Introduction
Trustees play a critical role in managing the assets of another person. With their broad discretion and limited oversight, beneficiaries heavily rely on the trustee’s accountability to ensure proper management of the trust. A vital component of this accountability is the duty to inform and account, which requires trustees to provide complete and accurate records of their actions. Failure to fulfill this duty can result in breaches of fiduciary responsibilities, leaving beneficiaries without means of redress. In this blog post, we explore the importance of trust accounting and the legal obligations imposed on trustees.
The Trustee’s Duty to Inform and Account
From its inception, the law of trusts has recognized the trustee’s duty to keep beneficiaries informed about the administration of the trust and to provide an account of all trustee actions. Without a comprehensive accounting, trustees can evade accountability for their actions, undermining the trust’s integrity and the beneficiaries’ rights.
In the case of Frethey v. Durant (48 N.Y.S. 839, N.Y.A.D. 1 Dept. 1897), the court held that a fiduciary agent or trustee must render an account and demonstrate the full performance of their trust duties. This duty stems from the fact that trustees possess knowledge and information that beneficiaries cannot access independently, making it essential for trustees to reveal the complete truth about the trust’s affairs.
The Legal Framework: Florida Statute 736.0813
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. Notwithstanding s. 736.0105(2)(s) or the duties under this paragraph, 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 an irrevocable trust, the terms of the trust may permit for accounting to the qualified beneficiaries only at the termination of the trust; upon the removal, resignation, or other event resulting in a trustee ceasing to serve as a trustee; or upon demand of a qualified beneficiary or the representative of a qualified beneficiary. This paragraph may not be construed to prohibit a trustee that is a family trust company, licensed family trust company, or foreign licensed family trust company from voluntarily accounting to the qualified beneficiaries annually or at other times selected by such 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.
Florida Statute 736.0813 specifically codifies the duty to inform and account for trustees in Florida. Under this statute, trustees must keep the qualified beneficiaries reasonably informed about the trust and its administration. The trustee’s duty to inform and account includes various requirements, such as providing notice of the trust’s acceptance, disclosing the trust’s existence, settlor information, and the right to request trust documents and accountings.
Furthermore, upon reasonable request, the trustee must furnish qualified beneficiaries with a complete copy of the trust instrument and relevant information about the trust’s assets, liabilities, and administration. For irrevocable trusts, the trustee must provide annual accountings and accountings upon trust termination or change of trustee.
Entitlement to an Accounting
Beneficiaries hold a vested interest in the trust property, entitling them to seek an accounting from the trustee. The accounting serves as a tool for enforcing the trust’s terms and holding the trustee accountable for their actions. Even a co-trustee has the right to seek an accounting from another co-trustee, ensuring transparency and trust among fiduciaries.
In legal cases like Payiasis v. Robillard (171 So.2d 630, Fla. 3d DCA 1965) and Carvel v. Godley (939 So.2d 204, Fla. 4th DCA 2006), the courts recognized the standing of beneficiaries and personal representatives to request accountings from trustees, reinforcing the importance of transparency and accountability.
The case of Corya v. Sanders highlights the statutory duty imposed on trustees of irrevocable trusts to account to beneficiaries. The court emphasizes that this duty applies regardless of the duration of the trust. Specifically, section 736.0813(1)(d) of the Florida Statutes mandates that trustees of irrevocable trusts provide annual accountings to qualified beneficiaries. The purpose of this duty is to ensure transparency and keep beneficiaries informed about the trust and its administration.
Consequences of Failing to Provide Accountings
In McCormick v. Cox, the court emphasizes the trustee’s duty to provide timely and accurate accountings to beneficiaries. The case showcases the repercussions of breaching this obligation. McCormick, as the trustee, failed to provide trust accounting reports to the beneficiaries until several years after they were due. The court deems this delay a significant breach of obligation. It emphasizes that a trustee’s fiduciary duty includes not only making prudent decisions but also filing annual accountings to keep beneficiaries properly informed about the trust’s financial aspects and fluctuations in asset values.
Distinction between Revocable and Irrevocable Trusts
Swan v. Trost (In re Trost) explores the trustee’s duty to inform and account to beneficiaries under Florida law, with a focus on the distinction between revocable and irrevocable trusts. The court clarifies that while a trust is revocable, the trustee’s duties are exclusively owed to the settlor. However, after the settlor’s death, the trustee’s duty extends to the beneficiaries. This distinction is crucial in understanding the trustee’s obligations at different stages of the trust.
Final Accounting upon Termination of the Trust
Merrill Lynch v. Alzheimer’s Assn highlights the requirement for a trustee to furnish trust beneficiaries with a final accounting upon termination of the trust. According to Florida law, beneficiaries must receive this accounting, and they have a specific timeframe to bring objections to the probate court. Beneficiaries may also choose to consent to the accounting to expedite the process. This case emphasizes the importance of providing a comprehensive accounting to beneficiaries upon the conclusion of a trust.
Duty to Keep Beneficiaries Reasonably Informed
Barnett Banks Trust N.A. v. Compson discusses the duty of a trustee to keep beneficiaries reasonably informed about the trust’s administration. The court addresses the extent to which the attorney-client privilege and work product doctrine may limit this duty. It emphasizes that the statutory requirement for trustees to disclose all trust affairs to beneficiaries can override such privileges in certain circumstances. This highlights the importance of transparency and the trustee’s obligation to provide relevant information to beneficiaries.
Conclusion
These cases collectively establish the principles and obligations surrounding a trustee’s duty to account to beneficiaries and provide them with necessary information. Trustees must fulfill their obligations by providing accurate and timely accountings, keeping beneficiaries informed about trust administration, and adhering to statutory requirements. By following these principles, trustees can uphold their fiduciary duty and ensure transparency and accountability in trust management.
Trust accounting serves as a minimum floor for beneficiaries to hold trustees accountable for their financial activities. It is a fundamental duty that trustees must fulfill, providing beneficiaries with transparency and ensuring the proper management of trust assets. By understanding the legal obligations and rights associated with trust accounting, beneficiaries can safeguard their interests and trust in the trustee’s fiduciary responsibilities.
If you or a loved one need help understanding your rights to assets in a Trust and are being shown less than full transparency by the Trustee, call me. We litigate Trust Disputes throughout Florida and our attorneys provide free, no obligation consultations.
-Brice Zoecklein
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.
