question 17

What is a spendthrift provision?

Answer 17

prevent a beneficiary from thwarting the purpose of the trust and gaining immediate access to funds that cannot be distributed under the trust terms. Not only is a beneficiary prevented from transferring her interest, but the beneficiary’s creditors are not able to attach that interest.

Question 18

What is the statute of limitations for a breach of trust claim?

Answer 18

4 years however, if the trust beneficiary receives a trust disclosure document that adequately discloses a matter and a limitation notice, then the statute of limitations is shortened to 6 months

Question 19

Is a passive trust (a trust in which the trustee’s only duty is to pass property to a beneficiary) a valid express trust?

Answer 19

NO

Question 20

When does a revocation of a trust become effective?

Answer 20

When the act of revocation occurs

Question 21

Is a trust presumed to be revocable or irrevocable?

Answer 21

Revocable

Question 22

What is the Florida Rule Against Perpetuities for non-vested property interests in trusts?

Answer 22

A non-vested property interest in a trust is invalid unless
(i) at the time the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive; or
(ii) the interest either vests or terminates within 1,000* years after its creation.

*Interests created from Jan. 1, 2001 - June 30, 2022 interest must vest within 360 years
Interests created on or before December 31, 2000, the vesting period is 90 years.

Question 23

In Florida, if a revocable trust is executed by a husband or wife as the settlor but then the couple obtains a divorce, what happens to the provisions of the trust that affect the settlor’s ex-spouse?

Answer 23

It becomes void

Question 24

Is consideration required to create a trust?

Answer 24

No

Question 25

What is the anti-lapse rule in Florida?

Answer 25

If a qualifying beneficiary of a future interest under the terms of a trust fails to survive the distribution date, and the deceased beneficiary leaves surviving descendants —-> a substitute gift is created in the beneficiary’s surviving descendants.

If there are no surviving descendants ——> the interest lapses.

Question 26

A trust has a material purpose if it

Answer 26

• has a spendthrift provision,
• a discretionary distribution provision,
• a distribution provision keyed to the support of the beneficiary or a
• postponement of enjoyment provision

Question 27

What is the “no further inquiry” rule under the duty of loyalty?

Answer 27

A trustee owes a duty of loyalty to the beneficiaries, and self dealing is prohibited. Once self-dealing is established, no further inquiry into the trustee’s reasonableness or good faith is necessary, because self-dealing is a per se breach of the duty of loyalty.

Question 28

When a distribution of corporate stocks is mandated by a trust instrument, the beneficiary is entitled to

Answer 28

(1) that stock,
(2) stock acquired by virtue of a stock split, and
(3) stock of another corporation acquired by merger

but NOT stock acquired by exercise of a purchase option.

Question 29

May a court modify the terms of an irrevocable trust if, because of circumstances not anticipated by the settlor, compliance with its terms would defeat or substantially impair the accomplishment of a material purpose of the trust?

Answer 29

YES

Question 30

Property given during the decedent’s lifetime to an heir will only be treated as an advancement against the heir’s share of the estate (but remember it does not bind the heirs descendants if the heir predeceases the decedent) if the gift was:

Answer 30

• declared in a contemporaneous writing by the decedent to be an advancement or
• acknowledged in writing by the heir as an advancement.