Trusts Flashcards

Question

Why does a Settlor's intent become an issue?

Answer 1

Questions of intent arise when there is a DISPUTE over whether the transferor of property: - INTENDED TO CREATE A TRUST or instead - INTENDED TO MAKE AN OUTRIGHT GIFT of the property to the transferee.

Answer 2

The use of common trust terms like: - “in trust” - “as trustee” creates a PRESUMPTION of the existence of INTENT to CREATE a TRUST **these words are not required** ``` By contrast, precatory language like: - HOPE - DESIRE - WISH may indicate an intent to create a MORAL rather than LEGAL obligation on the transferee. ```

Answer 3

Relationships between - Transferor - Transferee - Beneficiary/Purported Beneficiary Can be evidence of the Transferor’s INTENT. **Personal relationships might indicate an outright gift where e as a nonhuman entity like a trust company might indicate intent for a trust**

Answer 4

The more detailed the transferor’s instructions are with regard to the transferee’s use of the property, (particularly if the instructions indicate limitations on use) the more likely the transferor intended that the transferee hold the property for the benefit of another.

Answer 5

Transferee MUST have the PRESENT INTENT to create a trust. Expressing Intent to create a trust in the FUTURE is NOT SUFFICIENT. BUT: Expressing Intent to create a trust in the FUTURE and the - Transferor received CONSIDERATION may be sufficient to result in the FUTURE CREATION of a TRUST despite the lack of intent at that time.

Answer 6

Except as limited by - Wills (Test. Trust) - Statute of Frauds (for real property placed in trust), Settlor’s intent may be manifested by: - Writing - Spoken Words - Conduct. **A trust of personal property CAN be created ORALLY**

Answer 7

Intent to Create a Trust MUST be communicated by the SETTLOR to the TRUSTEE NO Requirement that the Settlor communicate intent to the Beneficiary.

Answer 8

RES = TRUST PROPERTY A VALID Trust MUST contain some property: - Owned by the SETTLOR - At the time the trust was created; and - Which was transferred to the trust or to the trustee. **If there is no trust property (RES), then the trust will generally FAIL**

Answer 9

Any full or fractional property interest, including 1. Real property, 2. Personal property, 3. Money, 4. Intangibles, 5. Partial Interests, or Future Interests (whether vested or contingent) will suffice, as will future earnings under an existing agreement, although a mere expectancy generally will not.

Answer 10

NO. There is NO minimum amount of property that must be placed in a trust.

Answer 11

Trust property must be: - Identifiable and - Segregated

Answer 12

The property must be described with reasonable certainty.

Answer 13

While a trust generally must be funded at its creation, - A Settlor may subsequently transfer other property to the trust. As with the initial transfer of property to a trust, a trust does not contain property that a settlor has made a gratuitous promise to transfer to the trust, unless and until the settlor honors that promise.

Answer 14

There are two circumstances in which a trust may be unfunded. 1) “Pour-over” trust 2) “Life insurance” trust

Answer 15

A trust that is to receive a devise from a will may be unfunded. This Trust is known as a “pour-over” trust and is created - While the Settlor is ALIVE - Funded typically at the time of the settlor’s death by a devise in the settlor’s will. **Created when Settlor is Alive because it's created with the Will and doesn't come into effect until the Settlor dies. The will devise "pours over" into a trust**

Answer 16

Trust property may consist of the trustee’s right to receive death benefits (e.g., proceeds from a life insurance policy, annuity, death benefit). **Which is why it's unfunded because those benefits don't come into effect until the Settlor dies**

Answer 17

The TRUSTEE holds the 1. LEGAL TITLE to the trust property 2. For the BENEFIT of the BENEFICIARY 3. Has POWERS and DUTIES imposed by the terms of the trust or by law.

Answer 18

A trust may have ONE or MORE TRUSTEES ``` BUT: The same individual CANNOT serve as: - SOLE Trustee and SOLE Beneficiary of a trust - When there are other Beneficiaries. ``` AND: If the SOLE Trustee is the SOLE Beneficiary, - Title MERGES and the TRUST TERMINATES

Answer 19

A person designated as a trustee can accept the position: 1. By substantially complying with a method of acceptance provided for in the terms of the trust; or 2. If the terms of the trust do not provide a method of acceptance, or the method is not made exclusive, by accepting delivery of the trust property, - Exercising powers as a trustee, - Performing duties as a trustee, or - Otherwise indicating acceptance of the trusteeship. - WILL INDICATE ACCEPTANCE

Answer 20

A trustee’s acceptance of a testamentary trust RELATES BACK to the date of the SETTLOR'S DEATH. Accordingly, - A Trustee can become LIABLE for Tort Claims against the Trust that arise PRIOR to the time the trustee accepted the trusteeship.

Answer 21

``` A Designated trustee - Who DOES NOT ACCEPT Trusteeship - Within a REASONABLE TIME - After KNOWING of the designation Is deemed to have DECLINED THE TRUSTEESHIP ``` ``` A person designated as trustee may, WITHOUT ACCEPTING THE TRUSTEESHIP, Act to Preserve the trust property if, - Within a REASONABLE TIME - AFTER Acting, - The Person sends to a QUALIFIED BENEFICIARY - A Written Statement DECLINING the Trusteeship. ``` Such person also may inspect or investigate trust property to determine potential liability under environmental or other law or for any other purpose.

Answer 22

A Trustee is essential to the creation of a trust, Once properly created, the Trust will NOT FAIL if the only Trustee: 1. Dies. 2. Becomes disabled, 3. Resigns, 4. Fails to Accept the office within a reasonable amount of time (Declines) The COURT will appoint a successor trustee, UNLESS, The Settlor expressed an intent that the trust was to continue ONLY SO LONG AS A PARTICULAR PERSON SERVED AS TRUSTEE The Vacancy in a Trusteeship, need not be filled unless the terms of the trust require otherwise or there is no remaining trustee.

Answer 23

A vacancy in a trusteeship that is REQUIRED to be filled must be filled in the following order of priority: 1. By a person NAMED or DESIGNATED pursuant to the terms of the trust to act as a successor trustee; 2. By a person APPOINTED by UNANIMOUS AGREEMENT of the QUALIFIED BENEFICIARIES; or iii) By a person APPOINTED by the COURT The court may appoint an additional trustee or a special fiduciary whenever it considers the appointment necessary for the administration of the trust, whether or not a vacancy in a trusteeship exists or is required to be filled.

Answer 24

A trustee must be given specific duties to perform. A passive trust— a trust in which the trustee’s only duty is to pass property to a beneficiary —is not a valid express trust. The expressed intention of the settlor to create a trust along with the identification of trust property and beneficiaries is usually sufficient for the court to infer duties to be performed by the trustee.

Answer 25

A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes and its administration. While the terms of the trust may designate the principal place where a trust is to be administered provided the trust has sufficient connection with that place, when the terms of the trust fail to designate the place of administration, the place of administration of the trust is the trustee’s usual place of business, or if the trustee has no place of business, the trustee’s residence. Fla. Stat. § 736.0108.

Answer 26

A trustee must have the capacity to take property and to administer the trust. Capacity to take property as a trustee is the same capacity necessary for acquiring or holding title to property for one’s own benefit. While minors and insane persons may have the capacity to hold property as a trustee, they generally lack the capacity to administer the trust and, as such, they usually cannot qualify as trustees. The court may require a bond to secure performance of the trustee’s duties if it is necessary to protect the interests of the beneficiaries. Fla. Stat. §736.0702.

Answer 27

If the terms of a trust do not specify the trustee’s compensation, then a trustee is entitled to reasonable compensation. If the terms of a trust specify the trustee’s compensation, then the trustee is entitled to be compensated as specified, but the court may allow greater or lesser compensation if the duties of the trustee are substantially different from those contemplated when the trust was created or if the compensation specified by the terms of the trust would be unreasonably low or high. If the trustee has rendered other services in connection with the administration of the trust, then the trustee will also be allowed reasonable compensation for such other services. Fla. Stat. § 736.0708.

Answer 28

A trustee is entitled to be reimbursed out of the trust property, with interest as appropriate, for reasonable expenses that were properly incurred in the administration of the trust. An advance by the trustee of money for the protection of the trust will give rise to a lien against trust property to secure reimbursement with reasonable interest. Fla. Stat. §736.0709.

Answer 29

A trustee may resign from the position by: i) Providing at least 30 days’ notice to the qualified beneficiaries (see §II.A.4. Beneficiaries, infra), the settlor (if living), and any co-trustees; or ii) Obtaining court approval. Fla. Stat. § 736.0705(1). In approving a resignation, the court may issue orders and impose conditions reasonably necessary for the protection of the trust property. Fla. Stat. §736.0705(2). In addition, any liability of a resigning trustee or of any sureties on the trustee’s bond for acts or omissions of the trustee is not discharged or affected by the trustee’s resignation. Fla. Stat. §736.0705(3).

Answer 30

The settlor, a co-trustee, or a beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on the court’s own initiative if: i) The trustee has committed a serious breach of trust; ii) The lack of cooperation among co-trustees substantially impairs the administration of the trust; iii) Due to the unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or iv) There has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, and the court finds that: a) Removal of the trustee best serves the interests of all of the beneficiaries; b) The removal is not inconsistent with a material purpose of the trust; and c) A suitable co-trustee or successor trustee is available. Fla. Stat. § 736.0706. Pending a final decision on a request to remove a trustee, or in lieu of or in addition to removing a trustee, the court may order appropriate relief to protect the trust property or the interests of the beneficiaries. Fla. Stat. §736.0706(3).

Answer 31

A “beneficiary” is a person who has a present or future beneficial interest in a trust, vested or contingent, or who holds a power of appointment over trust property in a capacity other than that of trustee. Unless restricted by the Rule Against Perpetuities, a beneficiary need not be currently ascertainable or alive. Fla. Stat. §736.0103(4). The beneficiary possesses the power to enforce the trust by virtue of holding equitable title to the trust property.

Answer 32

To be valid, a trust generally must name at least one definite beneficiary. A beneficiary is definite, even if unborn at the time the trust is created, provided such beneficiary will be identifiable by the time the beneficiary’s interest must vest under the Rule Against Perpetuities. Fla. Stat. § 736.0402(1), (2).

Answer 33

A trustee may be given the power to select a beneficiary from an indefinite class. The power must be exercised within a reasonable time or it fails. If it fails, the property passes to the persons who would have taken the property if the power had not been conferred. Fla. Stat. § 736.0402(3).

Answer 34

Florida has enacted the Uniform Statutory Rule Against Perpetuities, under which a nonvested property interest in a trust is invalid unless: i) At the time the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive; or ii) The interest either vests or terminates within 360 years after its creation. For property interests created on or before December 31, 2000, the alternate vesting period is 90 years rather than 360 years. Fla. Stat. § 689.225. In applying the Rule, an interest in an irrevocable trust is deemed to be created at the time the trust was created. An interest in a revocable trust is deemed created at the time the trust becomes irrevocable, which is generally at the settlor’s death.

Answer 35

If a trust fails for lack of a beneficiary, then a resulting trust (see § IV.A. Resulting Trust, infra) is presumed in favor of the settlor or her successors in interest.

Answer 36

Traditionally, the trustee of a private express trust without a definite beneficiary could not be compelled to comply with the terms of the trust. Such a trust was described as an “honorary trust.” Under the UTC as adopted by Florida, two types of trust without a definite beneficiary are recognized as enforceable trusts—trusts for general but noncharitable purposes and trusts for a specific noncharitable purpose other than the care of an animal. Fla. Stat. § 736.0409. (For trusts for the care of an animal, see § II.A.4.b.1. Animal trust, below.) For example, a settlor by will can create a trust to fund the saying of prayers for the settlor. A settlor can create a trust that gives the trustee the discretion to choose worthy purposes to receive the income from the trust on an annual basis.

Answer 37

The trust may not be enforced for more than 21 years. Fla. Stat. §736.0409(1). As a consequence, such a trust is sometimes referred to as a “21-year trust.”

Answer 38

The trust may be enforced by a person appointed in the terms of the trust, or if no person is appointed, by a person appointed by the court. Fla. Stat. §736.0409(2).

Answer 39

Property of an honorary trust must be applied only to the intended use of the property, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Unless the trust provides otherwise, property not required for the intended use must be distributed to the settlor, if then living, or otherwise as part of the settlor’s estate. Fla. Stat. § 736.0409(3).

Answer 40

charitable trust: Unless the beneficiary is a charitable organization, the beneficiaries of a charitable trust must be indefinite (see § III.B. Indefinite Beneficiaries, infra).

Answer 41

Any individual or entity can be named as a trust beneficiary, provided the individual or entity is capable of taking and holding title to property. Consequently, an animal cannot be the direct beneficiary of a trust. However, under the UTC as adopted by Florida, a trust may be created for the care of an animal. Fla. Stat. § 736.0409.

Answer 42

A trust may be created for the care of one or more animals alive during the settlor’s lifetime. Fla. Stat. § 736.0409(1).

Answer 43

The trust terminates on the death of the last surviving animal. Fla. Stat. §736.0409(1).

Answer 44

The rules that apply to honorary or 21-year trusts regarding enforcement and disposal of excess trust property (see § II.A.4.a.4. Honorary trust, above) also apply to an animal trust. Fla. Stat. § 736.0409(2), (3).

Answer 45

If a trust operates only incidentally or indirectly to benefit a person, the person will not be a beneficiary and will not be able to enforce rights under the trust. Example: The trust instrument requires a trustee to employ a specific attorney for the trust. The attorney is not a beneficiary of the trust and has no right to enforce the provision regarding her employment. A beneficiary of the trust, however, would have a right to enforce such an appointment and could bring an action against the trustee for failure to make the appointment if there was a loss to the trust resulting from the appointment of another attorney.

Answer 46

Notice to the beneficiary that a trust is being created for her benefit is not required to create the trust.

Answer 47

A beneficiary must accept her rights under a trust. A beneficiary of a trust cannot be forced to accept a trust interest. However, acceptance of a beneficial interest is generally presumed.

Answer 48

A beneficiary may disclaim her interest if she has not by words or conduct manifested acceptance of the trust. A disclaimer relates back to the date of the creation of the trust.

Answer 49

A “qualified beneficiary” includes a living beneficiary who is currently eligible to receive a distribution of trust income or principal (i.e., a current beneficiary) or would be eligible to receive such a distribution if the current beneficiary’s interest terminated without causing the trust to terminate or if the trust itself terminated on the date that the beneficiary’s status as a qualified beneficiary is determined (i.e., an intermediate or a first remainder beneficiary). A qualified beneficiary may hold a vested or contingent interest. Fla. Stat. § 736.0103(14). Unborn beneficiaries as well as more remote living beneficiaries or contingent beneficiaries are nonqualified beneficiaries. A qualified beneficiary is afforded more rights and responsibilities than a nonqualified beneficiary. Qualified beneficiaries must be given notice of, or must consent to certain actions with regard to the trust (e.g., appointment of a successor trustee (see § II.A.3.e. Successor trustee, supra)).

Answer 50

A trust may be created only to the extent that the purposes of the trust are lawful, are not contrary to public policy, and are possible to achieve. Fla. Stat. § 736.0404. Violations of public policy may include provisions encouraging divorce, preventing marriage, restraining religious freedom, discouraging performance of public duties, or unreasonably restraining alienation. In situations in which one of several trust terms is violative of public policy, any alternative terms will be honored unless the removal of the term proves fatal to the overall purpose of the trust.

Answer 51

A private express trust may be created by: i) Transfer of property to another person as trustee either during the settlor’s lifetime or by will or disposition taking effect on the settlor’s death; ii) Declaration by the owner of property that the owner holds identifiable property as trustee; or iii) Exercise of a power of appointment in favor of a trustee. Fla. Stat. § 736.0401. A private express trust may be created upon the settlor’s death through her will (i.e., a testamentary trust) or during the settlor’s life (i.e., an inter vivos trust).

Answer 52

A testamentary trust is a trust the terms of which are contained in a will. A testamentary trust must comply with the formalities for the creation of a will (see the Themis Wills outline for a discussion of these formalities). Property owned by the testator at her death is transferred by a devise in the will to the trustee of the trust as devisee.

Answer 53

A “secret” trust exists when a devisee promised the testator to hold and manage the devised property for the benefit of someone else. The intended beneficiary must prove the promise, which does not appear in the will, by clear and convincing evidence. If the beneficiary does so, then a constructive trust is imposed on the property for the intended beneficiary to prevent the unjust enrichment of the devisee (i.e., the “secret” trustee).

Answer 54

A “semi-secret” trust exists when the will provides for a devisee to use the devised property for the benefit of a person but does not identify that person. In this situation, the intended beneficiary is not permitted to present extrinsic evidence. Instead, a resulting trust is imposed on the devised property.

Answer 55

An inter vivos trust is a trust created during the settlor’s life. The formalities required depend on whether property to be transferred to the trust is real property and whether the trust is revocable or irrevocable.

Answer 56

Pursuant to the Statute of Frauds, the transfer of real property to an inter vivos trust, whether the trust is revocable or irrevocable, must be in a writing that is signed by the settlor who owns the property and that contains an adequate description of the property. Fla. Stat. §736.0403(2). For a trust in which the settlor is also the trustee, the transfer is effected through a declaration of trust. Because the settlor and the trustee are the same person, there is no need for delivery of the declaration in order for it to be effective. For a trust in which the settlor is not the trustee, the transfer is effected through a deed of trust. Personal property may be transferred to an inter vivos trust orally, but the transfer, as well as the terms of the trust, must be established by clear and convincing evidence. Fla. Stat. § 736.0407.

Answer 57

Apart from the transfer of real property to the trust, an irrevocable trust (i.e., a trust that cannot be amended or terminated by the settlor) may be created without the need to adhere to any formalities.

Answer 58

Apart from the transfer of real property to the trust, a revocable trust may be created without the need to adhere to any formalities unless the trust has testamentary aspects. A trust has testamentary aspects if it has a provision that disposes of trust property on or after the settlor’s death, other than to the settlor’s estate.

Answer 59

For a revocable inter vivos trust created on or after July 1, 2007, a provision that disposes of trust property upon the death of the settlor to a person other than the settlor’s estate will be ineffective unless the trust instrument and any amendments are executed in accordance with the formalities required for the execution of a will. This rule does not apply to a trust that is established as part of an employee annuity, an individual retirement account, or a Keogh or qualified retirement plan. Fla. Stat. § 736.0403(2), (3).

Answer 60

A person who holds a general power of appointment with regard to property may appoint the property to anyone, including herself or her estate. She may create a trust by appointment to a person as trustee for herself or others. A person holding a special power of appointment can only appoint among particular persons or classes of persons. She may create a trust by appointment to a trustee for the benefit of such persons, depending on the donor’s intent with regard to the special power of appointment.

Answer 61

A settlor may provide in the trust instrument that the law of a specific jurisdiction is to be applied to determine the meaning and effect of the terms of the trust (i.e., a choice-of-law provision). This provision will be given effect if: i) There is a sufficient nexus to the designated jurisdiction at the time of the creation of the trust or during the trust administration (e.g., the location of real property held by the trust, the residence or location of an office of the settlor, the trustee, or any beneficiary), and ii) Applying the law of another state is not contrary to a strong public policy of Florida. In the absence of an effective choice-of-law provision, the law of the jurisdiction in which the settlor resides at the time the trust is first created will govern. Fla. Stat. § 736.0107.

Answer 62

A trust is void if its creation was procured by fraud, duress, mistake, or undue influence. Any part of the trust is void if procured by such means, but the remainder of the trust not procured by such means is valid (assuming it is not invalid for other reasons). Likewise, if the revocation of a trust, or any part of the trust, is procured by fraud, duress, mistake, or undue influence, such revocation is void. Fla. Stat. § 736.0406.

Answer 63

A challenge to the validity of a trust or the revocation of a part of the trust cannot be brought until the trust becomes irrevocable either upon the settlor’s death or by the terms of the trust. A challenge to the revocation of an entire trust cannot be brought until the settlor has died. Fla. Stat. § 736.0207. Example: A 76-year-old woman who was married to a 32-year-old man created a revocable trust, naming herself and her bank as co-trustees. The couple divorced, and during the dissolution proceedings, the court set aside a transfer of some of the woman’s assets to her husband, finding that the transfer was the result of undue influence. Several months after the divorce, the couple remarried. Five days after the remarriage, the woman notified the bank of her desire to revoke her trust. Aware of the prior finding of undue influence, the bank refused to transfer the funds. The court held that a claim of undue influence could not be used to deprive a settlor of her right to revoke a trust in the absence of physical or mental incapacity. Florida Nat'l Bank v. Genova, 460 So.2d 895 (Fla. 1984). An action to contest the validity of a trust that was revocable at the settlor’s death is generally barred, if not commenced within four years. However, this time period is reduced to six months if the trustee sends proper notification to the challenger. Fla. Stat. § 736.0604.

Answer 64

A provision in a trust that would penalize a beneficiary for contesting the trust or instituting any actions relating to the trust assets is unenforceable. Fla. Stat. §736.1108.

Answer 65

Typically, a trust is created through a written document, such as a deed of trust when the settlor names someone else as trustee, or a declaration of trust when the settlor names himself as trustee. In interpreting the provisions of this instrument, the following rules apply unless a contrary intent is indicated by the terms of the trust instrument. Fla. Stat. §736.1101.

Answer 66

In general, the intent of the settlor, as expressed in the terms of the trust, controls the legal effect of the dispositions made in the trust. Fla. Stat. § 736.1101. To determine intent, the court will look at the trust instrument as a whole, taking into account the general dispositional scheme. Provost v. Justin, 19 So.3d 333 (Fla. Dist. Ct. App. 2009). When there is a conflict between the settlor’s general scheme and a specific provision, the general scheme should prevail. See West v. Francioni, 488 So.2d 571 (Fla. Dist. Ct. App. 1986) (interpreting a will). In addition, when there is conflict between two provisions in a trust instrument, the latter should prevail, as it represents the settlor’s latest expression of the settlor’s intent. See In re Tr. Estate of Smith, 75 So.2d 686 (Fla. 1954) (interpreting a will).

Answer 67

Generally, in interpreting the meaning of the language in a trust instrument, the court will look only at the text of the instrument itself (i.e., within its four corners). Admission of extrinsic evidence is prohibited. Roberts v. Sarros, 920 So.2d 193 (Fla. Dist. Ct. App. 2006). Exception—reformation to correct a mistake In determining a settlor’s original intent for the purposes of determining whether to reform a trust to correct a mistake of fact or law, the court may consider evidence relevant to the settlor’s intent even though the evidence contradicts an apparent plain meaning of the trust instrument. Fla. Stat. § 736.0415.

Answer 68

If the language in a trust instrument is ambiguous, evidence of the surrounding circumstances is admissible to explain and determine, but not to contradict, the meaning and intent of the terms employed in the instrument. Words in the instrument should be given their ordinary and usual meanings. The fact that parties ascribe different meanings to the language of a trust does not mean that the language is ambiguous so as to permit the admission of extrinsic evidence. Bryan v. Dethlefs, 959 So.2d 314 (Fla. Dist. Ct. App. 2007). In determining the intent of the settlor, a technical term used in a trust instrument should be accorded its legal definition, unless obviously used by the settlor in a different sense. Timmons v. Ingrahm, 36 So.3d 861 (Fla. Dist. Ct. App. 2010).

Answer 69

Rules of construction applicable to intestate succession and wills 1) Adopted persons and persons born out of wedlock The laws used to determine paternity and relationships for the purposes of intestate succession apply when determining whether class gift terminology and terms of relationship include adopted persons and persons born out of wedlock. Fla. Stat. § 736.1102.

Answer 70

Class gifts to descendants, issue, and other multigenerational classes are distributed per stirpes, unless otherwise indicated by the terms of the trust instrument. Fla. Stat. § 736.1103.

Answer 71

As is the case with a devise in a will, a distribution of specific securities, rather than their equivalent value, mandated by the trust instrument entitles the beneficiary only to (i) as much of the gifted securities of the same issuer held by the trust estate at the time of the occurrence of the event entitling the beneficiary to distribution, (ii) any additional or other securities of the same issuer held by the trust estate because of action initiated by the issuer (e.g., a stock split), excluding any acquired by exercise of purchase options, and (iii)securities of another issuer held by the trust estate as a result of a merger, consolidation, reorganization, or other similar action initiated by the original issuer. Fla. Stat. §736.1107.

Answer 72

For a trust to be considered charitable, it must have a stated charitable purpose. Charitable purposes include, but are not limited to (i) the relief of poverty, (ii) the advancement of arts, sciences, education, or religion, and (iii) the promotion of health, governmental, or municipal purposes. Fla. Stat. § 736.0405(1). If the terms of a charitable trust do not indicate a particular charitable purpose, then the court may select one or more charitable purposes, so long as the selection is consistent with the settlor’s intent, to the extent that such intent can be ascertained. Fla. Stat. §736.0405(2). A trust for profit (unless the profits are to go to a charitable purpose) or a trust for named persons is not a charitable trust.

Answer 73

For a trust to be considered charitable, it must have a stated charitable purpose. Charitable purposes include, but are not limited to (i) the relief of poverty, (ii) the advancement of arts, sciences, education, or religion, and (iii) the promotion of health, governmental, or municipal purposes. Fla. Stat. § 736.0405(1). If the terms of a charitable trust do not indicate a particular charitable purpose, then the court may select one or more charitable purposes, so long as the selection is consistent with the settlor’s intent, to the extent that such intent can be ascertained. Fla. Stat. §736.0405(2). A trust for profit (unless the profits are to go to a charitable purpose) or a trust for named persons is not a charitable trust.

Answer 74

Unless the beneficiary is a charitable organization, the beneficiaries of a charitable trust must be indefinite. Fla. Stat. §736.0402(1)(c). The community at large or a class comprising unidentifiable members, not a named individual or a narrow group of individuals, must be the beneficiary of a charitable trust. If the terms of a charitable trust do not indicate a particular beneficiary, then the court may select one or more beneficiaries, so long as the selection is consistent with the settlor’s intent, to the extent that such intent can be ascertained. Fla. Stat. § 736.0405(2). Compare private express trust: For a private express trust to be valid, it must have definite beneficiaries. For a charitable trust, the class to be benefited must be definite, but the specific persons to benefit from the trust must be indefinite to be valid.

Answer 75

Charitable trusts are not subject to the Rule Against Perpetuities. They may continue indefinitely. Additionally, under the so-called charity-to-charity exception to the Rule Against Perpetuities, a trust can be created that calls for transfers of interest among charities. However, a trust that directs the transfer of interest from a charitable beneficiary to a noncharitable beneficiary is subject to the Rule Against Perpetuities. Example 1: A trust created by Joan Smith provides “income from a fund to Florida State Hospital for as long as the hospital serves patients, and if the hospital shall ever cease to do so, then to the Dade County Red Cross.” The future interest held by the Dade County Red Cross is valid under the charity-to-charity exception. Example 2: A trust created by Joan Smith provides “income from a fund to the Miami?Dade County Shelter for the Homeless for as long as a facility for the homeless is maintained, and if not, then to Billy Marlin, his heirs, successors, and assigns.” The future interest held by Billy Marlin would be subject to the Rule Against Perpetuities.

Answer 76

The doctrine of cy pres (meaning “as near as possible”) is applied by a court to modify or terminate a charitable trust when: i) A particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful; and ii) Trust property may be applied or distributed, in whole or in part, in a manner consistent with the settlor’s charitable purposes. Fla. Stat. §736.0413(1). It is not enough that the court finds that the modification or termination would be a more desirable, effective, or efficient use of the trust property. The court must also determine that the modification or termination is in accord with the settlor’s charitable purposes.

Answer 77

Similar to the cy pres doctrine, the equitable doctrine of deviation allows a trustee to deviate from a term of the trust if compliance is impossible or, due to circumstances unforeseen by the settlor, would prevent accomplishment of the trust’s purposes. Deviation deals with the methods of accomplishing the trust’s purposes, while cy pres deals with the application of the trust’s property to different purposes. Fla. Stat. §736.1207.

Answer 78

The settlor or the state attorney general as well as a qualified beneficiary has standing to bring suit to enforce a charitable trust or to seek application of the cy pres doctrine. Fla. Stat. §§ 736.0110, 736.0405(3), 736.0413(2). Only a charitable organization that is a named beneficiary of the trust may be a qualified beneficiary. Individuals or entities who receive benefits through the organization (e.g., a student who receives a scholarship) do not have standing to sue.

Answer 79

Remedial trusts are created by operation of law as equitable remedies and therefore are not subject to the creation requirements that express trusts are. Remedial trusts are passive in that the sole duty of the trustee is to convey the trust property to the beneficiary; after this has been accomplished, the trust terminates.

Answer 80

A court may impose a resulting trust when a trust fails or when there is an incomplete disposition of trust property. Based on the settlor’s presumed intent, the court will require the trustee to return the trust property to the settlor or to the settlor’s estate. A court may also impose a resulting trust when a person pays for property and another person takes title to the property (a purchase-money resulting trust).

Answer 81

A resulting trust can arise when a private express trust fails. Example: Sophie conveys Whiteacre to Terrence to hold in trust for her nephew, Roger. Sophie is unaware that Roger had already died. The attempted express trust will fail for lack of a beneficiary. Terrence therefore will hold Whiteacre in a resulting trust for the benefit of the settlor, Sophie. a. Trust created for an illegal purpose If a settlor creates an express trust for an illegal purpose, it will fail. A resulting trust will not arise, though, if the policy against giving relief to a person who has committed an illegal act outweighs the policy against unjust enrichment. However, if a private express trust became illegal after it was lawfully created due to a change in the law, a resulting trust will be imposed. b. Charitable express trust If a charitable trust fails, a resulting trust is generally presumed only if the doctrine of cy pres is not applicable (see § III.D. Cy pres doctrine, supra).

Answer 82

A resulting trust will also arise when excess corpus remains in a trust after its purpose has been satisfied. Example: Stanley transfers $50,000 to Tara in trust to pay $1,000 per month to his daughter Beverly during her life. Beverly dies after having received $10,000. Tara, the trustee, will hold the remaining $40,000 in a resulting trust for the benefit of the settlor, Stanley.

Answer 83

If property is purchased and paid for by one person (regardless of the type of consideration provided), and title is taken in the name of another, then a resulting trust will generally be rebuttably presumed as arising in favor of the person who paid the money for the property. Parol evidence is admissible to rebut the presumption by showing that the payment was a gift, loan, or payment to discharge a debt.

Answer 84

If the transferee is a member of the transferor’s immediate family, then there is a rebuttable presumption that a gift was intended. Parol evidence will be admissible to show that no gift was intended, even if the property that was transferred is land. Example: Almonzo pays the purchase price for Blueacre and causes title to the property to be taken in his girlfriend Beth’s name. Unless Beth can prove the consideration was provided by Almonzo as a gift, loan, or payment of a debt, a purchase-money resulting trust will be imposed.

Answer 85

If the arrangement under which title is taken is for an illegal purpose, such as avoidance of creditors or taxes, then equity will generally decline to imply a resulting trust.

Answer 86

If part of the purchase price of the property has been paid by the claimant of a resulting trust, then she will be presumed to have intended a trust in the property to the extent of the proportion of funds extended for the purchase price, unless the parties have agreed to a different amount. Example: Shira paid $50,000 of a $100,000 purchase price for Redacre, which was put in the name of Cory, who paid the other $50,000 for the property. Shira, as equitable owner of half of the property, may be the beneficiary of a resulting trust of which Cory is the trustee, for $50,000 or one-half of the property.

Answer 87

A court may order a constructive trust as an equitable remedy to prevent unjust enrichment by a person obtaining or holding legal title to property through wrongful conduct, such as fraud, duress, undue influence, breach of contractual or fiduciary duty, or detrimental reliance by a third party on a false written representation by the settlor. Generally, a constructive trust will not be imposed upon the violation of an oral agreement, even if the agreement was relied upon by a third party, unless the violation constituted fraud, was committed by a fiduciary, or concerned the contents of the promisor’s will. Proof of the wrongful conduct must be established by clear and convincing evidence.

Answer 88

A constructive trust cannot be based on theft or conversion. This is because the thief or converter does not actually acquire title to the property through the wrongdoing. An action in replevin or trover would be the proper remedy under such circumstances.

Answer 89

The tracing doctrine may be applied if trust property has already been sold or otherwise disposed of, allowing the beneficiary of the constructive trust to pursue the sale proceeds or other property received. In such a case, the constructive trust may be imposed either against the seller or against the buyer.

Answer 90

Because a constructive trust is an equitable remedy, equitable defenses, such as unclean hands or laches, may prevent the imposition of a constructive trust.

Answer 91

A person who unlawfully and intentionally kills or participates in procuring the death of the settlor or another person on whose death the beneficiary’s interest depends is not entitled to any trust interest, including homestead, dependent on the victim’s death. Fla. Stat. §736.1104.

Answer 92

A final judgment of conviction of murder in any degree is conclusive for proving that a person unlawfully and intentionally killed or participated in procuring the death of the settlor or other person on whose death the beneficiary’s interest depends. In the absence of a murder conviction, the court may determine by the greater weight of the evidence (i.e., a preponderance of the evidence) whether the killing was unlawful and intentional. Fla. Stat. § 736.1104(2).

Answer 93

Such interest devolves as if the killer had predeceased the victim. Fla. Stat. §736.1104(1).

Answer 94

If a revocable trust is executed by a husband or wife as settlor prior to a divorce or annulment from the settlor’s spouse, any provision of the trust that affects the settlor’s spouse is void upon the divorce or annulment, unless the trust instrument or the judgment for dissolution of marriage or divorce expressly provides otherwise. Any such trust must be administered and construed as if the settlor’s spouse had died on the date of the divorce or annulment. Fla. Stat. § 736.1105. There is companion statute that provides for similar treatment of designations in favor of an ex-spouse in a life insurance policy, annuity, payable-on-death account, and similar assets. Fla. Stat. § 732.703.

Answer 95

Under Florida law, a future interest under the terms of a trust is contingent upon the beneficiary surviving the distribution date. Fla. Stat. §736.1106(2). Example: A settlor establishes an irrevocable trust. The income from the trust is to be paid annually to Sarah, the settlor’s spouse, for life, and then to Chad, the settlor’s only child, for life, and then, upon Chad’s death, the trust is to terminate and the trust property is to be paid to a charity. Under Florida law, Chad’s trust interest is contingent on surviving Sarah.

Answer 96

Unless a contrary intent appears in the trust instrument, anti-lapse only applies to Florida trusts if the beneficiary is a grandparent, or a lineal descendant of a grandparent, of the settlor or testator. Fla. Stat. §736.1106(5). Unless a contrary intent appears in the trust instrument, if a qualifying beneficiary of a future interest under the terms of a trust fails to survive the distribution date, and the deceased beneficiary leaves surviving descendants, then a substitute gift is created in the beneficiary’s surviving descendants. They take per stirpes the trust interest to which the beneficiary would have been entitled if the beneficiary had survived the distribution date. Fla. Stat. §736.1106(2). If there are no surviving descendants, then the interest lapses. Example 1: Assume the same facts as those in the immediately preceding example. In addition, Chad predeceases Sarah. At the time of Sarah’s death, Sam and Doris, Chad’s children, are alive, as are Greg and Gretchen, children of Debra, who herself was Chad’s child and who has predeceased Sarah. Chad’s income interest in the trust is divided into three parts, with Sam and Doris each entitled to one-third of the income interest, and Greg and Gretchen each entitled to one-sixth of the income interest, their equal share of Debra’s one-third interest. Example 2: Assume the same facts of those in Example 1 except that Chad’s only child was Debra. Chad’s income interest is divided in equal parts between Greg and Gretchen, Chad’s grandchildren, with each entitled to one-half of the income interest. Example 3: Assume the same facts as those in Example 1 except that Chad died childless. Chad’s income interest lapses. The trust is terminated and the charity is entitled to take the trust’s property.

Answer 97

If a contrary intent appears in the trust instrument, the anti-lapse rule does not apply. Words of survivorship attached to a future interest are a sufficient indication of a contrary intent. Fla. Stat. § 736.1106(3)(a). Similarly, the provision of an alternative taker of the trust interest overrides the anti-lapse rule. Example: Assume the same facts as those in Example 1, above, except that the wording of the trust specifically requires Chad to survive Sarah. Upon Sarah’s death, Chad’s interest lapses. The anti-lapse rule does not apply to create a substitute gift in Chad’s descendants. The trust terminates, and the trust property passes to the charity. A residuary clause in a will, however, is not a sufficient indication of a contrary intent, even though the will specifically provides that lapsed or failed devises are to pass under the residuary clause. Fla. Stat. § 736.1106(3)(b).

Answer 98

In general, in the absence of a contrary statutory provision or a provision in the trust instrument, a beneficiary’s interest in trust property is freely alienable. Any transferee from a beneficiary takes the same interest as the beneficiary held.

Answer 99

Unless a beneficiary’s interest is subject to a spendthrift provision (see § V.D.3. Spendthrift Provision, below) or a discretionary provision (see § V.D.4. Discretionary Distributions, below), the court may generally authorize a creditor or an assignee of the beneficiary to reach the beneficiary’s interest by attachment of present or future distributions to or for the benefit of the beneficiary or by other means. The court may limit the award to such relief as is appropriate under the circumstances. Fla. Stat. § 736.0501.

Answer 100

A spendthrift trust expressly restricts the beneficiary’s power to transfer her trust interest. A spendthrift provision is usually inserted into a trust instrument to prevent a beneficiary from thwarting the purpose of the trust and gaining immediate access to funds that cannot be distributed to the beneficiary under the terms of the trust. If a spendthrift clause applies, not only is a beneficiary prevented from transferring her interest, but also the beneficiary’s creditors are not able to attach that interest.

Answer 101

A spendthrift provision is valid only if the provision restrains both voluntary and involuntary transfer of a beneficiary’s interest. A provision allowing the beneficiary free access to his interest in the trust while restraining creditors from reaching that interest is violative of public policy and will not qualify as a spendthrift provision. Fla. Stat. § 736.0502(1). A term of a trust providing that the interest of a beneficiary is held subject to a spendthrift trust, or words of similar import, is sufficient to restrain both voluntary and involuntary transfer of the beneficiary’s interest. Fla. Stat. §736.0502(2).

Answer 102

If a spendthrift clause applies, most creditors of the beneficiary may not reach the interest or a distribution by the trustee before receipt of the interest or distribution by the beneficiary. Fla. Stat. § 736.0502(3). In addition, any attempted assignment by the beneficiary of her interest is unenforceable. Also, the beneficiary’s interest is not reachable in bankruptcy proceedings. A spendthrift restriction applies only as long as the property remains in the trust. It is inapplicable to property that has been distributed to the beneficiary.

Answer 103

The following claims against a beneficiary are not precluded by a spendthrift clause: i) Support claims by a spouse, an ex-spouse, or a child of a beneficiary; ii) Claims by a judgment creditor who has provided services for the protection of a beneficiary’s trust interest; and iii) Claims of the federal government or the State of Florida. Fla. Stat. § 736.0503(2). While these claimants (also known as “exception creditors”) may seek a court order attaching present and future trust distributions made to the beneficiaries, except for governmental claims (item (iii) above), the court may issue such an order only as a last resort upon an initial showing that traditional methods of enforcing the claim are insufficient. Consequently, if the beneficiary has other assets, the claimant must first seek to satisfy the claim from those assets. Fla. Stat. §736.0503(3). For treatment of claims against a beneficiary who is also a settlor of the trust, see § V.D.5. Rights of Creditors of the Settlor, below.

Answer 104

A creditor or an assignee of a beneficiary may reach a mandatory distribution of income or principal, including a distribution upon termination of the trust, if the trustee has not made the mandatory distribution to the beneficiary within a reasonable time after the designated distribution date, even though the trust contains a spendthrift provision. Fla. Stat. § 736.0506(2).

Answer 105

When a trustee has discretion to make a distribution to or for the benefit of a beneficiary, a beneficiary’s creditor generally may not attach or otherwise reach the beneficiary’s interest in the discretionary distribution before it is made. This restriction applies whether the trustee’s discretion is subject to a standard (e.g., “the health, education, maintenance, or support of the beneficiary”). In addition, this restriction applies even if the trust does not contain a spendthrift provision. Also, unlike a spendthrift provision, this restriction applies to any beneficiary creditor, even those such as the spouse, ex-spouse, or child of the beneficiary with a support claim. Fla. Stat. § 736.0504(1, 2). However, a Florida court has ruled that the restriction does not prohibit a former spouse from obtaining a writ of garnishment against discretionary disbursements made by a trustee exercising its discretion. Berlinger v. Casselberry, 133 So.3d 961 (Fla. Dist. Ct. App. 2013).

Answer 106

While the beneficiary has the right to bring an action against the trustee seeking a distribution on the grounds that the trustee has abused her discretion or failed to adhere to the standard for distribution, the beneficiary’s creditor does not. The creditor cannot compel a distribution that is subject to the trustee’s discretion. Fla. Stat. § 736.0504(2)(a), (4).

Answer 107

A settlor cannot protect himself from a creditor’s claim by placing property in a trust to the extent that the settlor retains control over or an interest in the trust. This is true with regard to a creditor’s claim that arises after as well as before the trust was created.

Answer 108

All property held in a revocable trust is subject to the claims of the settlor’s creditors during the settlor’s lifetime, except to the extent that the property would otherwise be exempt by law if owned directly by the settlor. Fla. Stat. §736.0505(1)(a). Since the settlor can regain control over the property placed in a revocable trust at any time, the creditor can reach the trust property, even if the settlor is not a beneficiary of the revocable trust. If the settlor is a beneficiary of the revocable trust, neither a spendthrift nor a discretionary provision will prevent a settlor’s creditor from reaching the trust property.

Answer 109

Upon the settlor’s death, a settlor’s creditor generally must file a claim that is dependent upon the individual liability of the settlor with the personal representative of the settlor’s estate; the creditor may not bring an action directly against the trust. Fla. Stat. § 736.1014. Instead, the personal representative of the settlor’s estate may demand that the trustee make a payment from trust property to enable the personal representative to meet the administrative expenses and other obligations of the settlor’s estate, including the creditor’s claim, only if and to the extent that the property in the settlor’s probate estate is insufficient to meet these expenses and obligations. Fla. Stat. §§ 733.607, 736.05053.

Answer 110

With respect to an irrevocable trust in which the settlor is also a beneficiary (i.e., a self-settled trust), a settlor’s creditor may reach the maximum amount that can be distributed to the settlor or for the settlor’s benefit whether or not the trust is subject to a spendthrift provision. If a trust has more than one settlor, the amount the creditor of a particular settlor may reach may not exceed the settlor’s interest in the portion of the trust attributable to that settlor’s contribution. Fla. Stat. §736.0505(1)(b).

Answer 111

The holder of a power of withdrawal from an irrevocable trust is treated as the settlor of a revocable trust with respect to property subject to the power. Once the power has lapsed or been released or waived, the former holder retains the status of settlor with regard to the property that was subject to the lapsed, released, or waived power. Consequently, the former holder’s creditors can reach the maximum amount of that property that can be distributed to the former holder, but only to the extent that the value of such property exceeds the greater of (i) the federal gift-tax annual exclusion ($14,000 for 2016) or, if the holder was married at the time of the transfer to which the power applies, double that amount ($28,000 for 2016), or (ii)the safe harbor for lapses under the federal gift and estate tax laws (the greater of $5,000 or five percent of the trust). Fla. Stat. § 736.0505(2).

Answer 112

Trust property is not subject to the personal obligations of the trustee, even if the trustee becomes insolvent or bankrupt, unless the trustee is also the settlor or beneficiary of the trust. Fla. Stat. § 736.0507.

Answer 113

A trust will automatically terminate to the extent that the trust expires, is revoked, or is properly distributed pursuant to the terms of the trust. Fla. Stat. § 736.0410(1). A trust will automatically terminate when all of the trust purposes have been accomplished. A spendthrift provision in a trust would constitute a material purpose, and therefore the provision would prevent termination. Similarly, if there is a clear and unambiguous provision as to a trust’s duration, then a material purpose would be defeated if the trust were terminated before that time period expired. EXAM NOTE: A trust can be modified, depending on the type of trust (revocable or irrevocable) by the settlor (revocable) or by agreement, the court, or the trustee (irrevocable).

Answer 114

A settlor may revoke or amend a revocable trust. For trusts created on or after July1,2007 (the effective date of the FTC), a trust is revocable unless the terms expressly provide that the trust is irrevocable. Fla. Stat. § 736.0602(1). If the trust is revoked, then the trustee must distribute the property as directed by the settlor. Fla. Stat. §736.0602(4).

Answer 115

A settlor may revoke or amend a revocable trust: i) By substantial compliance with a method provided in the terms of the trust; or ii) If the terms of the trust do not provide a method, then: a) By a later will or codicil that expressly refers to the trust or specifically devises property that would otherwise have passed according to the terms of the trust; or b) By any other method manifesting clear and convincing evidence of the settlor’s intent. Fla. Stat. §736.0602(3). When a settlor revokes or amends a revocable trust with testamentary aspects by a later will or codicil, the later will or codicil must be executed with the formalities required for a will.

Answer 116

If a revocable trust is created or funded by more than one settlor, then each settlor generally may revoke or amend the trust with regard to the portion of the trust property that is attributable to that settlor’s contribution. To the extent that the trust consists of community property, it may be revoked by either settlor-spouse acting alone, but may be amended only by the joint action of both settlor-spouses. Upon the revocation or amendment of the trust by fewer than all of the settlors, the trustee is required to promptly notify the other settlors of the revocation or amendment. Fla. Stat. §736.0602(2).

Answer 117

A trustee who does not know that a trust has been revoked or amended is not liable for distributions made and other actions taken on the assumption that the trust had not been amended or revoked. Fla. Stat. § 736.0602(7).

Answer 118

Under common-law doctrine, which supplements the FTC, an irrevocable trust can be terminated by the consent of all beneficiaries, as long as the trust has no material purpose that would be violated by termination or amendment of the trust. A guardian or a guardian ad litem may consent on behalf of a beneficiary who is a minor, an incompetent adult, or unborn. The consent of the settlor or trustee is not required, nor is judicial approval. a. Material purpose trust A trust has a material purpose if it has a spendthrift provision, a discretionary distribution provision, a distribution provision keyed to the support of the beneficiary, or a postponement of enjoyment provision.

Answer 119

Under common-law doctrine, which supplements the FTC, an irrevocable trust with a material purpose can be terminated by the consent of all beneficiaries and the settlor. Neither the consent of the trustee nor judicial approval is required.

Answer 120

After the settlor’s death, an irrevocable trust may be modified or terminated upon the unanimous agreement of the trustee and all qualified beneficiaries. Fla. Stat. §736.0412(1). Modification is not prohibited by a spendthrift clause or by a provision in the trust instrument that prohibits amendment or revocation of the trust. Fla. Stat. §736.0412(2). Although a spendthrift trust may be modified, it cannot be terminated. a. Exceptions 1) Trusts created prior to January 1, 2001 This statutory provision does not apply to any trust created prior to January1, 2001. Fla. Stat. § 736.0412(4). 2) Trusts created after December 31, 2000 This statutory provision does not apply to any trust created after December31, 2000, if: i) Under the terms of the trust, the common-law or 90-year Rule Against Perpetuities applies; ii) The terms of the trust expressly prohibit judicial modification; or iii) The trust is a charitable trust and not all of the charitable interests have terminated. Fla. Stat. § 736.0412(4).

Answer 121

Modification that is permitted Modification includes: i) Amending or changing the terms of the trust, including terms governing distribution of the trust income or principal or terms governing administration of the trust; ii) Terminating the trust in whole or in part; iii) Directing or permitting the trustee to do acts that are not authorized or that are prohibited by the terms of the trust; or iv) Prohibiting the trustee from performing acts that are permitted or required by the terms of the trust. Fla. Stat. §§ 736.0412(1), 736.04113(2).

Answer 122

A court may modify an irrevocable trust if doing so is not inconsistent with the settlor’s purpose, when in the beneficiaries’ best interest, due to unanticipated changes, for an uneconomic trust, to correct mistakes, or to accomplish the settlor’s tax objectives.

Answer 123

Upon application of a trustee of a trust or any qualified beneficiary, a court at any time may modify the terms of an irrevocable trust if: i) The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill; ii) Because of circumstances not anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair the accomplishment of a material purpose of the trust; or iii) A material purpose of the trust no longer exists. Fla. Stat. § 736.04113(1). The court is required to consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and extrinsic evidence relevant to the proposed modification. The court is not precluded from modifying a trust because the trust contains spendthrift provisions. Fla. Stat. §736.04113(3). If the trust contains terms establishing the duration of the trust, however, it may not be terminated before that time.

Answer 124

If any of the above conditions exist, the court may: i) Amend or change the terms of the trust, including terms governing distribution of the trust income or principal or terms governing trust administration; ii) Terminate the trust in whole or in part; iii) Direct or permit the trustee to do acts that are not authorized or that are prohibited by the terms of the trust; or iv) Prohibit the trustee from performing acts that are permitted or required by the terms of the trust. Fla. Stat. § 736.04113(2).

Answer 125

If compliance with the terms of a trust is not in the best interests of the beneficiaries, then upon the application of a trustee or any qualified beneficiary, a court may at any time modify an irrevocable trust. Fla. Stat. § 736.04115(1). The court must exercise its discretion in a manner that conforms as far as possible with the intent of the settlor, taking into account the current circumstances and best interests of the beneficiaries. The court must consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and extrinsic evidence relevant to the proposed modification. The court is not precluded from modifying a trust because the trust contains spendthrift provisions. Fla. Stat. §736.04115(2).

Answer 126

1) Trusts created prior to January 1, 2001 Judicial modification pursuant to this statute does not apply to any trust created prior to January 1, 2001. Fla. Stat. § 736.04115(3). 2) Trusts created after December 31, 2000 Judicial modification pursuant to this statute does not apply to any trust created after December 31, 2000, if: i) Under the terms of the trust, the common-law or 90-year Rule Against Perpetuities applies; or ii) If the terms of the trust expressly prohibit judicial modification. Fla. Stat. § 736.04115(3).

Answer 127

When modification is permitted, the court may: i) Amend or change the terms of the trust, including terms governing distribution of the trust income or principal or terms governing administration of the trust; ii) Terminate the trust in whole or in part; iii) Direct or permit the trustee to do acts that are not authorized or that are prohibited by the terms of the trust; or iv) Prohibit the trustee from performing acts that are permitted or required by the terms of the trust. Fla. Stat. §§ 736.04113(2), 736.04115(1).

Answer 128

A court may modify or prematurely terminate an irrevocable trust due to a change in circumstances not anticipated by the settlor. Fla. Stat. §§ 736.04113(4), 736.04115(5).

Answer 129

Upon application of a trustee or any qualified beneficiary, a court may modify or terminate a trust or remove the trustee and appoint a different trustee if the court determines that the value of the trust property is insufficient to justify the cost of administration. Fla. Stat. § 736.0414(2). Upon termination of the trust, the trustee must distribute the trust property in a manner consistent with the purposes of the trust. Fla. Stat. § 736.0414(3). The existence of a spendthrift provision in the trust does not preclude modification or termination. Fla. Stat. § 736.0414(4).

Answer 130

Upon application of a settlor or of 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. 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. Fla. Stat. § 736.0415.

Answer 131

Upon application of any interested person, a court may modify the terms of a trust in a manner that is not contrary to the settlor’s probable intent in order to achieve the settlor’s tax objectives, and it may require that the modification have a retroactive effect. Fla. Stat. § 736.0416.

Answer 132

Modification or Termination of a Trust by the Trustee 1. Termination of an Uneconomic Trust With a Value Less Than $50,000 After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value of less than $50,000 may terminate the trust without court approval if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration. Fla. Stat. § 736.0414(1). Such power to terminate will apply to a trust that has a spendthrift provision unless the trust instrument expressly provides that the trustee may not terminate the trust under such circumstances. Fla. Stat. §736.0414(4). Upon termination of the trust, the trustee must distribute the trust property in a manner consistent with the purposes of the trust. Fla. Stat. §736.0414(3).

Answer 133

After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts if the result does not impair the rights of any beneficiary or adversely affect achievement of the purposes of the trusts or trust. Fla. Stat. § 736.0417(1).

Answer 134

3. Distributions to Another Trust a. Trustee with absolute power to invade principal in the trust Unless the trust instrument expressly provides otherwise, a trustee who has absolute power under the terms of a trust to invade the principal of the trust to make distributions to or for the benefit of one or more persons may instead exercise the power by distributing all or part of the principal of the trust subject to the power in favor of a trustee of another trust for the current benefit of one or more such persons under the same trust instrument or under a different trust instrument. For the trustee to be able to exercise the power: i) The beneficiaries of the second trust may include only beneficiaries of the first trust; and ii) The second trust must not reduce any vested interest. Fla. Stat. § 736.04117(2)(a).

Answer 135

In an exercise of absolute power by the trustee, the second trust may: i) Retain a power of appointment granted in the first trust; ii) Omit a power of appointment granted in the first trust, other than a presently exercisable general power of appointment; iii) Create or modify a power of appointment if the power holder is a current beneficiary of the first trust; iv) Create or modify a power of appointment if the power holder is a beneficiary of the first trust who is not a current beneficiary, but the exercise of the power of appointment may take effect only after the power holder becomes, or would have become if then living, a current beneficiary of the first trust; and v) Extend the term of the second trust beyond the term of the first trust. Fla. Stat. § 736.04117(2)(b).

Answer 136

An absolute power to invade principal includes a power to invade principal that is not limited to specific or ascertainable purposes, such as health, education, maintenance, and support, whether or not the term “absolute” is actually used. A power to invade principal for purposes such as best interests, welfare, comfort, or happiness will constitute an absolute power not limited to specific or ascertainable purposes. Fla. Stat. § 736.04117(1)(a).

Answer 137

Unless the trust instrument expressly provides otherwise, a trustee who has a power, other than an absolute power, under the terms of a first trust to invade principal to make current distributions to or for the benefit of one or more beneficiaries may instead exercise such power by appointing all or part of the principal of the first trust subject to such power in favor of a trustee of one or more second trusts. Fla. Stat. § 736.04117(3). If the trustee exercises the power to invade the principal, the second trust(s) must grant each beneficiary of the first trust beneficial interests that are substantially similar to the interests provided by the first trust. If the first trust grants a power of appointment to a beneficiary of that trust, the second trust must grant that power of appointment in the second trust to the beneficiary. If the first trust does not grant a power of appointment to a beneficiary of the first trust, the second trust may not grant a power of appointment in the second trust to the beneficiary. Fla. Stat. §736.04117(3).

Answer 138

To exercise such power, the trustee must do so in a written instrument that is signed and acknowledged by the trustee and filed with the records of the first trust. Fla. Stat. § 736.04117(6). Unless waived by all qualified beneficiaries of the first trust, the trustee must notify all the qualified beneficiaries, in writing, at least 60 days prior to the effective date of the trustee’s exercise of the power to invade principal of the manner in which the trustee intends to exercise the power. Fla. Stat. § 736.04117(8)(a).

Answer 139

The exercise of the power to invade principal is not prohibited by a spendthrift clause or by a provision in the trust instrument that prohibits amendment or revocation of the trust. Fla. Stat. § 736.04117(9).

Answer 140

A trustee derives her authority from the trust instrument. The trustee generally administers the trust without court supervision. Fla. Stat. § 736.0201. Before any duties are imposed, the trustee must accept the trusteeship (see § II.A.3.b. Acceptance of trusteeship, supra). The trustee is then charged with following the settlor’s instructions and acting as a fiduciary on behalf of the beneficiaries of the trust.

Answer 141

A trustee has the powers specifically conferred by the terms of the trust and, except as limited by the terms of the trust, has by statute all powers over trust property that an unmarried competent owner has over individually owned property and any other powers appropriate to achieve the proper investment, management, and distribution of the trust property. Fla. Stat. § 736.0815(1). In addition, the FTC specifically confers a wide variety of powers on a trustee, including the powers to hold and invest assets; to operate a business; to buy, sell, lease, or encumber trust assets; to insure assets; to vote securities; and to prosecute and defend actions involving the trust. Fla. Stat. §736.0816. The exercise of any power by the trustee is subject to the fiduciary duties described in greater detail below. Fla. Stat. § 736.0815(2).

Answer 142

a. Mandatory powers A power is mandatory when a trustee is required by the terms of the trust to perform a particular act (e.g., make a distribution to a beneficiary). b. Mandatory limitations on powers The terms of a trust can also specifically limit a trustee’s otherwise permissible powers (e.g., a spendthrift provision). c. Discretionary powers Most powers, though, are discretionary, in that a trustee can decide whether exercise of the power is appropriate under the circumstances. Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of such terms as “absolute,” “sole,” or “uncontrolled,” a trustee is required to exercise a discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries. While such discretion is subject to judicial review, a court cannot determine that a trustee abused her discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion. Fla. Stat. § 736.0814(1). Even if a trustee is granted complete discretion under the trust instrument, her actions are not immune from review if it can be shown that she failed to exercise any judgment. d. Power to inspect and comply with environmental laws Unless otherwise provided in the trust instrument, the trustee has the power to reasonably inspect and take action to comply with environmental laws affecting the property and general human health, without incurring liability to any beneficiary or other person for a decrease in value due to compliance with environmental law. Fla. Stat. § 736.08163.

Answer 143

If there are co-trustees, then the expectation is that they will act by unanimous decision. If they are unable to reach a unanimous decision, they may act by majority decision. Fla. Stat. § 736.0703(1). If a vacancy occurs in a co-trusteeship, then the remaining co-trustees or a majority of the remaining co-trustees may act for the trust. Fla. Stat. §736.0703(2). If a co-trustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity, and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, then the remaining co-trustee or a majority of the remaining co-trustees may act for the trust. Fla. Stat. § 736.0703(4). If the terms of a trust instrument provide for the appointment of more than one trustee but confer on one or more of the trustees, to the exclusion of the others, certain specific powers, then the excluded trustees must act in accordance with the exercise of the power by the specified trustees. Fla. Stat. § 736.0703(9).

Answer 144

A trustee is bound by a broad range of fiduciary duties designed to ensure that the trustee acts solely in the best interests of the beneficiaries when managing the trust. While a trust is revocable, the trustee’s duties are owed exclusively to the settlor. During the period the power may be exercised, the holder of a power of withdrawal from an irrevocable trust has the rights of a settlor of a revocable trust to the extent of the property subject to the power. Fla. Stat. § 736.0603. A trustee may follow a direction of the settlor that is contrary to the terms of the trust while the trust is revocable. Fla. Stat. § 736.0808.

Answer 145

Upon acceptance of a trusteeship, the trustee is required to administer the trust in good faith, in accordance with its terms and purposes, in the interests of the beneficiaries, and in accordance with the FTC. Fla. Stat. § 736.0801. This duty is mandatory. It cannot be waived by the terms of the trust. Fla. Stat. §736.0105(2)(b).

Answer 146

A trustee owes a duty of loyalty to the beneficiaries of the trust. The trustee must administer the trust solely in the interests of the beneficiaries. A trustee is not permitted to engage in acts that personally benefit the trustee, conflict with the trustee’s fiduciary duty, or appropriate an opportunity of the trust. In general, self?dealing (e.g., selling property owned by the trustee personally to the trust, buying trust property, using trust assets as collateral for obtaining a personal loan) is prohibited. Fla. Stat. § 736.0802(1), (4). Once self-dealing by the trustee is established, no further inquiry into the trustee’s reasonableness or good faith is necessary, because self-dealing is a per se breach of the duty of loyalty (“no further inquiry” rule). UTC § 802, cmt. a. Voidable transaction In general, a beneficiary may void a trustee’s self-interested transaction. Fla. Stat. §736.0802(2). 1) Exceptions A trustee’s breach of the duty of loyalty is not voidable by a beneficiary if: i) The transaction was authorized by the terms of the trust; ii) The transaction was approved by a court; iii) The beneficiary did not commence a judicial proceeding within the required time period (see § VIII.A.2. Statute of Limitations, infra); iv) The beneficiary consented to the trustee’s conduct, ratified the transaction, or released the trustee; v) The transaction involves a contract entered into or a claim acquired by the trustee when that person had not become or contemplated becoming trustee; vi) The transaction was consented to in writing by a settlor of the trust while the trust was revocable; vii) The transaction is one by a corporate trustee that involves a money?market mutual fund, a mutual fund, or a common trust fund; or viii) An authorized transaction by a family trust company. Fla. Stat. § 736.0802(2). b. Rebuttable presumption of conflict of interest for transactions with close associates of the trustee Unlike a self-dealing transaction with the trustee personally, which is irrebuttably presumed to be voidable, a transaction relating to trust property entered into by the trustee with: i) The trustee’s spouse; ii) The trustee’s descendants, siblings, parents, or the spouse of such relatives; iii) The trustee’s officer, director, employee, agent, or attorney; or iv) A corporation, a person, or an enterprise in which the trustee (or a person owning a significant interest in the trustee) possesses an interest that may affect the trustee’s judgment; is rebuttably presumed to be a violation of the trustee’s duty of loyalty. Fla. Stat. §736.0802(3). Factors relevant to a determination of conflict include the fairness of any consideration involved and whether the terms of the transaction are similar to those that would be found in an arms-length transaction involving an independent party. UTC § 802, cmt. There is an exception when a trustee that is authorized by lawful authority to engage in trust business invests trust funds in its own investment instruments, provided the trustee complies with notice and disclosure requirements. Fla. Stat. § 736.0802(5). c. Transactions that are not precluded The trustee’s duty of loyalty will not preclude the following transactions, if fair to the beneficiaries: i) An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee; ii) Payment of reasonable compensation to the trustee; iii) A transaction between a trust and another trust, the decedent’s estate, or a guardian of the property of which the trustee is a fiduciary or in which a beneficiary has an interest; iv) A deposit of trust money in a bank operated by the trustee; v) An advance by the trustee of money for the protection of the trust; or vi) Employment of attorneys, accountants, investment advisors, or agents, even if they are the trustee, an affiliate of the trustee, or otherwise associated with the trustee, to advise or assist the trustee in the exercise of any of the trustee’s powers. Fla. Stat. § 736.0802(7), (8). Communications between a lawyer and a trustee are privileged under the attorney-client privilege and protected from disclosure under the duty of confidentiality to the same extent as if the trustee were not acting as a fiduciary. Fla. Stat. §90.5021. The crime or fraud exception to the lawyer-client privilege is still applicable to such communications, however.

Answer 147

When a trust has two or more beneficiaries, the trustee must act impartially in administering the trust property, giving due regard to the beneficiaries’ respective interests. Fla. Stat. § 736.0803. When a trust has both present and future beneficiaries, the trustee has a duty to balance their often-conflicting interests by investing the property so that it produces a reasonable income while preserving the principal for the remaindermen. The duty of impartiality may be eliminated by the terms of a trust that require the trustee to favor one beneficiary over another.

Answer 148

Generally, life beneficiaries are entitled to the trust income, and remaindermen are entitled to the trust principal. Typically, all assets received by a trustee are allocated to either income or principal. The traditional approach to such allocation assumed that any money generated by trust property was income and that any money generated in connection with a conveyance of trust property was principal. The modern approach is embodied in the Uniform Principal and Income Act (UPAIA), adopted in most states, including Florida. It focuses on total return to the trust portfolio, regardless of classifications of income or principal. Under the UPAIA, a trustee is empowered to recharacterize items and reallocate investment return as she deems necessary to fulfill the trust purposes, as long as her allocations are reasonable and are in keeping with the trust instrument. Fla. Stat. §738.104(1).

Answer 149

The trustee must balance the following factors in determining how best to exercise such allocation: i) The intent of the settlor and the language of the trust instrument; ii) The nature, size, likely duration, and purpose of the trust; iii) The identities and circumstances of the beneficiaries; iv) The relative needs for regularity of income, preservation and appreciation of capital, and liquidity; v) The net amount allocated to income under various sections of the UPAIA and the increase and decrease in the value of principal assets; vi) The anticipated effect of economic conditions on income and principal; and vii) The anticipated tax consequences of the adjustment. Fla. Stat. § 738.104(2).

Answer 150

The trustee may not make adjustments under the UPAIA if she is also a trust beneficiary. Fla. Stat. § 738.104(3)(f). The trustee is also prohibited from making adjustments if she is not a beneficiary of the trust, but the adjustment would benefit the trustee directly or indirectly. Fla. Stat. §738.104(3)(g). If there is a co-trustee, however, who is not a beneficiary, then the co-trustee may make the adjustment unless the exercise of such power is not permitted by the terms of the trust. Fla. Stat. § 738.104(4). In addition, a trustee may not make an adjustment (i) that diminishes the income interest in a trust that requires all of the income to be paid at least annually to a spouse and for which an estate tax or gift tax marital deduction would be allowed, in whole or in part, if the trustee did not have the power to adjust or (ii) that reduces the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify for a gift?tax exclusion. Fla. Stat. § 738.104(3).

Answer 151

If the trustee is not permitted to make adjustments, then the trustee is permitted to convert a trust that pays income to a lifetime beneficiary into a total return unitrust. Fla. Stat. § 738.1041(2). Under a total return unitrust, the distinction between income and principal is not relevant because the lifetime beneficiaries are entitled to a fixed annual share (between three percent and five percent) of the value of the trust principal. Fla. Stat. §738.1041(2)(b). This allows the trustee to make investment decisions without being concerned about an investment’s projected income.

Answer 152

The UPAIA sets forth specific rules for allocation of certain receipts and expenses between income and principal, subject to the adjustment power of the trustee.

Answer 153

Cash received from an entity is characterized as income unless the money is a capital gain for federal income tax purposes or is received following a partial or complete liquidation of the entity. All property other than cash (e.g., stock dividends) received from an entity is characterized as principal. Fla. Stat. §738.401.

Answer 154

Proceeds from life insurance policies or other contracts in which the trust or trustee is named as a beneficiary are allocated to principal unless the contract insures the trustee against loss, in which case the proceeds are allocated to income. Fla. Stat. § 738.504.

Answer 155

The fiduciary must allocate to income the lesser of: i) The amount received from an annuity, individual retirement account (IRA), a deferred compensation plan, a pension plan, a profit-sharing plan, a stock-bonus plan, an employee stock-ownership plan, or another similar arrangement in which federal income tax is deferred; or ii) The income determined by either a separate account or a nonseparate account. The remaining amount of payment must be allocated to principal. A separate account means a fund holding assets exclusively for the benefit of a participant or account owner and (i) the value of such assets or the value of the separate account is ascertainable at any time, or (ii) the administrator of the funds maintains records that show receipts and disbursements associated with such assets. A nonseparate account is a fund for which the value of the participant’s or account owner’s right to receive benefits can be determined only by the occurrence of a date or an event as defined in the instrument governing the fund. Fla. Stat. § 738.602.

Answer 156

A liquidating asset is one with a value that diminishes over time because the asset is expected to produce receipts over only a limited period (e.g., patents or copyrights). Proceeds from liquidating assets are allocated as 5% income and 95% principal. Fla. Stat. § 738.603.

Answer 157

Most oil, gas, mineral, and water rights payments are allocated ten percent to income and 90% to principal. Fla. Stat. § 738.604.

Answer 158

1) Expenses charged to income Trust income is charged with the following expenses: i) One-half of the regular compensation to the trustee and to those who provide investment, advisory, or custodial services to the trustee; ii) One-half of accounting costs, court costs, and the costs of other matters affecting trust interests; iii) Ordinary expenses in their entirety; and iv) Insurance premiums that cover the loss of a trust asset. Fla. Stat. § 738.701. 2) Expenses charged to principal Trust principal is charged with the following expenses: i) The remaining one-half of the regular compensation to the trustee and to those who provide services to the trustee; ii) The remaining one-half of accounting costs, court costs, and the cost of other matters affecting trust interests; iii) All payments on the principal of any trust debt; iv) All expenses of any proceeding that concerns an interest in principal; v) Estate taxes; and vi) All payments related to environmental matters. Fla. Stat. § 738.702.

Answer 159

a. In general A trustee is required to administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In doing so, the trustee must exercise reasonable care, skill, and caution. Fla. Stat. § 736.0804. A trustee must only incur expenses that are reasonable in relation to the trust property, the purposes of the trust, and the skills of the trustee. Fla. Stat. § 736.0805.

Answer 160

A trustee who has special skills or expertise, or is named trustee in reliance on the trustee’s representation that she has special skills or expertise, must use such special skills or expertise. Fla. Stat. § 736.0806.

Answer 161

At common law, trustees were limited to statutory lists of acceptable investments unless the trust instrument expressly authorized a deviation from the list. Only a few states continue to adhere to such lists. Florida has adopted the Uniform Prudent Investor Act (UPIA), which requires the trustee to act as a prudent investor would when investing her own property. Fla. Stat. § 518.01, et seq. Note: The UPIA applies only if the terms of the trust do not specify otherwise.

Answer 162

Under the UPIA, as under the FTC with regard to a trustee’s general actions with respect to the trust, the trustee must exercise reasonable care, caution, and skill when investing and managing trust assets, unless the trustee has special skills or expertise, or has represented herself to have special skills or expertise, in which case she has a duty to use such skills and expertise. Fla. Stat. § 518.11(1)(a).

Answer 163

Determinations of compliance under the UPIA are made with reference to the facts and circumstances as they existed at the time the action was made, and they do not consider hindsight. Fla. Stat. § 518.11(1)(b).

Answer 164

The UPIA assesses a trustee’s investments based on the total performance of the trust, as opposed to looking at individual investments, so that a high-risk investment that would have been considered too risky under the common law can be offset by lower-risk investments. The reasonable care and prudence standard is to be applied to investments not in isolation, but in the context of the investment portfolio as a whole and as a part of an overall investment strategy that should incorporate risk and return objectives reasonably suitable to the trust. Fla. Stat. § 518.11(1)(a). The trustee has a duty to pursue an investment strategy that considers both the reasonable production of income and safety of capital consistent with the trustee’s duty of impartiality and the purposes of the trust. Whether investments are underproductive or overproductive of income shall be judged by the portfolio as a whole and not as to any particular asset. Fla. Stat. §518.11(1)(e)

Answer 165

The factors that the trustee may consider in making investment decisions include (i) the general economic conditions, (ii) the possible effect of inflation, (iii)the expected tax consequences of investment decisions or strategies, (iv)the role each investment or course of action plays within the overall portfolio, (v) the expected total return, including both income yield and appreciation of capital, and (vi) the duty to incur only reasonable and appropriate costs. Fla. Stat. §518.11(1)(f).

Answer 166

The trustee’s investment decisions and actions are judged in terms of her reasonable business judgment regarding the anticipated effect on the investment portfolio as a whole under the facts and circumstances prevailing at the time of the decision or action. Note: The prudent-investor rule is a test of conduct and not of resulting performance. Fla. Stat. § 518.11(1)(b).

Answer 167

The trustee must adequately diversify the trust investments to spread the risk of loss, unless the trustee reasonably determines that the trust purposes would be better served without diversification. Fla. Stat. §518.11(1)(c). Investing in a single mutual fund may be sufficient if the fund is sufficiently diversified. a) Individual versus corporate trustees A presumed greater expertise creates a higher standard for professional or corporate trustees than the standard for individual trustees. b) Duty not absolute A trustee is justified in not diversifying if the administrative costs of doing so (including tax consequences or changes in controlling interest of a family-run business) would outweigh the benefits.

Answer 168

Part of being prudent is recognizing self-limitations when they exist and delegating investment functions to an expert when necessary. a) Requirements for delegation A trustee may delegate any part or all of the investment functions, with regard to acts constituting investment functions that a prudent investor of comparable skills might delegate under the circumstances, to an investment agent if the trustee exercises reasonable care, judgment, and caution in selecting the investment agent, in establishing the scope and specific terms of any delegation, and in reviewing periodically the agent’s actions to monitor overall performance and compliance with the scope and specific terms of the delegation. Fla. Stat. § 518.112(1). b) Duty of an agent In performing a delegated function, the investment agent is subject to the same duties and standards as the trustee. Fla. Stat. § 518.112(6). c) Protection of a trustee If the trustee used reasonable care, judgment, and caution in selecting the delegate, then the trustee is not responsible for the agent’s investment decisions, actions, or omissions. Fla. Stat. § 518.112(4).

Answer 169

As under the UPIA with regard to a trustee’s investment decisions, under the FTC, a trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances. Fla. Stat. §736.0807. The requirements and effects of delegation are the same as those set out with regard to the UPIA (see §VII.B.4.c.7. Delegation, above).

Answer 170

A trustee is required to take reasonable steps to take control of and protect the trust’s property. Fla. Stat. § 736.0809. If a portion of the trust property consists of a claim against either a third party or a predecessor trustee, then the trustee must act with reasonable promptness to enforce the claim in favor of the trust. If any actions have been brought against the trust, then the trustee has the obligation to defend them so long as a valid defense is available. Fla. Stat. § 736.0811. The trustee is also required to take all reasonable steps to compel a former trustee or other person to deliver trust property. Fla. Stat. § 736.0812. If co-trustees have been appointed and one of them threatens to wrongfully deplete the assets belonging to the trust, then the other trustee or trustees must exercise reasonable means to prevent such wrongful conduct. In caring for real property, the trustee must take whatever steps an ordinary owner would take, including insuring, repairing, and otherwise maintaining the property.

Answer 171

The trustee has the duty to properly earmark the trust property and to have it segregated from her own property and from the property of others. Fla. Stat. §736.0810. If the trustee commingles trust property with her own, then the trustee is guilty of breach of trust. a. Presumption when commingled property is lost or destroyed If some of the commingled property is lost or destroyed, then there is a presumption that the lost or destroyed property was the trustee’s and that the remaining property belongs to the trust. If a portion of the commingled assets increases in value, then there is a presumption that the assets belonging to the trust increased in value. Similarly, if a portion of the assets declines in value, then there is a presumption that the trustee’s individual assets declined in value. b. Corporate stock held in the name of the trustee or nominee If a portion of the trust property consists of corporate stock, then a trustee can properly hold the corporate stock in her own name or in the name of a nominee; however, the trustee will be responsible for any acts or omissions of the nominee in whom title to the corporate stock is placed. Fla. Stat. § 736.0816(8)(b). c. Trust companies—common trust funds Florida allows a trust company or trust department to establish one or more common trust funds for the purpose of furnishing investments to itself as fiduciary. Fla. Stat. § 660.42. If a bank or trust company is a co-fiduciary, then the other trustee must consent before trust funds can be invested in a common trust fund. The investments making up the common trust fund must be proper trust investments. Fla. Stat. § 660.43.

Answer 172

A trustee is required to keep a qualified beneficiary reasonably informed of the trust and its administration. Fla. Stat. § 736.0813. A trustee must disclose to the beneficiaries complete and accurate information about the nature and extent of the trust property, including allowing access to trust records and accounts. The trustee must also identify possible breaches of trust and promptly disclose such information to the beneficiaries. Fla. Stat. § 736.08135. For trusts created after July 1, 2007, within 60 days after acceptance of the trust, the trustee must give notice to the qualified beneficiaries of the acceptance of the trust and the full name and address of the trustee. For all irrevocable trusts created after June 21, 2011, the trustee must also inform the qualified beneficiaries of the fiduciary lawyer-client privilege that applies to any communications between the trustee and any attorney employed by the trustee. Fla. Stat. § 736.0813. Within 60days after the date that the trustee acquires knowledge of the creation of an irrevocable trust, or the date that the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, the trustee must give notice to the qualified beneficiaries of the trust’s existence, the identity of the settlor or settlors, the right to request a copy of the trust instrument, and the right to accountings. Fla. Stat. § 736.0813(1)(a),(b). Instead of providing a copy of the trust instrument to a person other than a beneficiary, the trustee may provide a certification of trust containing the essential information. Again, for irrevocable trusts created after June 21, 2011, the trustee must also inform the qualified beneficiaries of the fiduciary lawyer-client privilege that applies to any communications between the trustee and any attorney employed by the trustee. Fla. Stat. § 736.0813.

Answer 173

A qualified beneficiary is entitled to a trust accounting annually, upon termination of the trust or upon change of the trustee. Fla. Stat. § 736.0813(1)(d). A qualified beneficiary may waive in writing the trustee’s duty to account. Fla. Stat. §736.0813(2). Note: Waiver of the duty to report does not relieve a trustee from liability for misconduct that would have been disclosed by a report. a. Constructive fraud If an accounting includes false factual statements that could have been discovered to be false had the trustee properly investigated, then a constructive fraud results.

Answer 174

A trustee must take reasonable steps to redress a breach of trust known to the trustee to have been committed by a former trustee. Fla. Stat. §736.0812. However, a successor trustee is not personally liable for actions taken by any prior trustee, nor does any successor trustee have a duty to institute any proceeding against any prior trustee, or file any claim against any prior trustee’s estate, for any of the prior trustee’s actions as trustee under any of the following circumstances: i) As to a successor trustee who succeeds a trustee who was also the settlor of a trust that was revocable during the time that the settlor served as trustee; ii) As to any beneficiary who has waived any accounting, but only as to the periods included in the waiver; iii) As to any beneficiary who has released the successor trustee from the duty to institute any proceeding or file any claim; iv) As to any person who is not an eligible beneficiary; or v) As to any eligible beneficiary: a) If at least two-thirds of the eligible beneficiaries have released the successor trustee; b) If the eligible beneficiary has not delivered a written request to the successor trustee to institute an action or file a claim against the prior trustee within six months after the date of the successor trustee’s acceptance of the trust, if the successor trustee has notified the eligible beneficiary in writing of the right to make such a request; or c) For any action or claim that the eligible beneficiary is barred from bringing against the prior trustee. Fla. Stat. §736.08125.

Answer 175

1. Breach of Trust A violation by a trustee of a duty that the trustee owes to a beneficiary is a breach of trust. Fla. Stat. § 736.1001(1). a. Remedies To remedy a breach of trust that has occurred or may occur, a court may: i) Compel the trustee to perform her duties; ii) Enjoin the trustee from committing a breach of trust; iii) Compel the trustee to redress a breach of trust by paying money or restoring property, or by other means; iv) Order the trustee to account; v) Appoint a special fiduciary to take possession of the trust property and administer the trust; vi) Suspend the trustee; vii) Remove the trustee; viii) Reduce or deny compensation to the trustee; ix) Under certain circumstances, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or x) Order any other appropriate relief.

Answer 176

To the extent that the breach of trust resulted in no distribution to a beneficiary or a distribution that was too small, the court may require the trustee to pay from the trust to the beneficiary an amount that the court determines will restore the beneficiary, in whole or in part, to his appropriate position. Similarly, to the extent that the breach of trust has resulted in a distribution to a beneficiary that is too large, the court may restore the beneficiaries, the trust, or both, in whole or in part, to their appropriate positions by requiring the trustee to withhold an amount from one or more future distributions to the beneficiary who received the distribution that was too large or by requiring that beneficiary to return some or all of the distribution to the trust. Fla. Stat. §736.1001(3).

Answer 177

A trustee who commits a breach of trust is liable for the greater of: i) The amount required to restore the value of the trust property and trust distributions to what it would have been if the breach had not occurred, including lost income, capital gain, or appreciation that would have resulted from proper administration; or ii) The profit that the trustee made by reason of the breach. Fla. Stat. §736.1002(1). The court must award attorney’s fees and costs in an action for breach of fiduciary duty “as in chancery actions.” Fla. Stat. § 736.1004(1). Under the chancery rule, a trial court may apportion the costs between the parties, or require all costs be paid by either party, as justice requires. Akins v. Bethea, 33 So. 2d 638 (Fla. 1948). The court may, in its discretion, order that payment be made from a party’s interest in the trust, if any, or from other property of the party. Fla. Stat. § 736.1004(2).

Answer 178

If more than one trustee is liable to the beneficiaries for a breach of trust, then each liable trustee is entitled to pro rata contribution from the other. Fla. Stat. §736.1002(2). a) Denial of contribution A trustee is not entitled to contribution if the trustee committed the breach of trust in bad faith. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received. Fla. Stat. § 736.1002(2). b) Amount of contribution In determining the pro rata shares of liable trustees in the entire liability for a breach of trust, each person’s relative degree of fault is the basis for allocation of liability. Fla. Stat. §736.1002(3).

Answer 179

A claim against the trustee for breach of trust generally must be brought within four years of the breach. If, however, the action is based on fraud, then the statute of limitations will not begin to run until the plaintiff/beneficiary discovers the fraud or should have discovered it with reasonable diligence. a. Shorter period when the beneficiary receives a disclosure document and a limitation notice If the trust beneficiary receives a trust disclosure document that adequately discloses a matter and a limitation notice, then the statute of limitations is shortened to six months. Fla. Stat. § 736.1008(2). 1) Trust disclosure document A trust disclosure document is a trust accounting or any other written report of the trustee. A trust disclosure document adequately discloses a matter if it provides sufficient information so that a beneficiary knows of a claim or reasonably should have inquired into the existence of a claim with respect to that matter. Fla. Stat. §736.1008(4)(a). 2) Limitation notice A limitation notice is the trustee’s written statement informing the beneficiary of the statute of limitations for bringing an action. Fla. Stat. §736.1008(4)(c). b. Accrual of a claim based on the beneficiary’s actual knowledge When a trustee has not issued a final trust accounting, has not given written notice to the beneficiary of the availability of the trust records for examination, or a limitations notice, a claim against the trustee for breach of trust based on a matter not adequately disclosed in a trust disclosure document accrues when the beneficiary has actual knowledge, established by clear and convincing evidence, of: i) The facts upon which the claim is based; or ii) The trustee’s repudiation of the trust or adverse possession of trust assets. Fla. Stat. § 736.1008(3).

Answer 180

All claims by a beneficiary against a trustee are barred: i) Upon the later of: a) Ten years after the date the trust terminates, the trustee resigns, or the fiduciary relationship between the trustee and the beneficiary otherwise ends if the beneficiary had actual knowledge of the existence of the trust and the beneficiary’s status as a beneficiary throughout the 10-year period; or b) Twenty years after the date of the act or omission of the trustee that is complained of if the beneficiary had actual knowledge of the existence of the trust and the beneficiary’s status as a beneficiary throughout the 20?year period; or ii) Forty years after the date the trust terminates, the trustee resigns, or the fiduciary relationship between the trustee and the beneficiary otherwise ends. Fla. Stat. § 736.1008(6)(a). If a beneficiary shows by clear and convincing evidence that a trustee actively concealed facts supporting a cause of action, then the statute of repose is extended by 30 years. Fla. Stat. § 736.1008(6)(b). A statute of repose, unlike a statute of limitations, which is a defense that may be waived, is an absolute time restriction on when a claim may be asserted.

Answer 181

A trustee is protected from liability to a beneficiary in the following circumstances.

Answer 182

A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent that the breach resulted from the reliance. Fla. Sta. § 736.1009.

Answer 183

If the happening of an event—including marriage, divorce, performance of educational requirements, or death—affects the administration or distribution of a trust, then a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee’s lack of knowledge of the event. Fla. Stat. § 736.1010.

Answer 184

A trustee is not liable to a beneficiary if the beneficiary consented to the conduct, ratified the transaction, or released the trustee from liability. The trustee, however, is not relieved of liability for a breach of trust if the beneficiary’s consent, ratification, or release was induced by the trustee’s improper conduct or if, at the time, the beneficiary did not know of her rights or of material facts. Fla. Stat. §736.1012.

Answer 185

A term of a trust relieving a trustee of liability for a breach of trust is unenforceable to the extent that the term: i) Attempts to relieve the trustee of liability for a breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries; or ii) Was inserted into the trust instrument as the result of an abuse by the trustee of a fiduciary or confidential relationship with the settlor. Fla. Stat. § 736.1011(1). An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term is fair under the circumstances, and the term’s existence and contents were adequately communicated directly to the settlor or the independent attorney of the settlor. Fla. Stat. § 736.1011(2).

Answer 186

A co-trustee who does not join in an action of another co-trustee is not liable for that action, so long as she has exercised reasonable care to prevent the co?trustee from committing a breach of trust and to compel the co-trustee to redress a breach of trust. Fla. Stat. § 736.0703(6), (7). A dissenting co-trustee who joins in an action at the direction of the majority of the co-trustees but who notifies any co-trustee of the dissent at or before the time of the action is not liable for the action. Fla. Stat. § 736.0703(8). If a trust power is given to some co-trustees but not to others, then the trustees to whom the powers have not been given are not liable for consequences that result from the exercise of the powers, unless they have actual knowledge of willful misconduct by the trustee exercising such powers. Fla. Stat. §736.0703(9).

Answer 187

A trustee is not personally liable on contracts entered into in the trustee’s fiduciary capacity during the course of administration of the trust, unless the trustee fails to reveal her representative capacity and to identify the trust estate in the contract. Fla. Stat. § 736.1013(1). Contracts entered into on behalf of the trust, though, may be enforced against the trust estate, and the trustee may be sued in her fiduciary capacity. Fla. Stat. § 736.1013(3).

Answer 188

A trustee is liable in tort only if she is personally at fault. Fla. Stat. §736.1013(2). A third party who is injured in tort, though, can sue the trust estate, and the trustee may be sued in her fiduciary capacity. Fla. Stat. § 736.1013(3).

Answer 189

A person other than a beneficiary who assists a trustee in a transaction or who deals with the trustee for value is protected from liability when a trustee is exceeding or improperly exercising a power if the person acts in good faith and without knowledge of the trustee’s wrongful behavior. A similar protection exists for a person other than a beneficiary who deals with a former trustee without knowledge of the termination of the trusteeship. A person other than a beneficiary who in good faith deals with a trustee does not have a duty to inquire into the extent of the trustee’s powers or the propriety of their exercise. Similarly, a person who in good faith delivers assets to a trustee, including a beneficiary or a third party, need not ensure their proper application. Fla. Stat. § 736.1016.

Answer 190

Certain legal methods are available to a settlor to make an inter vivos transfer by which property will pass to a beneficiary at the settlor’s death, without the formalities of a will. Often these will substitutes allow probate to be avoided.

Answer 191

Under a revocable inter vivos trust, an interest passes to the beneficiary during the settlor’s lifetime, subject to revocation by the settlor. Probate is avoided because the assets, on the settlor’s death, are held by the trustee of the trust.

Answer 192

An inter vivos trust that is otherwise valid and that has been created by a written instrument is not invalid nor is it an attempted testamentary disposition if the settlor retains: i) The power to revoke, amend, alter, or modify the trust in whole or in part; ii) The power to appoint by deed or will the persons and organizations to whom the income shall be paid or the principal distributed; iii) The power to add to, or withdraw from, the trust all or any part of the principal or income at one time or at different times; iv) The power to remove the trustee or trustees and appoint a successor trustee or trustees; v) The power to control the trustee or trustees in the administration of the trust; vi) The right to receive all or part of the income of the trust during the settlor’s life; or vii) The power to act as or become the sole trustee of the trust, either at the time of the execution of the instrument or thereafter. Fla. Stat. § 689.075.

Answer 193

A devise in a will may be made to the trustee of a trust, so long as the trust was executed prior to or contemporaneously with the will. Fla. Stat. §732.513(1). A pour-over devise is valid even if the trust is amendable or revocable by any person, or if the trust has been amended or revoked in part after execution of the will or a codicil to it. Fla. Stat. § 732.513(2)(a), (b). A pour-over devise is permitted even if the trust had no property during the settlor’s lifetime. Fla. Stat. § 732.513(2)(c).

Answer 194

A life insurance policy designates the trustee of a trust as the beneficiary of the policy. Upon the death of the insured, the policy proceeds are distributed by the trustee in accordance with the terms of the trust. The trust is not required to have a trust corpus other than the right of the trustee to receive the proceeds. This type of trust is also available for other types of death benefits, such as those paid by an annuity or endowment contract; a health or an accident policy; or a pension, profit-sharing, stock-bonus, or stock?ownership plan or an individual retirement account. Fla. Stat. §733.808(2).

Answer 195

Every state, including Florida, has enacted the UTMA, which provides a convenient method by which an account can be set up for a minor, with a custodian who is required to manage the account for the minor. Such an arrangement is not a true trust because the custodian does not hold legal title to the account. The custodian, though, has legal powers to collect, hold, manage, invest, and reinvest the custodial property and, like a trustee, is subject to the prudent-investor rule. The custodian also has the power to pay to the minor or on the minor’s behalf as much of the property as the custodian deems advisable for the minor’s use and benefit. The account terminates and the funds in the account are paid to the minor generally when the minor reaches the age of 21 years, but that may be extended to the age of 25 years if the beneficiary is provided with proper notice and given the opportunity to demand an immediate distribution of the custodial property. If the minor dies, then the account terminates and the funds are paid to the minor’s estate. Fla. Stat. §§710.101–.126.

Answer 196

A Totten trust is not a true trust because there is no separation of legal and equitable title. Rather, it is a designation given to a bank account in a depositor’s name as “trustee” for a named beneficiary. It is sometimes referred to as an “ITF” (In Trust For) account. The name “Totten” derives from the case in which such arrangements were first recognized, In re Totten, 71 N.E. 748 (N.Y. 1904). Florida courts have recognized the existence of a Totten trust. Seymour v. Seymour, 85 So.2d 726 (Fla. 1956). During the depositor’s lifetime, the depositor retains control of the account and the ability to make deposits and withdrawals. The beneficiary has no standing to object to these transactions. Siegel v. Novak, 920 So.2d 89 (Fla. Dist. Ct. App. 2006). The depositor’s creditors can reach the funds while the depositor is living. A Totten trust can be revoked by any lifetime act manifesting the depositor’s intent to revoke, or by will. Barnard v. Gunter, 625 So.2d 56 (Fla. Dist. Ct. App. 1993) (inter vivos revocation); Serpa v. N. Ridge Bank, 547 So.2d 199 (Fla. Dist. Ct. App. 1989) (revocation by will). If the trust is not revoked, the funds in the bank account pass to the named beneficiary rather than to the depositor’s estate. Nahar v. Nahar, 576 So.2d 862 (Fla. Dist. Ct. App. 1991) (funds not subject to payment of the depositor’s estate expenses). A Totten trust is distinguishable from a joint bank account, the proceeds of which pass by law at the death of one joint tenant to the other.

Answer 197

Florida statutorily recognizes pay-on-death (POD) bank accounts. When a bank account has multiple account holders, the bank account must be held with the right of survivorship in order for a POD designation to be given effect. When a POD account is used, any money in the account when the last account holder dies is paid to the designated POD beneficiary. If more than one beneficiary is designated, the money in the account is divided equally among the beneficiaries. If a beneficiary predeceases the last account holder, the beneficiary’s estate is not entitled to the money. Instead, if there is no surviving beneficiary, the money is paid to the estate of the last account holder. Fla. Stat. §655.82. A bank account designated as a deposit in trust, including a Totten trust, is subject to these rules. Fla. Stat. §655.825; Keul v. Hodges Blvd. Presbyterian Church, 180 So.3d 1074, fn.1 (Fla. Dist. Ct. App. 2015).

Answer 198

A power of attorney is a grant of authority by a principal to another person to act on behalf of the principal. A durable power of attorney permits that person to act on behalf of a principal even though the principal is unable to act on his own behalf (i.e., is incapacitated).

Answer 199

A power of attorney must be signed not only by the principal, but also by two witnesses. The principal must also acknowledge his signature before a notary public. If the principal is physically unable to sign the power of attorney, the notary public before whom the principal’s oath or acknowledgment is made may sign the principal’s name on the power of attorney. Fla. Stat. § 709.2105(2), (3). A durable power of attorney created in Florida must contain the words “this durable power of attorney is not terminated by the subsequent incapacity of the principal except as provided in Chapter 709, Florida Statutes,” or similar words that show the principal’s intent that the authority conferred is exercisable notwithstanding the principal’s subsequent incapacity. Fla. Stat. §709.2104.

Answer 200

Power of Attorney Executed Prior to October 1, 2011 A power of attorney executed in Florida prior to October 1, 2011, is valid if its execution complied with the law of Florida at the time of its execution. Fla. Stat. §709.2106(2).

Answer 201

A power of attorney executed in another state that does not comply with the execution requirements of Florida is valid in Florida if, at the time of its execution, the power of attorney and its execution complied with the laws of the state of its execution. A third party who is requested to accept an out-of-state power of attorney may reject the power of attorney without liability unless the principal obtains, at the principal’s expense, an opinion of counsel regarding any matter of law concerning the power of attorney, including its execution and validity. If provided with such an opinion, the third party may rely on it without liability. Fla. Stat. §709.2106(3).

Answer 202

Unless stated otherwise within the power of attorney, photocopies or electronically transmitted copies of original powers of attorney have the same effect as the original. However, an original power of attorney that is relied upon to affect the title to real property may be required for recording in the official records. Fla. Stat. §709.2106(5).

Answer 203

A person appointed as an agent under a power of attorney must be at least 18 years of age. A financial institution with trust powers, a place of business in Florida, and an authorization to conduct trust business in Florida may also be appointed as an agent. Fla. Stat. §709.2105(1).

Answer 204

Unless otherwise provided by the power of attorney, a person accepts appointment as an agent under a power of attorney by exercising authority or performing duties as an agent or by any other assertion or conduct indicating acceptance of the position. Fla. Stat. §709.2113.

Answer 205

A power of attorney is generally exercisable when executed. A power of attorney is generally ineffective if the power of attorney provides that it is to become effective at a future date or upon the occurrence of a future event or contingency. Fla. Stat. §709.2108.

Answer 206

Agent's Duties An agent is a fiduciary of the principal. Fla. Stat. §709.2114(1).

Answer 207

Regardless of the provisions in the power of attorney, an agent must act only within the scope of authority granted in the power of attorney. In doing so, he may not act contrary to the principal’s reasonable expectations actually known by the agent. He must also act in good faith. He must not act in a manner that is contrary to the principal’s best interests, and he must attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interests based on all relevant factors, including: i) The value and nature of the principal’s property; ii) The principal’s foreseeable obligations and need for maintenance; iii) Minimization of taxes, including income, estate, inheritance, generation?skipping transfer, and gift taxes; iv) Eligibility for a benefit, a program, or assistance under a statute or rule; and v) The principal’s personal history and making or joining in making gifts. The agent generally may not delegate authority to a third person. Furthermore, the agent must keep a record of all receipts, disbursements, and transactions made on behalf of the principal. He must create and maintain an accurate inventory each time the agent accesses the principal’s safe-deposit box, if the power of attorney authorizes the agent access to the box. Fla. Stat. §709.2114(1)(a).

Answer 208

Except as otherwise provided in the power of attorney, an agent must act loyally and for the sole benefit of the principal. He must act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interests. He must act with care, competence, and diligence ordinarily exercised by agents in similar circumstances, and he must cooperate with the person who has authority to make healthcare decisions for the principal in order to carry out the principal’s reasonable expectations to the extent actually known by the agent and otherwise act in the principal’s best interests. Fla. Stat. §709.2114(2)(a).

Answer 209

An agent who has special skills or expertise, or is named as agent in reliance on the agent’s representation that she has special skills or expertise, must use such special skills or expertise. Fla. Stat. §709.2114(4).

Answer 210

A court may terminate an agent’s authority, remove the agent, or grant other appropriate relief if an agent violates his duties. Fla. Stat. §709.2116(1). a. Conflict of interest If an agent’s exercise of a power is challenged in a judicial proceeding brought by or on behalf of the principal on the grounds that the exercise of the power was affected by a conflict of interest, and evidence is presented that the agent or an affiliate of the agent had a personal interest in the exercise of the power, then the agent or affiliate has the burden of proving, by clear and convincing evidence, that the agent acted: i) Solely in the interests of the principal; or ii) In good faith in the principal’s best interests, and the conflict of interest was expressly authorized in the power of attorney. Fla. Stat. §709.2116(4).

Answer 211

An agent may exercise only authority specifically granted to the agent in the power of attorney and any authority reasonably necessary to give effect to that express grant of specific authority. Fla. Stat. §709.2201. Without limitation, authority of an agent may include the authority: i) To execute stock powers or similar documents on behalf of the principal; ii) To convey or mortgage homestead property (the agent may not mortgage or convey homestead property without joinder of the principal’s spouse or the spouse’s guardian if the principal is married); and iii) If specifically granted in a durable power of attorney, to make all healthcare decisions on behalf of the principal. If subjects over which authority is granted by a power of attorney are similar or overlap, the broadest authority controls. Fla. Stat. § 709.2201.

Answer 212

Certain authorities granted to an agent must be specifically enumerated in the power of attorney and signed or initialed by the principal next to each specific enumeration. Those powers are the power to: i) Create an inter vivos trust; ii) Amend, modify, revoke, or terminate a trust created by or on behalf of the principal, but only if the trust instrument explicitly provides for amendment, modification, revocation, or termination by the settlor’s agent; iii) Make a gift; iv) Create or change rights of survivorship; v) Create or change a beneficiary designation; vi) Waive a principal’s right to be a beneficiary of a joint-and-survivorship annuity, including the survivor benefit under a retirement plan; or vii) Disclaim property and powers of appointment. Fla. Stat. § 709.2202.

Answer 213

A grant of authority to conduct banking transactions grants general authority to the agent to engage in the following transactions without additional specific enumeration within the power of attorney: i) Establish, continue, modify, or terminate an account or other banking arrangement with a financial institution; ii) Contract services available from a financial institution such as renting a safe?deposit box or space within the vault; iii) Withdrawal by check, order, electronic funds transfer, or otherwise, money or property of the principal deposited with or left in the custody of a financial institution; iv) Receive statements of account and similar documents from a financial institution and act with respect to them; v) Purchase cashier’s checks, official checks, counter checks, bank drafts, money orders, and similar instruments; vi) Endorse and negotiate checks, cashier’s checks, official checks, drafts, and other negotiable papers of the principal or payable to the principal or the principal’s order; transfer money; receive the cash or other proceeds of those transactions; and accept drafts drawn by a person upon the principal and pay it when due; vii) Apply for, receive, and use debit cards, electronic transaction authorizations, and traveler’s checks from a financial institution; viii) Use, charge, or draw upon any line of credit, credit card, or other credit established by the principal with a financial institution; and ix) Consent to an extension of the time of payment with respect to commercial paper or a financial transaction with a financial institution.

Answer 214

A power of attorney that specifically includes the statement that the agent has “the authority to conduct investment transactions” grants general authority to the agent with respect to securities held by financial institutions to take the following actions without additional specific enumeration in the power of attorney: i) Buy, sell, and exchange investment instruments; ii) Establish, continue, modify, or terminate an account with respect to investment instruments; iii) Pledge investment instruments as security to borrow, pay, renew, or extend the time of payment of a debt of the principal; iv) Receive certificates and other evidences of ownership with respect to investment instruments; v) Exercise voting rights with respect to investment instruments in person or by proxy, enter into a voting trust, and consent to limitations on the right to vote; and vi) Sell commodity futures contracts and call and put options on stocks and stock indexes. Fla. Stat. § 709.2208.

Answer 215

An agent may not: i) Perform duties under a contract that requires the exercise of personal services of the principal; ii) Make any affidavit as to the personal knowledge of the principal; iii) Vote in any public election on behalf of the principal; iv) Execute or revoke a will or codicil of the principal; or v) Exercise powers and authority granted to the principal as trustee or as a court?appointed fiduciary. Fla. Stat. §709.2201.

Answer 216

An agent’s authority terminates when: i) The agent dies, becomes incapacitated, resigns, or is removed by the court; ii) An action is filed for the dissolution or annulment of the agent’s marriage to the principal or for their legal separation, unless the power of attorney otherwise provides; or iii) The power of attorney terminates. Fla. Stat. §709.2109(2).

Answer 217

A power of attorney may be revoked by expressing the revocation in a subsequently executed power of attorney or other writing signed by the principal. Otherwise, the execution of a power of attorney does not revoke a power of attorney previously executed by the principal. Fla. Stat. § 709.2110.

Answer 218

A power of attorney terminates when: i) The principal dies; ii) The principal revokes the power of attorney; iii) The power of attorney provides that it terminates; iv) The purpose of the power of attorney is accomplished; or v) The agent’s authority terminates, and the power of attorney does not provide for another agent to act under the power of attorney. Fla. Stat. §709.2109(1).

Answer 219

A power of attorney that is not a durable power of attorney terminates when the principal becomes incapacitated. A power of attorney, including a durable power of attorney, terminates when the principal is adjudicated totally or partially incapacitated by a court, unless the court determines that certain authority granted by the power of attorney is to be exercisable by the agent. Fla. Stat. §709.2109(1).

Trusts Flashcards

FL Trusts (243 cards)