COMPENSATION OF TRUSTEES WHO ARE ALSO BENEFICIARIES

In a recent Florida Second DCA case, Burgess v. Prince, 25 So.3d 705 (Fla. 2^nd DCA 2010), the Court determined that a Trustee of a family trust, who was also a Trust beneficiary, was entitled to compensation for her management of Trust assets, despite the fact that the trust instrument provided that a beneficiary of the Trust could not receive compensation for serving as Trustee.  The trial court removed the Trustee and ordered that she may not be compensated for managing a business, which was a trust asset, and all compensation she received would be charged against her distributive share of the Trust.  See Id.  On appeal, the Appellate Court upheld the removal without discussion but reversed a part of the final judgment which ruled the Trustee could not be compensated for managing the business which was a trust asset.  Although the trust instrument provided that a Trustee who is also a beneficiary shall serve as Trustee without compensation, the Appellate Court found that the Trustee received compensation from the trust for operating the business, rather than as compensation as Trustee.  In ruling, the Appellate Court relied on language in the trust instrument which plainly stated that the Trustee can employee various individuals, including any Trustee, if such employment was deemed necessary or desirable and to be paid reasonable compensation for their services.  In addition, the trust instrument had language which allowed a Trustee to employee any beneficiary or individual fiduciary in any capacity. (more…)

Breathing Life Into An Otherwise Unenforceable Trust Instrument

The following is based on real events, only the names have been changed to protect the guilty. 

Jane Settlor created her revocable trust in 2005, naming herself as the initial trustee and sole income beneficiary during her lifetime, and upon her death, the remainder of the trust estate is to be divided amongst numerous individuals (some family, some not), charities and a charitable foundation that she created.  The drafting attorney, John Lawyer, is also the nominated successor trustee and the CEO of Mrs. Smith’s charitable foundation.

A couple years after executing her trust, Jane Settlor pulled out her estate planning documents to re-review her estate plan.  Upon reviewing her revocable trust, and to her surprise, she noticed that many of the residuary beneficiaries of her trust were people that she hardly knew at all, and should not have been included as beneficiaries of her trust.  Mrs. Settlor immediately began crossing out names and devises, and interlineated (in her own handwriting) new names and devises.  Next to each interlineated change, Mrs. Settlor handwrote her initials and the date.  She then made some handwritten notes on the front page of the trust instrument, which read as follows:  “Mr. Lawyer, I read my trust today, and I couldn’t believe what I saw.  There were people named who I hardly even know.  I was so sick at the time I signed the trust, that I didn’t even know what was being presented to me for my signature!!!”  (more…)

Fourth District Reverses $1.6M Jury Verdict Because Lawyer Failed to Substitute Decedent’s Estate as a Party

Litigation presents lots of surprises and traps for the unwary.  The consequences of failing to follow a seemingly-routine procedure can sometimes lead to horrific consequences. 

An example of one of the plain and simple rules of litigation is that if a party dies and the claim is not thereby extinguished, the court may order substitution of the proper parties. The motion for substitution may be made by any party or by the successors or representatives of the deceased party.  The motion must be made within 90 days or the action shall be dismissed as to the deceased party. The purpose of this rule is to facilitate the rights of persons having lawful claims against estates being preserved, so that otherwise meritorious actions will not be lost

When counsel files a suggestion of death, opposing counsel should (a) contact opposing counsel for information regarding the date and place of death, and such information as opposing counsel may have regarding whether an estate has been opened, or (b) propound discovery directed at obtaining the same information, or (c) both.  Generally, if the decedent’s estate has been opened, then the personal representative should be substituted in place of the decedent; however, if no estate has been opened, then another appropriate representative, such as a guardian ad litem, will need to be substituted.  Failure to substitute the proper representative or guardian nullifies subsequent proceedings. (more…)

Under Florida law, “a person who is absent from the place of his or her last known domicile for a continuous period of 5 years and whose absence is not satisfactorily explained after diligent search and inquiry is presumed to be dead. The person’s death is presumed to have occurred at the end of the period unless there is evidence establishing that death occurred earlier. Evidence showing that the absent person was exposed to a specific peril of death may be a sufficient basis for the court determining at any time after such exposure that he or she died less than 5 years after the date on which his or her absence commenced. “  F.S. 731.103 (3)

Florida law does not preclude the establishment of death by direct or circumstantial evidence prior to 5-years.

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What’s a beneficiary to do?

Many people utilize revocable trusts in an effort to avoid probate.  Often, the primary asset of a revocable trust is real estate.  The person who signs the trust (Settlor) customarily chooses the individual(s) to serve as a successor trustee upon the Settlor’s death or incapacity.

Once the Settlor dies and a successor trustee accepts the position, a set of laws mandates the trustee’s conduct under Florida law.  These laws are found in Chapter 736 of the Florida Statutes, also known as the Florida Trust Code.  In particular, sections 736.0801 (duty to administer trust), 736.0802 (duty of loyalty) 736.0803 (impartiality), and 736.0804 (prudent administration) are triggered.  The Florida Trust Code was modified substantially in recent years and the current version took effect on July 1, 2007.     (more…)

STEP CHILDREN AND CHILDREN BORN OUT OF WEDLOCK

Florida inheritance laws do not treat your stepchildren as your legal heirs, therefore, they do not have an automatic legal right to inherit from you. If you want to ensure they will receive part of your estate, you will need a Will that specifically names them as a beneficiary. If you simply leave “20 percent to my children”, then your stepchildren may inherit nothing. It is important to name each individual child as a beneficiary instead of referring to them as “my children”, which will avoid confusion in interpretation of the Will language. If you formally adopt your stepchildren, then they will inherit from you as a beneficiary the same way as your biological children. (more…)