Disinherited children are “interested persons” who have standing to sue a trustee for breach of trust while their invalidation of trust action is pending.
The Fifth District Court of Appeals released the Cruz v. Community Bank opinion holding that disinherited children had standing to sue a trustee for breach of trust while their trust invalidation action was pending. Under the facts of Cruz, the decedent’s children, Tracy L. Cruz and Gregory W. Cates, brought an action seeking to invalidate their father’s 2016 trust, which essentially disinherited them in favor of charities, on the grounds that their father lacked capacity at the time he created the trust. While the trust contest was pending, the trustee of the decedent’s trust, served an accounting on Ms. Cruz and Mr. Cates, who in turn filed a breach of trust action alleging mismanagement of the trust assets. The trustee bank moved to dismiss the complaint on the grounds that Ms. Cruz and Mr. Cates did not have standing to sue because they were disinherited under the trust. The trial court agreed, dismissed the action and the appeal followed.
The defining issue for the appellate court was whether a potential inheritance (if the trust contest was successful) is an interest that will be affected by a trustee’s management of trust assets. The court concluded that because Ms. Cruz and Mr. Cates stood to receive the assets of the contested trust depending on the outcome of the invalidation action, they were interested persons under the Florida Trust Code (Fla.Stat. 736.08165(1)) and their potential inheritance is an interest that is affected by the trustee’s management of the trust. Therefore, the court concluded Ms. Cruz and Mr. Cates had standing to sue the trustee for breach of trust.