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How Long Does a Beneficiary Have to Challenge the Actions (or Inaction) of a Trustee?

Written by on Feb 10, 2014| Posted in: Trust Litigation

Typically, a trustee serves its accounting on beneficiaries which discloses all matters involving the trusts.  Under normal circumstances, a beneficiary then has four years from receipt of the accounting to bring an action for breach of fiduciary duty.  If an accounting is not provided to the beneficiaries, or when the accounting falls short of properly informing a beneficiary of what is happening with the trust assets, then the Statute of Limitations never begins to run.  If a beneficiary has actual knowledge of the matter not adequately disclosed in the accounting, and it can be proven by clear and convincing evidence that the beneficiary had actual knowledge, or if there has been a repudiation of the Trust by the Trustee and the beneficiary has actual or constructive knowledge of the repudiation, then the four-year statute of limitations will bar that claim, Fla. Stat. §736.1008(3)(a).  The fact that a Trustee has not rendered an accounting for many years is only knowledge of a breach of trust and not repudiation of the Trust, and thus, the Statute of Limitations is not triggered.  Cassedy v. Alland Investments Corporation, 982 So. 2d 719 (Fla. 1st DCA 2008). Therefore, the critical factor in determining when the clock starts ticking for a beneficiary to hire a Florida trust lawyer to sue the trustee is when did the beneficiary actually know about the matter complained of?

The fact that a trustee has not rendered an accounting for many years is not determinative in deciding whether a beneficiary is out of time to challenge the conduct of a trustee.   Ordinarily, a trustee will raise the defense of laches to a complaining beneficiary who the trustee believes has “slept on her rights.”  These defenses usually require a trial, however because they involves factual issues.    The affirmative defense of laches must be proven by facts about both the plaintiff’s and the defendant’s conduct and is not established merely by the passage of an inordinate period of time.

The seminal case in Florida on the issue of laches in the context of trustees and beneficiaries of trusts is Nayee v. Nayee, 705 So.2d 961 (Fla. 5th DCA 1998).  Nayee  involved a family trust that was established in 1979 for the purpose of operating a hotel.  The trustee took title to the hotel and sold it in 1981.  The Plaintiff beneficiaries of the 1979 trust sued the trustee in 1995 for an accounting claiming that the trustee had failed to pay them their share of the money due from the sale of the hotel as required by the trust instrument.  The trustee responded by filing a motion for summary judgment claiming that plaintiffs participated in meetings where they were aware they were not being paid in accordance with the trust and, accordingly, they knew or should have known of the trustee’s breach of trust and should be barred from bringing the action more than sixteen years after the establishment of the trust and more than thirteen years after Plaintiffs first expressed a concern about the trustee’s handling of the trust.  The trial court granted the trustee’s motion for summary judgment and the Fifth District Court of Appeals reversed holding that summary judgment was inappropriate due in large part to the existence of a fiduciary relationship between the trustee and the trust beneficiaries:

[I]n Florida, an action could be brought against a trustee for an accounting or breach of trust long after the trust had been terminated, if the trustee had wrongfully retained funds belonging to the beneficiary during the period of trust administration, because the funds wrongfully withheld are themselves held in trust. Sewell v. Swell Properties 30 So.2d 361 (Fla. 1947).   Finally, in the case of an express trust, it is not enough that the beneficiary have knowledge of facts which would lead a reasonable person to inquire about a breach of fiduciary duty, although the latter is generally sufficient with respect to other fiduciary relationships.  Rather, the beneficiary was required to have actual knowledge of the facts later complained of.  In Sewell, the court reasoned:  Where the trustee by fraud or deception, or even by keeping quiet when he should speak and account to his cestui, causes the cestui to be ignorant of the rights of the cestui and of the duties of the trustee, laches will not be imputed to the cestui until discovery of the true condition.

Also see Sewell v. Sewell Props, 30 So. 2d 361 (Fla. 1947) (“Where the trust by fraud or deception, or even by keeping quiet when he should speak and account to his cestui, causes the cestui to be ignorant of the rights of the cestui and of the duties of the trustee, laches will not be imputed to the cestui until discovery of the true condition”); Taplin v. Taplin 88 So.3d 344 (Fla. 3rd DCA 20120) (limitations with respect to actions brought by a beneficiary against a trustee of a trust only apply where the trustee has issued a final account or statement to the beneficiary and has informed the beneficiary of the location and availability of records for his examination).

In  Kravitz v. Levy, 973 So.2d 1274 (Fla. 2nd DCA 2008)  an estate beneficiary brought a cause of action in 2001 for breach of fiduciary duty after learning that the distributions he received from the fiduciary in 1963 were improper.  During discovery, the beneficiary testified that he believed he was supposed to receive substantially more than the $25,000 he received in 1963, and also admitted that the fiduciary did nothing to prevent him from reviewing the court file, but also testified that there was no accounting ever offered by the fiduciary.  The trial court granted summary judgment and dismissed the case due to the delay in bringing the action by the beneficiary.  The Third District Court of Appeals reversed, finding that there were material issues of fact precluding summary judgment.  Critical in the court’s analysis was the record evidence of the fiduciary’s continued performance of his fiduciary duties and lack of finality to the estate administration and discharge of the fiduciary:

“A cause of action for breach of fiduciary duty against the personal representative, individually, does not accrue until discharge.  Appellant alleges that the [estate] was never closed and thus the court never discharged [the fiduciary].  The [fiduciary] disputes this.  The documents in the record are not conclusive either way.  This constitutes a material issue of fact.  Further, the record reflects that [the fiduciary] continued to deal with estate assets, signing various documents as executor of the estate…continued to collect dividends on stocks belonging to the estate which he never distributed to the estate beneficiaries but kept in escrow.  We conclude that material issues of fact remain as to whether [the fiduciary] was discharged as executor of the estate…these issues are for a jury to resolve.”

The bottom line is that if a beneficiary believes that a trustee has been doing something improperly, whether out in the open or behind closed doors, it is critical for the beneficiary to seek counsel of a qualified trust lawyer to review the situation and act as an advocate for the beneficiary if necessary in order to correct the problem and achieve justice.

 

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