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Written by on Jan 27, 2019| Posted in: Trust Litigation

The term “qualified beneficiary” has special significance under the Florida Trust Code.  Status as a “qualified beneficiary” confers rights, including the right to: a complete copy of the trust instrument, the right to an accounting, the right to relevant information about trust assets and liabilities and details about trust administration.  See, Fla.Stat. §§736.0105 (r)-(t), 736.0813.  Accordingly, whether a trust beneficiary is a “qualified beneficiary” is an important issue for both the trustee and for the beneficiary because the status imposes duties on the trustee and confers rights upon the beneficiary.

The Fourth DCA recently addressed when a charitable beneficiary has the rights of a qualified beneficiary in Hadassah, The Women’s Zionist Organization of America, Inc. v. Stephen G. Melcer, Trustee, et al, 44 Fla.L.Weekly D207a.

Sylvia Gelt created a trust in 1989.  The trust provided that upon her death, a portion of the trust was to be placed in a Credit-Shelter Trust (“CST”) for her husband, Samuel, and then upon his death, the balance of the CST would be divided into three separate trusts for the benefit of her daughters, Marsha, Roberta and Jerilyn.  During the daughters’ lifetimes, they each have the right to receive income and principal distributions from their respective trust shares.  None of them has a general or testamentary power of appointment over either the income or the principal.  The CST further provides that upon the death of a daughter, her share terminates and is redistributed to the surviving daughters and then upon the death of the last surviving daughter, her share terminates, and the trustee is directed to distribute the remaining principal and undistributed income to three specifically-named charities.

Sylvia died first, followed by Samuel.  The trustee of the trust filed an action to resign and named the three daughters and the three charities as qualified beneficiaries.  The daughters filed a motion for summary judgment claiming the charities are not qualified beneficiaries.  The trial court agreed but the Fourth DCA did not and reversed.

At issue was interpretation of Fla. Stat. §736.0110 (1), which provides:

A charitable organization expressly designed to receive distributions under the terms of a charitable trust has the rights of a qualified beneficiary under this code if the charitable organization, on the date the charitable organization’s qualification is being determined:

(a) is a distributee or permissible distribute of trust income and principal;

(b) would be a distribute or permissible distribute of trust income or principal on termination of the interests of other distributees or permissible distributees then receiving or eligible to receive distributions; or

(c) would be a distribute or permissible distribute of trust income or principal if the trust terminated in accordance wit its terms on that date.

The gravamen of the daughters’ argument to the lower court was that the charities were not qualified beneficiaries because the CST provided for sequential termination of the daughters’ individual interests, i.e. “A’s interest passes to B and C; then B’s interest passes to C; then C’s interest passes to the charities.”  Id.  In other words, the daughters argued that the charities would not be permissible distributees until C was the sole, surviving daughter. The Fourth DCA disagreed and held it was contrary to the plain language of the Florida Trust Code to apply a sequential termination analysis (instead of a simultaneous termination analysis) to determine whether the charities were qualified beneficiaries.

The Fourth DCA held that the plain language of the statute – specifically the phrase “termination of the interests of other distributees” – contemplates simultaneous termination of the interests of the distributees for the purposes of determining whether a charitable remainderman beneficiary is a qualified beneficiary under the Florida Trust Code.  So, the proper analysis in determining whether the charities were qualified beneficiaries should have been “if A, B and C’s interests simultaneously terminate, would the charities be distributees or permissible distributees?”  Because the answer was clearly “yes,” the Fourth DCA held the charities were qualified beneficiaries.

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