Overview of a Trustee’s Duties Under the Florida Trust Code
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A trustee of a trust in Florida has numerous duties to which they must adhere to in the administration of the trust. A trustee’s failure to do so may constitute a breach of trust and give rise to legal claims by trust beneficiaries. The Florida Trust Code provides an overview of the trustee’s duties in section 736.0801, making clear that “Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this code.” Thus, in addition to complying with the duties set out in the trust document itself, the trustee also has to comply with the duties prescribed in the Florida Trust Code. This blog provides an overview of certain key trustee duties under the Florida Trust Code.
Trustee’s Duty of Impartiality
Under Section 736.0803 of the Florida Trust Code, “If a trust has two or more beneficiaries, the trustee shall act impartially in administering trust property, giving due regard to the beneficiaries respective interests.” In other words, the trustee cannot favor certain beneficiaries, or certain classes of beneficiaries, over other beneficiaries, and must act with the same degree of care to protect their interests. For example, an income beneficiary cannot be given preference in the management of trust assets by the trustee to the detriment of a remainder beneficiary who would receive trust assets after the death of the income beneficiary. See NCNB Nat’l Bank of Fla. v. Shanaberger, 616 So. 2d 96 (Fla. 2d DCA 1993) (“A trustee is always subject to accountability to remaindermen where discretion is improperly, arbitrarily or capriciously exercised.”).
Trustee’s Duty of Loyalty
A trustee has a duty of loyalty to the beneficiaries of the trust. This means that “As between a trustee and the beneficiaries, a trustee shall administer the trust solely in the interests of the beneficiaries.” Fla. Stat. § 736.0802(1). In other words, the trustee is prohibited from engaging in self-dealing or otherwise putting their own interests over the interests of the beneficiaries. Subject to certain exceptions in the Florida Trust Code, conflict of interest transactions by a trustee are subject to being found void. For example, in Brigham v. Brigham, 11 So. 3d 374 (Fla. 3d DCA 2009), a trustee’s conveyance of trust property to the trustee individually was held to be void due to the trustee’s conflict of interest because it was to the trustee’s individual benefit and to the detriment of the beneficiary of the trust.
Trustee’s Duty to Preserve Trust Assets and Make Them Productive
Under section 737.0809 of the Florida Trust Code, the “trustee shall take reasonable steps to take control of and protect the trust property.” In addition, a trustee has a duty to “keep the trust property separate from the trustee’s own property” and may not commingle trust assets with those of the trustee or third parties. Fla. Stat. § 736.0810(2).
A trustee also has a duty to make the trust property productive of income. Although there are numerous exceptions to the rule, generally, the trustee is required to administer the trust as a prudent person would under the prudent investor rule, set out in section 518.11, Florida Statutes, in relevant part, as follows:
The fiduciary has a duty to invest and manage investment assets as a prudent investor would considering the purposes, terms, distribution requirements, and other circumstances of the trust. This standard requires the exercise of reasonable care and caution and 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, guardianship, or probate estate. If the fiduciary has special skills, or is named fiduciary on the basis of representations of special skills or expertise, the fiduciary is under a duty to use those skills.
A trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances, including investment functions pursuant to the prudent investor statute. Fla. Stat. § 736.0807(1). In doing so, the trustee must exercise “reasonable care, skill, and caution” in selecting the agent, establishing the scope and terms of the delegation consistent with the trust, and reviewing the agent’s actions periodically to monitor performance and compliance with the terms of the delegation. A trustee that does so will not be liable to beneficiaries or the trust for the actions of the agent to whom the function was delegated. Fla. Stat. § 736.087(3).
Trustee’s Duty to Keep Beneficiaries Reasonably Informed and Provide Trust Accountings
The Florida Trust Code requires a trustee to keep qualified beneficiaries reasonably informed of the trust and its administration. Fla. Stat. § 736.0183. Upon reasonable request, the trustee shall provide the beneficiary with relevant information about the assets and liabilities of the trust and the particulars relating to trust administration, and a complete copy of the trust instrument. Fla. Stat. § 736.0183(d) and (e).
The trustee of an irrevocable trust also has the duty under section 736.0183 of the Florida Trust Code to provide a trust accounting to each qualified beneficiary at least annually and on termination of the trust or change of the trustee. The accounting must comply with section 736.01835 of the Florida Trust Code and must include, among other items, identification of all cash and property transactions and all significant transactions affecting administration during the account period, including gains and losses realized during the accounting period and all receipts and disbursements, and to the extent feasible, the identification and valuation of trust assets on hand at the close of the accounting period.
Importantly, section 736.1008 of the Florida Trust Code provides that a beneficiary must file a claim within 6 months for any matter disclosed in a trust accounting or disclosure document that includes a trustee’s limitation notice, or the claim will be barred. Accordingly, trust beneficiaries must timely and carefully examine trust accountings and disclosure documents from the trustee in order to be able to timely assert claims related to matters adequately disclosed in the documents.
Trustees have a number of important duties under the Florid Trust Code that they must comply with in administering trusts. These duties are important to ensure that the trustee puts the interests of beneficiaries before the trustee’s own interests, and acts fairly and in good faith to preserve and protect the trust assets for the benefit of beneficiaries. The law allows beneficiaries to potentially assert legal claims against a trustee who violates the trustees’ obligations and commits a breach of trust. However, beneficiaries must closely review trust accountings and other disclosures by the trustee, as the law requires quick action in order to be able to assert a claim related to anything disclosed in a trust accounting or trust disclosure.