Florida Trust Administration
Types of Trusts
Florida Trust Lawyers can prepare a wide variety of trusts to implement various estate planning strategies, including:
- Charitable Lead Trust (CLT) - opposite of a charitable remainder trust (CRT), the CLT pays a set percentage of the value of the trust’s assets over a set time period to a named beneficiary and at the end of the trust’s term, its corpus is passed to the donor’s heirs.
- Charitable Remainder Trust (CRT) - opposite of a charitable lead trust (CLT), the CRT allows the trustee to sell assets and reinvest the proceeds, while making periodic payments to named beneficiaries either for life or a set time period up to 20 years; when the last remaining beneficiary passes, or a set deadline is met, the trust ends and the corpus is then distributed to a designee, such as a university or charitable foundation.
- Domestic Asset Protection Trust (DAPT) - these trusts protect assets from creditors, and are popular as alternatives to pre-nuptial agreements. Assets are transferred to the trust although the transferee can still receive benefits since the settlor can legally name himself as beneficiary of the trust. The trust must be irrevocable and a trustee must be appointed with independent discretion to administer the trust who is a resident of the jurisdiction in which the trust is formed.
- Grantor Retained Annuity Trust (GRAT) - allows large gifts to be made to beneficiaries without exposure to the federal gift tax by creating a trust that is an annuity, with the donor being paid a set yearly payment for a certain number of years. At that time, anything left in the GRAT passes to the beneficiary as a gift.
- Qualified Domestic Trust (QDOT) - used to avoid estate taxation upon the death of the spouse who is a U.S. citizen when the surviving spouse is not a citizen of the United States. After the death of the surviving spouse, the trust’s assets are subject to the estate tax as though they were included in the estate of the first spouse to die.
Other trust vehicles are being created all the time. For purposes of estate planning, trusts that can be implemented to limit estate taxation also include the Intentionally Defective Grantor Trust (IDGT); the Irrevocable Life Insurance Trust (ILIT); the Private Annuity Trust (PAT); the Qualified Personal Residence Trust (QPRT), and the Retirement Plan Trust (RPT).
The Duties and Liabilities of a Trustee
The responsibilities placed upon the individual placed in the role of Trustee under Florida law are tremendous. Trustees are given much power and with that power, the law imposes many protections against the possible temptations to abuse that power that might arise. Under the Florida Trust Code, trustees are fiduciaries with established duties (Florida Statutes §§736.0801 et seq) and corresponding liabilities (Florida Statutes §§736.1001 et seq.).
Under Florida law “… upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this code.” (Florida Statute §736.0801) This must be done“… solely in the interests of the beneficiaries.” (Florida Statute §736.0802) Accordingly, once the Trustee accepts the position, he agrees to act against his own self-interests if need be, in order to administer the trust for the beneficiaries’ benefit.
The trustee acts in allegiance and loyalty to the beneficiaries of the trust, and failure to meet his fiduciary duties can expose the trustee to personal liability. Accordingly, it is extremely important for a trustee to seek experienced legal guidance in the carrying out of his work as trustee in order to avoid or limit exposure of his personal assets to claims by the trust beneficiaries in any breach of fiduciary cause of action.
Trustees must follow the dictates of the trust instrument itself as well as federal and state law. Conflicts arising between the law and the language of the instrument must be resolved; sometimes, this may involve the filing of a lawsuit by the trustee specifically to obtain judicial resolution of the dilemma. (For the trustee to make the call on his own might expose the trustee to personal liability.)
During the course of his tenure as Trustee, periodic communications with the beneficiaries by the Trustee are extremely important. Keeping the beneficiaries “reasonably informed” is legally required, but what is “reasonable” will be dependent upon the individual circumstances. Also, the trust may not delineate guidelines for updating or informing those benefiting from the trust of the decisions and actions of the Trustee, but the prudent trustee is well-advised to communicate often and in detail with the beneficiaries of the trust. Written communications serve everyone well, and any conflicts or confusion that arise from these updates can be resolved expeditiously with the assistance of legal counsel, if need be.
Each year, the trustee will also be required to give a full accounting of the trust (assets, liabilities, revenue received, payments made, etc.) to the beneficiaries. This cannot be waived by the trustee; it is required by law that this annual accounting be performed.
Finally, while the trustee is required to undertake as much of the administration as possible personally, this does not prohibit the trustee from seeking the assistance of professionals, including accountants, bookkeepers, and attorneys to assist the trustee in the performance of his duties. Given the personal exposure a trustee undertakes when accepting the job of trust administration, most trustees do engage experienced trust planning and administration attorneys to assist them in their efforts.
If you are a trustee or the beneficiary of a trust and have comments or questions regarding how a Florida Trust Lawyer at the Law Offices of Adrian Philip Thomas, P.A. might be of assistance in your particular case, please feel free to contact the firm’s office to schedule a free initial consultation with one of our attorneys.