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Trust Administration: Trustee Duties And Responsibilities

If you are the trustee, beneficiary or a creditor of a revocable living trust in Florida that is being administered because of the death of the grantor of the trust, failure to comply with those statutory duties and responsibilities can lead to significant potential liability.

All trustees must follow the terms of the trust instrument unless the provision is illegal or impossible to perform, or if circumstances warrant a court-ordered deviation.

In order to perform the responsibilities of trust administration, all trustees have not only the powers specifically set forth in the trust instrument but also those provided in the probate code that are automatically granted even though not stated in the trust itself.

If both the specific powers stated in the trust instrument and those found in the probate code are not sufficient to enable the trustee to complete the instructions of the trust, the trustee can petition the court for additional powers.

Additionally, there may be an omnibus clause in the trust or other implied powers by law, which allow the trustee to do anything necessary to carry out the objectives and purposes of the trust. (Note: Using any powers that go beyond those expressly stated in the trust or provided by statute can be risky to the trustee and should be exercised very cautiously.)

Terms Of The Trust

The express terms of the trust instrument are controlling of the trustee’s actions. Many of the terms in the trust are based on the Florida Trust Code and case law that gives very specific meaning to various words and phrases. The assistance of Florida trust administration lawyers and attorneys can help a trustee understand the legal implications of such language – rather than the trustee “guessing” what the language might mean.

Any action taken by the trustee that goes contrary to the express language of the trust may expose the trustee to personal liability.

If the language of the trust instrument is ambiguous or unclear, the trustee can refer to verbal or written instructions known to the trustee that are outside of the trust for clarification. However, those extrinsic sources cannot be used to override or take any action that is contradictory to the language of the trust instrument.

Rather than taking any action that is contrary to the trust instrument (even if it appears to be inferred by extrinsic written or oral instructions from the trustmaker), the trustee should consider petitioning a court for direction and guidance. Failure to do so could make the trustee personally liable to beneficiaries or third parties who were negatively affected by the trustee’s conduct. Filing a petition with the court to determine the meaning of the language of the trust document requires the assistance of Florida trust administration lawyers and attorneys.

If any written direction to the trustee outside the trust would have the effect of modifying the language of the trust itself, the trustee would put himself or herself at peril if he or she followed those instructions unless they meet the formal, legal requirements for trust modification.

Duty Of Skill And Care

All trustees have the duties and responsibilities of the trustee position regardless of whether they are compensated for their services.

In fulfilling the duties, the trustee must do so “with reasonable care, skill and caution under the circumstances then prevailing that a prudent person acting in a like capacity would use in the conduct of an enterprise of like character and with like aims to accomplish the purpose of the trust as determined from the trust instrument.” This applies to investments, administration and distribution.

If the trustee is considered to be an “expert trustee” with special knowledge, skills and experience dealing with trusts, his or her duty of care and diligence will be greater.

At least once every year (more often if required by the trust), the trustee is required to give a full accounting of the value of all assets, income received, distributions made, expenses paid, etc., to all beneficiaries to whom income or principal that year was distributable. Any language in the trust going contrary to this requirement is void. However, a beneficiary may voluntarily waive the right to receive that information.

The trustee also must keep beneficiaries reasonably informed of trust activity and administration.

When a trust that was revocable becomes irrevocable (usually on the death of a trustmaker), the trustee must provide a complete copy of the irrevocable portions of the trust to any beneficiary of a deceased trustmaker who requests a copy.

The above duty to provide a copy of the trust includes the responsibility to provide a report about the assets, liabilities and disbursements that are relevant to the beneficiary’s interest. (This does not apply if the trust is revocable or if it is waived by the language in the trust.)

The privileges of attorney/client communications and attorney work product remain protected and do not need to be disclosed.

If access to records is given to a beneficiary or potential heir rather than providing copies thereof, the trustee should be present during that review.

Absent contrary instructions in the trust instrument, the trustee has a duty not to delegate to third persons the performance of acts that the trustee can reasonably be required to perform personally. (This does not mean the trustee is prohibited from engaging the services of attorneys, financial advisers, accountants, clerical assistants, etc.)

Notification Requirements

Notification to all beneficiaries of an irrevocable trust or the irrevocable portion of a trust must be given in the following circumstances pursuant to Florida Statutes, Section 736.0813:

  • When a previously revocable trust becomes irrevocable in full or in part
  • When there is a change of trustees of an irrevocable trust

The persons to receive notification are:

  • Each beneficiary of the irrevocable trust or irrevocable portion
  • Each heir of the trustmaker if the event creating the irrevocability is the death of the trustmaker
  • The attorney general if the trust is a charitable trust subject to the supervision by the attorney general

Identification of said persons is tempered by the ability of the trustee to identify or locate such persons through reasonable diligence.

Notification is to be made by mail to the last known address or by personal delivery within 60 days following the occurrence of the event requiring service of the notification or 60 days following the trustee becoming aware of the existence of the person entitled to notification.

The notification must contain the following:

  • The identity of the trustmaker and the date of the trust
  • The name, mailing address and phone number of each trustee of the trust
  • The address of the physical location serving as the place of administration of the trust
  • Any additional information that may be required by the terms of the trust itself
  • The right of the recipient upon reasonable request to receive a true and complete copy of the terms of the trust as applicable to that person
  • A warning, set out in a separate paragraph in not less than 10 point boldfaced type, that states, “you may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the day on which a copy of the terms of the trust is mailed or personally delivered to you in response to your request during the 120-day period, whichever is later.” (This warning is not required if notification is served only because of a change of trustee.)

Failure of a trustee to provide the required notice will subject the trustee to all damages, including attorney fees and costs caused by the failure to give the notification unless the trustee has made a good faith effort to comply with that responsibility.

Duty Of Confidentiality

Every trustee has a duty to keep the affairs of the trust confidential (this applies to the terms of the trust, the identity and interest of the beneficiaries and the nature of the trust assets.)

Special rules may apply if the trustee is a corporate fiduciary administering a private trust.

In some instances, the duty of confidentiality can be overridden. These include:

  • Litigation and rules of discovery or presentation of evidence that may be applicable
  • Possibly government regulations such as the filing of income tax returns or property tax issues
  • When the information that is being disclosed is already of public record
  • The previously described rights of certain beneficiaries or heirs to receive copies or information from the trust

Conflicts Of Interest

The primary duty of every trustee is to administer the trust solely in the interest of the trust beneficiaries (i.e., according to the distribution and asset management that is provided in the trust for the beneficiaries).

Although a trustee can also be a beneficiary of the same trust, doing so may occasionally create a potential conflict of interest with respect to the rights or management of assets for other beneficiaries.

If the trustee has any other financial dealings with the trust such as landlord, creditor, etc., such may also create a potential conflict of interest.

All self-dealings of every nature by the trustee with the trust are prohibited! (This is true even though the transaction causes no actual loss or damage to the trust.)

If the trustee already had an existing relationship business-wise or was a creditor of the trust before becoming a trustee, such may continue (though it may create a potential conflict of interest in the administration of trustee duties).

Once the trustee assumes that position, however, no new transactions of any kind that would benefit the trustee personally or for profit are allowed. Thus, the trustee can not even use assets of the trust for personal benefit or enter into new transactions with the trust of any nature that would be beneficial to the trustee.

The trustee may, of course, use the trust assets in the course of carrying out the trustee’s duties and administration of the trust.

This prohibition may also extend to family members or business associates of the trustee.

Sometimes, however, such self-dealing transactions are allowed by language in the trust and, if so, may be allowed if the conditions of the trust are fulfilled.

Transactions between the trustee and the trust can also be undertaken if informed consent is contained from all beneficiaries or is approved by the court.

Every trustee is also prohibited from engaging in a business that is in competition with any business of the trust.

If you need the assistance of Florida trust administration lawyers and attorneys to ensure that you, as trustee, fulfill those trustee duties and responsibilities, or as a beneficiary to recover from a trustee’s conflict of interest, please contact us today.