Overview of a Trust Beneficiary’s Remedies Under the Florida Trust Code for Breach of Trust
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Trusts are a common estate planning vehicle, in which property is held in a trust and administered by the trustee for the benefit of the beneficiaries of the trust. See Miller v. Kresser, 34 So. 3d 172 (Fla. 4th DCA 2010). The Florida Trust Code defines a trust beneficiary as “a person who has a present or future beneficial interest in a trust.” Fla. Stat. § 736.0103(4). A recent blog provided an overview of trustee obligations under the Florida Trust Code, including the trustee’s obligations to administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with the Trust Code. This blog addresses the key remedies that beneficiaries may look to under the Florida Trust Code when a trustee fails to comply with the trustee’s duties and commits a breach of trust.
Beneficiary’s Remedies for Breach of Trust
Under section 736.1001(1) of the Florida Trust Code, “A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.” Generally, a beneficiary is the only person who can maintain a lawsuit against the trustee to enforce the trust. In order to remedy a breach of trust that has occurred or may occur, section 736.1001(2) of the Florida Trust Code provides numerous remedies a beneficiary can request a court to impose. These remedies include that the court may:
- Compel the trustee to perform the trustee’s duties;
(b) Enjoin the trustee from committing a breach of trust;
(c) Compel the trustee to redress a breach of trust by paying money or restoring property or by other means;
(d) Order a trustee to account;
(e) Appoint a special fiduciary to take possession of the trust property and administer the trust;
(f) Suspend the trustee;
(g) Remove the trustee;
(h) Reduce or deny compensation to the trustee;
(i) 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
(j) Order any other appropriate relief.
As an illustration of the remedies available, section 736.1001(3) provides that if a breach of trust results in the favoring of any beneficiary to the detriment of any other beneficiary or consists of an abuse of the trustee’s discretion that results in no distribution to a beneficiary or a distribution that is too small, the court may require the trustee to make payment from the trust to the beneficiary an amount the court determines will restore the beneficiary to the appropriate position. To the extent the breach of trust has resulted in a distribution to a beneficiary that is too large, the court may restore the beneficiaries of the trust to their appropriate positions by requiring the trustee to withhold an amount from future distributions to the beneficiary that received the too large distribution, or by requiring that beneficiary to return some or all of the too large distribution to the trust. Fla. Stat. § 736.1001(3).
Courts have the authority to employ one or more these remedies under the Florida Trust Code remedies in order to remedy a breach of trust. For example, in McCormick v. Cox, 118 So. 3d 980 (Fla. 3d DCA 2013), the beneficiaries of a family trust brought an action against the trustee (an attorney), the trustee’s law firm, and the trustee’s son for breach of trust. After finding that the trustee had committed numerous breaches of trust, including unilaterally paying himself a seven-figure trustee’s fee, failing to file annual trust accountings, and failing to avoid undervaluing trust property, the court:
- removed the trustee;
(2) disallowed all of the trustee’s fees;
(3) required the trustee’s law firm to disgorge and return to the trust the attorney’s fees paid by the trust;
(4) awarded damages against the trustee and his law firm; and
(5) precluded the trustee’s son as serving as successor trustee.
Damages and Attorney’s for Breach of Trust
In addition to the remedies discussed above, section 736.1002 of the Florida Trust Code provides that a trustee who commits a breach of trust is liable for damages in the greater of:
- The amount required to restore the value of the trust property and trust distributions to what they would have been if the breach had not occurred, including lost income, capital gain, or appreciation that would have resulted from proper administration of the trust; or
- The profit the trustee made by reason of the breach.
If more than one person, including the trustee, is liable for damages for breach of trust, the beneficiary’s recovery of a judgment against one liable person does not discharge other liable persons from liability to the beneficiary for breach of trust unless the original judgment is satisfied. Fla. Stat. § 736.1002(5).
The Florida Trust Code also provides that in all actions for breach of fiduciary duty or challenging the exercise or failure to exercise a trustee’s power, the court shall award taxable costs, including attorney’s fees as in chancery actions. Fla. Stat. § 736.1004. “Under the chancery rule, a trial court may ‘apportion the costs between the parties, or require all costs be paid by the prevailing party.’” Harrell v. Badger, 171 So. 3d 764 (Fla. 5th DCA 2015). In other words, a beneficiary that prevails in an action for breach of trust will likely be entitled to recover the attorney’s fees and court costs of the action, in addition to any damages or other relief awarded. The court may direct payment of attorney’s fees and costs from a party’s interest in the trust, or enter a judgment that may be satisfied from other property of the party, or both. Fla. Stat. § 736.1004.
As can be seen, the Florida Trust Code provides beneficiaries with numerous potential remedies in the event of a breach of trust by a trustee. These remedies are often at the discretion of the court, and although beyond the scope of this blog, there are various defenses and exceptions to trustee liability in the Florida Trust Code that must be taken into account in assessing appropriate actions trust beneficiaries may take in the event of a breach of trust. Therefore, consultation with an attorney with experience in trust litigation is recommended whenever a beneficiary suspects a potential breach of trust.