FLORIDA TRUST LITIGATION
Strategically, trusts are used by many individuals who are seeking to avoid the courtroom since trusts can provide for distribution of assets at death (as well as during one’s lifetime) and thereby avoid the need for a will which would necessitate probating through the courts.
Savvy property owners have successfully used trusts to hold their assets in such a way that at the time of their deaths, little if any property was left in their estate that would be subject to probate or to the provisions of a Last Will and Testament. In doing so, they avoided the probate court and saved their beneficiaries time, money and aggravation.
Trusts, however, are not a guaranteed strategic success in the avoidance of courtroom litigation. There are many times when trustees, beneficiaries, or others with an interest in the trust’s assets will challenge a trust, the actions of a trustee, or the validity of the trust itself and lawsuits will be filed. Florida Trust Litigation situations can include:
Florida Trust Disputes & Contests (challenging the validity of the Trust)
Sometimes, not only beneficiaries but also those outside the Trust (often, unhappily so) will file suit challenging the legal validity of a Trust. They may do so in any number of ways, such as asserting:
- Mistake in Execution – an express trust (one that is written) must be executed in conformance with Florida Statute §737.111. If this statute is not followed, the trust may not be recognized under Florida law.
- Undue Influence – an undue influence claim challenges whether the person making the Trust did so freely and without being coerced by a person who was in a position of confidence (trust) and control.
- Lack of Capacity – a lack of capacity claim is asserted based upon the belief that at the time the Trust was executed the person making the Trust did not have the requisite mental ability to understand a) the amount and nature of his property; b) the family members and loved ones who would ordinary receive such property; and c) how the Will disposes of such property. The standard for “testamentary capacity” is not as high as general competency. A person need only understand the nature and extent of his assets and the natural objects of his bounty (his family). Lack of capacity can be the result of the natural aging process or the result of a person being on a substantial amount of medication, e.g. heavy morphine to treat end-stage cancer. Lack of capacity litigation relies on medical records and the irrational conduct of the testator prior to executing the Trust.
The causes of action for a trust dispute or trust contest are substantially similar to those for a Will Contest.
Trust Construction (asking for clarification of the terms of the Trust)
There are occasions when a Trust contains language that is confusing or even contradictory. Mistakes can be made, or ambiguities can arise, when Trusts are prepared. Afterwards, a lawsuit may be needed in order for a judge to rule on whether or not Florida laws will allow the Trust to be revised or reformed, even after the Grantor’s death.
Alternatively, sometimes a Trust is properly prepared, but circumstances have evolved that have left portions of the trust ambiguous. For example, all of the trustees named in the trust have died and the trusteeship is left vacant. In all of these cases, the assistance of the court may be sought to resolve matters.
Challenges to the Trustee
Many lawsuits dealing with Trusts in Florida courtrooms are focused upon the actions of the Trustee in implementing the language of the trust documents, and not challenging the content of the Trust itself. These challenges to the actions (or inactions) of the Trustee can include:
- Breach of Fiduciary Duty– a person nominated by a trust document to serve as trustee has duties and responsibilities with which they are charged. Failure to properly administer a trust, either by overt act or by omission, can be actionable. Sometimes the remedy sought is removal of the fiduciary, but sometimes, when funds have been wasted or mismanaged or excessive fees have been taken, the remedy is a surcharge action. For a list of the duties and powers of a trustee, see Florida Statute §§737.301-309.
- Removal of Fiduciary — a fiduciary may be removed by the court for cause.
- Surcharge Action – The purpose of a surcharge against a fiduciary is to restore the losses sustained by the fiduciary’s breach of duty.
- Accounting – Beneficiaries have the right to an accounting. If one has not been provided, then a beneficiary may seek the court’s assistance to compel the fiduciary to account for the trust assets. If an accounting has been provided and is objectionable for any reason, then the beneficiary may object to the accounting and seek judicial intervention.
Alternatives to a Trust Contest as of 2007
Under Florida’s Trust Code, which became effective in July 2007, there are now several options for trust beneficiaries or interested persons who are seeking justice in connection with a Florida Trust other than seeking to have a trust declared invalid, in whole or in part:
- Nonjudicial Settlement Agreements – Under the Florida Trust Code §736.0111, interested persons may enter into a binding nonjudicial settlement agreement with respect to virtually any trust matter. Many lawsuits can be avoided through the parties working out a nonjudicial settlement agreement (outside of court). The advantages of this type of resolution is that it avoids the often uncertain outcome that comes with trying a case through a verdict and gives the parties some control over the ultimate result.
- Trust Modification and Termination – Often times a trust dispute can be resolved through simple modification, termination or reformation of the trust. The Florida Trust Code, at Section 736.04113 permits trust modifications in a manner consistent with the settlor’s purposes for the trust. Section 736.04115 permits judicial modifications in the best interest of the beneficiaries. Finally, §736.0412 permits nonjudicial modifications of trusts.
- Uneconomic Trust Can Be Terminated – Section 736.0414 of the Florida Trust Code provides a mechanism for a trustee or a court to modify or terminate an uneconomic trust. A trustee of a trust with property worth less than $50,000 may terminate the trust on its own initiative if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration. In addition, upon application of a trustee or any qualified beneficiary, a court may modify or terminate a trust, or remove or appoint a different trustee, if the court determines that the value of the trust property is insufficient to justify the cost of administration.
- Trust Reformation – Under Section 736.0415, an interested person may ask the Court to reform the terms of a trust to conform to the settlor’s intentions 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. Under this new section of the Trust Code, reformation is available for both mistakes of law and of fact, whether or not the terms of the trust are ambiguous. §736.4015 is available for all types of mistakes, whether in the expression or in the inducement.
- Trustee Removal – A trustee may resign with court approval or, in lieu thereof, by giving at least 30 days notice to the settlor (if living), the co trustees (if any) and all qualified beneficiaries. In either case, a trustee’s resignation does not discharge any liability of the resigning trustee or any sureties on the trustee’s bond.
a. Grounds for Removal of Trustee — According to §736.0706, court removal of a trustee may be sought by the settlor, a co trustee, or any beneficiary. In addition, a court may remove a trustee on its own initiative. Statutory grounds for removal include a serious breach of trust, lack of cooperation among co trustees, and unfitness, unwillingness, or persistent failure to effectively administer the trust.
b. If All Beneficiaries Agree, Trustee Can Be Removed — Section 736.0706 also permits removal of a trustee at the request of all of the qualified beneficiaries or upon a showing of a substantial change in circumstances. Removal on these grounds does not require a showing of malfeasance. It requires only that the removal best serve the interests of all beneficiaries, that it not be inconsistent with a material purpose of the trust, and that a suitable co trustee or successor trustee be available.
If you have comments or questions regarding how a Florida Trust Litigation Lawyer at the Law Offices of Adrian Philip Thomas, P.A. might be of assistance with a Florida Trust Dispute or Florida Trust Contest matter, please feel free to contact the firm’s office to schedule a free initial consultation with one of our attorneys.