Section 736.0415 of the Florida Trust Code expressly provides that unambiguous provisions of a trust may be reformed where clear and convincing evidence shows that the language of the trust does not reflect the settlor’s intent, even where the evidence regarding the settlor’s intent is contrary to the trust itself:

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. See § 736.0415, Fla. Stat. (2010) (emphasis added).

The express purpose of section 736.0415 is to permit reformation of an otherwise clear, unambiguous written trust signed by a settlor where evidence exists that the “plain meaning of the trust instrument” does not evidence the settlor’s intent. A trust with testamentary aspects may even be reformed after the death of the settlor for a drafting mistake so long as the reformation is not contrary to the interest of the settlor. Reformation under the section is available for mistakes of law and of fact. Florida case law also supports reformation to cure scrivener’s or drafting errors. [See In re Estate of Robinson, 720 So.2d 540 (Fla. 4th DCA 1998)]. The party seeking reformation of a trust with testamentary aspects has the burden to prove, by clear and convincing evidence, that the trust, as written, does not reflect the settlor’s intent.

Can I fire my trustee?

We receive numerous inquiries from clients asking, “How can I fire my Trustee?”  In Florida, “firing a Trustee” is called a trustee removal action, through which an interested party may seek to remove a trustee of a trust, sometimes for reasons other times for no cause.  Florida Trust law contains specific statutes which address the removal of trustees.

According to Florida Statute §736.0706, 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. 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. Any action to remove a trustee on these grounds would be considered a removal “for cause.”

Florida Statute §736.0706, also permits the removal of a trustee without cause at the request of all of the qualified beneficiaries, or upon a showing of substantial change in the circumstances. Removal on these grounds does not require proof of any breach of fiduciary duty, malfeasance or other grounds for removal. It requires only that the removal of the trustee (or firing of the trustee as some like to say) best serves 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.

So whether your trustee is treating the trust like his own personal checking account, repeatedly failing to provide accountings or reasonable information regarding the assets of your Trust, failing to invest prudently, or any other grounds which could constitute a serious breach of trust, or you just don’t feel the trustee is providing any benefit and a suitable replacement trustee is ready and willing to take over at a lower cost, you as a beneficiary, co-trustee, or settlor, has the ability to seek removal through the Court.

What Is a Reasonable Trustee’s Fee?

 Under the Florida Trust Code, “A Trustee is entitled to compensation that is reasonable under the circumstances.”  F.S. §736.0708(1).  Unfortunately, the statutes are devoid of any reference to what amounts to “reasonable” compensation or how to determine whether fees sought by a trustee are per se reasonable. Generally, compensation of a Trustee may be established in the Trust instrument or by separate agreement with the Trustee.  In the absence of either, the circuit court has jurisdiction to review and determine a trustee’s fees.  F.S. §736.0201(4)(c), (4)(g).  Even in certain situations in which the trust does specify the trustee’s compensation, the court may adjust that compensation if the trustee’s duties are substantially different from those contemplated when the trust was created or if the compensation specified is unreasonably low or high.  F.S. §736.0708(2).  As a result, whether or not the trust instrument provides for the basis, amount, and form of compensation, the amount or rate of a trustee’s compensation or commission is not determined by any inflexible rule, but rests within the sole discretion of the appropriate court in which discretion is to be recognized in accordance with certain established principles as set forth in prior case law. As a result of the lack of a statutory guideline for determining the reasonableness of trustee fees, the court is left with the task of determining the reasonableness of the trustee’s compensation and in doing so will often look to the duties and responsibilities of the trustee under the particular trust at issue.  See, for example, Osius v. Miami Beach First Nat. Bank, 74 So.2d 779 (Fla. 1954).

In 1958, the Supreme Court in West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla. 1958), established factors for the court to consider in determining a reasonable fee.  Some of those factors used in determining the reasonableness of a fee include:

• The amount of capital income received and disbursed by the trustee
• The wages or salary customarily granted to agents for performing light work in the community
• The success or failure of the trustee’s administration
• Any unusual skill or experience the trustee brought to the trust administration
• The loyalty or disloyalty of the trustee to the beneficiaries
• The amount of risk and responsibility assumed by the trustee
• The time involved in administering the trust
• The custom in the community as to compensation of trustees by settlors or courts and as to compensation paid trust companies and banks serving as trustees
• The character of the work performed by the trustee
• Any estimate the trustee has given of the value of his or her own services
• Payments made or allowed by the beneficiaries to the trustee intended to be applied toward the trustee’s compensation

The factors listed above are not all inclusive and the court may use other factors in determining the amount of reasonable compensation due a trustee.  The fundamental criteria is reasonableness, determined in the light of the facts and circumstances of each individual case. 

Despite Florida having no statutory schedule for trustee’s fees, a standard range of trustee’s fees is generally recognized by corporate or professional Florida fiduciaries.  While there are numerous variations stated by corporate trustees in their fee schedules, there is a common range.  Similar to the fixing of the compensation for a personal representative, the trustee is also entitled to additional compensation for extraordinary services.  There is a significant amount of competition currently existing in the fees for services charged by trust departments, and rates generally decrease as the value of the trust assets increase.

Additional issues complicating the decision on the reasonable compensation of trustees also arise when there are multiple trustees, and in determining the allocation of a trustee’s fee from principal versus income.  Should multiple trustees receive a greater amount in total of fees then a single trustee would receive for having done the same job?  The answer appears to be “no” unless the trust provides otherwise, there is a separate agreement with the settlor providing otherwise, or a trustee is providing a special service that warrants an additional fee.  See Westcoast Hospital Association v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla. 1958).  Generally, the multiple trustees must agree on how the fee will be divided among them, otherwise the court will do so.  With regard to the allocation of a trustee’s fee, the first question involves whether the fee should be taken from principal or income.  The second issue becomes whether a particular beneficiary should pay more than other beneficiaries.  With regard to the principal and income question the trust controls and absent language in the trust addressing this issue then Florida Statute §738.701 and §738.702 govern.  Based upon these statutes, one-half of the ordinary compensation is to be paid out of trust income, the other from principal.

Despite the Florida Legislature’s failure to provide uniform measures for the reasonableness of trustee fees, it is clear that a trustee is entitled to reasonable compensation for his or her services rendered in administering the trust.  Despite the absence of a statutory fee schedule, certain factors are applicable despite factual differences in each case. First and foremost, in seeking compensation for their services, the controlling duty of a trustee is the faithful and efficient conservation of the trust assets.  It is also clear that in seeking compensation for their services, the burden of proof is on the trustee to show that money expended was a proper disbursement and reasonable.  If the trustee fails to keep clear, distinct and accurate accounts, all presumptions are against him and all insecurities and doubts are to be taken adversely to him.  If he loses his accounts, he must bear any resulting damage.  See Troub v. Troub, 135 So.2d 243 (Fla. 2^nd DCA 1961).  Therefore, any compensation to be paid to a trustee must be contained within trust accountings, unless waived by all interested parties. 

Any interested parties may seek a court order on the reasonableness of the trustee’s compensation.  In making its decision, whatever elements of proof are acceptable to a court in awarding trustee compensation, it is fundamental that the compensation must be supported by evidence, be it testimony, documentation, or both.  See Hood v. Marvin and Kay Lichtman Foundation, 832 So.2d 941 (Fla. 3^rd DCA 2002). Beneficiaries must be conscious of the amount of compensation a trustee is receiving. The only certainty about the reasonableness of such compensation is that there is no certainty and it is the trustee’s responsibility to account for his or her efforts and the amount of compensation they are paid must be in line with the services they have provided. Trustees are not entitled to compensation simply by virtue of their appointment as trustee, but must provide a service and/or benefit that is supported by adequate proof. If you have any questions about the amount of compensation being paid to the trustee of a trust for which you are a beneficiary, please contact a trust litigation attorney to discuss the specific facts of your case and whether such compensation is reasonable.

Does the Florida Trust Code allow for freezing of trust assets without the burden of proving the traditional elements for an injunction?

In short the answer is “sort of.”  Historically, if you want an injunction, the moving party must prove:

1. She will suffer irreparable harm for which there is no adequate remedy at law unless injunctive relief is granted;
2. She has a clear legal right to request injunctive relief; and
3. The entry of this injunctive relief will not disserve the public interest.  

“No adequate remedy at law” is the insurmountable obstacle to injunctive relief because many court rules that if you can get a money judgment (whether or not it is  collectable),then there is an adequate remedy at law therefore you are not entitled to an injunction.  Think of injunctions as the appropriate remedy for the hippie who doesn’t want the developer to cut down a 500 year old tree- no legal remedy can replace that tree if it is cut down so the hippie gets the injunction.   Read the rest of this entry

If a person is serving as a trustee of a discretionary trust (trustee has the right and authority to distribute income and principal) then he has complete authority over trust distributions and according to the trust document answers to no one.  However, what if the trustee of the trust exercises his  authority to distribute the entire trust corpus to the current beneficiary or worse distribute all of the trust assets to himself?  Can this be stopped and can the trustee really clean out all of the cash. If the trustee takes this action, there arises a question as to what the trustee’s fiduciary duty is to the other beneficiaries of the trust.  The case of  Mesler v. Holly, 318 So. 2d 330 (Fla. 2d DCA 1975) provides, “even unlimited power of invasion is subject to implied limitations to protect remaindermen.” Read the rest of this entry

Desperate Times Call for Desperate Measures

“O mischief, thou art swift to enter in the thoughts of desperate men!”~William Shakespeare

During the recent economic crisis, our office has seen an increase in trust litigation matters involving trustees failing to fulfill their fiduciary obligations by participating in self-dealing, receiving unreasonable compensation and trustee fees and taking personal loans against the Trust expecting to pay it back before any of the beneficiaries become aware. These cases generally do not involve strangers or neutral, independent, or professional trustees breaching their duties to the Trusts, but quite often involve siblings breaching their duties to siblings, step-parents failing their step-children, long-time family attorneys or friends stealing from their clients’ children. What is disturbing is these are the same people we tend to trust and have shown no signs of dishonesty or disloyalty in the past. One can debate the reasons behind this sudden increase in fiduciary litigation, but one thing is certain, now more than ever it is important that a beneficiary of a trust ensure that their interests are protected and that the trustee responsible for preserving the Trust’s assets is not asleep behind the wheel, or worse, treating the Trust assets as if they were their own personal assets. As so eloquently stated by Mr. Shakespeare,  even people we love and trust, named as trustees to take care of our inheritances, may be facing their own personal financial crisis, a level of desperation which can cause a once honest person to steal in order to survive.

The question is, how can you try to prevent such indiscretions and limit the amount of potential damages that occur when good trustees go bad? Read the rest of this entry

“I’ve got the power!”

Does absolute discretion mean trustees can exercise their discretion absolutely?

The short answer is “no.”  

The longer answer requires the starting point to be – what does the trust say?  The settlor is the person who makes the trust and his or her intent is the polestar by which a trust should be interpreted and construed. 

So if the trust grants the trustee the absolute discretion to distribute money from the trust then isn’t the trust stating that the trustee can do no wrong when deciding what amount to distribute?  Well, not really.  A provision seemingly allowing the trustee to distribute whatever he or she wants to must be balanced with the rest of the document. In other words, a trustee cannot pluck a sentence or two out of a forty page document and rely upon it as his or her absolute authority to distribute all the trust money with impugnity, leaving the remaindermen beneficiaries holding the bag–in many cases an empty one.

The courts have balanced the trustee’s power or discretion to invade the trust principal with the trustee’s fiduciary obligation to the remaindermen beneficiaries. As stated by one court “even an unlimited power of invasion is subject to implied limitations to protect the remaindermen.” So while the trustee may be singing “I’ve got the power,” the second stanza sounds like “but not to the detriment of the final beneficiaries.”

Many people establish trusts through their Last Will and Testament (“testamentary trusts”).  Often establishing trusts is an effective way of ensuring one’s heirs are provided with income while providing checks and balances on the investing and distribution of principal.  At the recent deposition of a financial advisor in a trust dispute, there was testimony that a typical inheritance is usually squandered within eighteen (18) months. Read the rest of this entry

A LESSON IN TRUST…

We often come across cases in which a Will or a Trust leaves assets equally to all of the Decedent’s children. However, at the time of death, most of the Decedent’s assets are held in joint accounts with only one of the children named as a joint owner, thereby entitling only one child to the entire account as the remaining joint owner and avoiding the equal distribution that the parent planned through his or her Will and/or Trust.

Unfortunately, the account title tends to control, despite the understanding that the child receiving the account as joint owner had been placed on the account for convenience purposes only to help mom or dad pay bills, as needed; not to receive all of the assets upon their death. Parents believe their children would never cut out their siblings but this is sadly not always the case. Read the rest of this entry

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. Read the rest of this entry