The administration of a trust in Florida is governed by strict statutory requirements designed to ensure accountability and transparency. Trustees are legally obligated to keep beneficiaries informed and provide detailed accountings of the trust’s administration. The case of Hadassah v. Melcer, 268 So.3d 759 (Fla. 4th DCA 2019) highlights the practical implications of these duties and provides a critical look at the identification of “qualified beneficiaries” under the Florida Trust Code. Understanding these obligations is essential for both trustees and beneficiaries to protect their rights and interests.
Duties of Trustees: Informing and Accounting
Florida Statute § 736.0813 requires trustees to keep qualified beneficiaries informed about the trust’s administration. This obligationbegins early in the trustee’s tenure. Within 60 days of accepting a trusteeship, the trustee must notify beneficiaries of their acceptance, provide their con tact information, and inform them that communications are protected under the fiduciary lawyer-client privilege. Similarly, if a trust becomes irrevocable—whether due to the death of the settlor or other circumstances—the trustee must notify beneficiaries of the trust’s existence and their rights within the same timeframe.
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.90.5021applies 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.90.5021applies 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.
In addition to these initial notifications, trustees must respond to reasonable requests for information from beneficiaries. This includes providing a copy of the trust instrument and explaining the trust’s assets, liabilities, and administrative decisions. These communications are vital to maintaining transparency and building trust between the trustee and beneficiaries.
Annual accountings are another cornerstone of trust administration. Florida Statute § 736.08135 mandates that trustees provide a clear, understandable report detailing the trust’s financial activities. This includes a summary of all transactions, valuations of trust assets, and the allocation of income and principal. In the case of a final accounting, the report must also outline the distribution plan for any remaining trust assets. These reports ensure beneficiaries have the information necessary to evaluate the trust’s management and protect their interests.
736.08135 Trust accountings.—
(1) A trust accounting must be a reasonably understandable report from the date of the last accounting or, if none, from the date on which the trustee became accountable, that adequately discloses the information required in subsection.
(2) (a)The accounting must begin with a statement identifying the trust, the trustee furnishing the accounting, and the time period covered by the accounting.
(b)The accounting must show all cash and property transactions and all significant transactions affecting administration during the accounting period, including compensation paid to the trustee and the trustee’s agents. Gains and losses realized during the accounting period and all receipts and disbursements must be shown.
(c)To the extent feasible, the accounting must identify and value trust assets on hand at the close of the accounting period. For each asset or class of assets reasonably capable of valuation, the accounting shall contain two values, the asset acquisition value or carrying value and the estimated current value. The accounting must identify each known noncontingent liability with an estimated current amount of the liability if known.
(d)To the extent feasible, the accounting must show significant transactions that do not affect the amount for which the trustee is accountable, including name changes in investment holdings, adjustments to carrying value, a change of custodial institutions, and stock splits.
(e)The accounting must reflect the allocation of receipts, disbursements, accruals, or allowances between income and principal when the allocation affects the interest of any beneficiary of the trust.
(f)The trustee shall include in the final accounting a plan of distribution for any undistributed assets shown on the final accounting.
(3) Notwithstanding subsections (1) and (2), if a family trust company, licensed family trust company, or foreign licensed family trust company, as defined in s.662.111,is a trustee of the trust, such trustee may elect, for any accounting period, to provide the qualified beneficiaries with all of the following information:
(a) A notice stating that the trustee has made an election to provide the information described in this subsection.
(b) The information required by paragraph (2)(a) and, if applicable, the information required by paragraph (2)(f).
(c) A financial statement for the trust which summarizes the information provided pursuant to paragraphs (2)(b)-(e). The financial statement must contain sufficient information to put the beneficiary on notice of the trust’s comprehensive assets and liabilities as well as of the transactions occurring during the accounting period. A financial statement that reports a summary of the comprehensive assets and liabilities at the beginning and end of the accounting period and the aggregate amounts of all cash and property transactions, gains, losses, receipts, expenses, disbursements, distributions, accruals, or allowances occurring within the accounting period for each category of assets and liabilities meets the requirements of this paragraph.
For the purposes of this chapter, a financial statement that a trustee provides to a beneficiary of a trust under this subsection is deemed to be a trust accounting. Any trustee that makes the election provided in this subsection shall, upon request of any beneficiary made within the limitations period under s.736.1008, make available the detailed information necessary for preparation of the financial statement to the beneficiary within 30 days after the date of such request, including providing copies of the requested information. A request by a beneficiary for the detailed information necessary for the preparation of the financial statement tolls the running of any applicable limitations period until the detailed information is made available to the beneficiary.
(4) Subsections (1) and (2) govern the form and content of all trust accountings rendered for any accounting periods beginning on or after January 1, 2003, and all trust accountings rendered on or after July 1, 2018. The election provided in subsection (3) for trusts for which a family trust company, licensed family trust company, or foreign licensed family trust company, as defined in s.662.111, is a trustee is available for any accounting periods beginning on or after July 1, 2022. This subsection does not affect the beginning period from which a trustee is required to render a trust accounting.
Qualified Beneficiaries: Who Has the Right to Be Informed?
The concept of “qualified beneficiaries” plays a critical role in defining the scope of a trustee’s obligations. A qualified beneficiary is generally someone who is currently entitled to receive distributions, would receive distributions if the interests of current beneficiaries terminated, or would benefit if the trust were terminated entirely. This definition is codified in § 736.0110 of the Florida Trust Code and was a key issue in the Hadassah v. Melcer case.
In Hadassah, the trust established by Sylvia Gelt named her three daughters as current beneficiaries and designated several charities to receive the remaining trust funds upon the death of the last surviving daughter. When the trustee sought to resign, he identified the daughters and charities as qualified beneficiaries. However, the daughters contested the charities’ designation, arguing that only current beneficiaries should be considered qualified. The court ultimately sided with the charities, finding that the Florida Trust Code’s definition of qualified beneficiaries included those who would inherit upon the termination of current interests. This decision underscores the importance of clear statutory language in determining who has the right to be informed and accounted to by the trustee.
Practical Implications and Breaches of Duty
Trustees must carefully navigate their statutory duties to avoid breaches that could lead to legal disputes. A failure to notify beneficiaries within the required timeframe, for example, could result in a breach of fiduciary duty. Similarly, a trustee who delays or omits annual accountings risks exposing themselves to claims of mismanagement.
Consider a hypothetical scenario where a trustee fails to notify a charitable organization designated to receive residual distributions upon the death of a current beneficiary. This omission could deprive the charity of its right to monitor the trust’s management, potentially leading to disputes when distributions are eventually made. In another example, a trustee who fails to allocate income and principal transparently in their annual accounting could face allegations of self-dealing or favoritism.
Lessons from Hadassah v. Melcer
The Hadassah case illustrates how statutory duties intersect with the practical realities of trust administration. It emphasizes the importance of identifying all qualified beneficiaries—including contingent beneficiaries like charities—at the outset. Trustees must be proactive in providing information to avoid potential disputes, while beneficiaries must assert their rights if they suspect a breach. The Florida Trust Code provides a clear framework for addressing these issues, but successful trust administration requires diligent compliance and communication. Trustees who embrace these responsibilities and beneficiaries who remain informed can ensure the trust’s goals are met while minimizing conflicts.
Conclusion
Trustees in Florida bear significant responsibilities under the law, and the failure to fulfill these duties can have serious consequences. Cases like adassah v. Melcer serve as important reminders of the need for transparency and accountability in trust administration. Whether you are a trustee navigating your obligations or a beneficiary seeking to protect your rights, understanding the statutes and case law that govern trust administration is essential.
For guidance on trust administration or beneficiary rights, give us a call. Our experienced attorneys are ready to help you navigate the complexities of Florida’s trust laws and ensure your interests are protected.
- Brice Zoecklein, Esq.
- 813-501-5071
Disclaimer: The information contained in this blog/website is for informational purposes only and provides general information about the law but not specific advice. This information should not be used as a substitute for advice from competent legal counsel as laws change and the facts in your specific case need to be analyzed.
