In Florida trust law, the term “qualified beneficiaries” is crucial for understanding the dynamics of trust management and the resolution of legal disputes. These beneficiaries either currently receive benefits from a trust or stand to receive them under certain conditions, such as the termination of the trust or the death of current beneficiaries.
736.0103 Definitions.—Unless the context otherwise requires, in this code:
(4) “Beneficiary” means 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. An interest as a permissible appointee of a power of appointment, held by a person in a capacity other than that of trustee, is not a beneficial interest for purposes of this subsection. Upon an irrevocable exercise of a power of appointment, the interest of a person in whose favor the appointment is made shall be considered a present or future beneficial interest in a trust in the same manner as if the interest had been included in the trust instrument.
(19) “Qualified beneficiary” means a living beneficiary who, on the date the beneficiary’s qualification is determined:
(a) Is a distributee or permissible distributee of trust income or principal;
(b) Would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in paragraph (a) terminated on that date without causing the trust to terminate; or
(c) Would be a distributee or permissible distributee of trust income or principal if the trust terminated in accordance with its terms on that date.
A “qualified beneficiary” as outlined by section 736.0103(16), Florida Statutes, is a living beneficiary who, on the date the beneficiary’s qualification is determined, is a distributee or a permissible distributee of trust income or principal. This status applies even in the event the beneficiary would be a distributee or permissible distributee of trust income or principal should the trust terminate in accordance with its terms on that date. An example of this would be contingent remainder beneficiaries of a trust, who are considered qualified beneficiaries because of their interest in the distribution of any remaining principal following the death of a lifetime beneficiary.
On the other hand, the term “beneficiary” generally refers to an heir at law in an intestate estate or a devisee in a testate estate. However, once an heir at law or a devisee has had their interest in the estate satisfied, this term no longer applies to them . It’s important to note that a “beneficiary” does not equate to a “qualified beneficiary,” as the duty to account outlined in section 736.0813 is limited to “qualified beneficiaries”.
736.0813 Duty to inform and account.—The trustee shall keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration.
(1) The trustee’s duty to inform and account includes, but is not limited to, the following:
(a) Within 60 days after acceptance of the trust, the trustee shall give notice to the qualified beneficiaries of the acceptance of the trust, the full name and address of the trustee, and that the fiduciary lawyer-client privilege in s. 90.5021 applies with respect to the trustee and any attorney employed by the trustee.
(b) Within 60 days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, the trustee shall 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, the right to accountings under this section, and that the fiduciary lawyer-client privilege in s. 90.5021 applies with respect to the trustee and any attorney employed by the trustee.
(c) Upon reasonable request, the trustee shall provide a qualified beneficiary with a complete copy of the trust instrument.
(d) A trustee of an irrevocable trust shall provide a trust accounting, as set forth in s. 736.08135, from the date of the last accounting or, if none, from the date on which the trustee became accountable, to each qualified beneficiary at least annually and on termination of the trust or on change of the trustee.
(e) Upon reasonable request, the trustee shall provide a qualified beneficiary with relevant information about the assets and liabilities of the trust and the particulars relating to administration.
Paragraphs (a) and (b) do not apply to an irrevocable trust created before the effective date of this code, or to a revocable trust that becomes irrevocable before the effective date of this code. Paragraph (a) does not apply to a trustee who accepts a trusteeship before the effective date of this code.
(2) A qualified beneficiary may waive the trustee’s duty to account under paragraph (1)(d). A qualified beneficiary may withdraw a waiver previously given. Waivers and withdrawals of prior waivers under this subsection must be in writing. Withdrawals of prior waivers are effective only with respect to accountings for future periods.
(3) The representation provisions of part III apply with respect to all rights of a qualified beneficiary under this section.
(4) As provided in s. 736.0603(1), the trustee’s duties under this section extend only to the settlor while a trust is revocable.
(5) This section applies to trust accountings rendered for accounting periods beginning on or after July 1, 2007.
Fundamentally, the distinction between qualified and non-qualified beneficiaries is in the nature of their interests. A qualified beneficiary possesses a more immediate or defined interest in the trust income or principal, whereas a non-qualified beneficiary might hold an interest that is more contingent or undefined. This difference is significant as it influences their respective rights and obligations under the trust. For instance, only qualified beneficiaries must be informed and accounted for by the trustee as per section 736.0813, Florida Statutes.
Contingent remainder beneficiaries are recognized as “qualified beneficiaries” under Florida law due to their future potential interests in the trust. This classification emphasizes their legal standing to engage in litigation concerning the trust, particularly in the distribution of principal after the death of lifetime beneficiaries. Rachins v. Minassian, App. 4 Dist., 251 So.3d 919 (2018).
Beneficiaries’ Standing to Sue for Breach of Fiduciary Duty
Beneficiaries who may receive benefits in the future have standing to sue for breaches of fiduciary duty if they can demonstrate a probable future interest in the trust. This was clearly articulated in a case where children of a trust settlor had the right to sue the trustee for breach, based on their status as future distributees of the trust principal. Rachins v. Minassian, App. 4 Dist., 251 So.3d 919 (2018).
Notification Requirements and Trust Decantation
Qualified beneficiaries must be notified of significant trust actions that affect their interests, such as the decantation of trust assets. A failure in this duty can lead to the invalidation of the trust actions, as demonstrated in a case where the trustee did not notify the daughters of their rights before transferring trust assets to a new trust. Harrell v. Badger, App. 5 Dist., 171 So.3d 764 (2015).
The role of qualified beneficiaries in trust administration and litigation in Florida is dynamic and critical. Trust administrators and estate planners must remain vigilant about the evolving legal landscape to ensure compliance with the Florida Trust Code and to protect the interests of all beneficiaries.
By understanding these legal precedents and their applications, those involved in managing or benefiting from trusts can better navigate the complexities of trust administration in Florida. These cases underscore the importance of adhering to legal standards and the rights afforded to qualified beneficiaries under Florida law.
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-Brice Zoecklein, Esq.
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