What is Trust Administration in Florida?
Florida trust administration is the process by which a trustee executes a trust’s terms and manages the assets within a trust. It is not court-supervised. The trustee is given certain powers and responsibilities under Florida law. Trust administration can be complicated, so if you are a trustee, it is helpful to reach out to an experienced Naples trust administration lawyer. A lawyer can help you carry out your duties as a trustee and avoid personal liability.
What are the Duties of a Trustee in Florida?
Trustees have significant power. To ensure that they use this power responsibly, Florida law requires them to administer the trust in good faith, in accordance with the terms and purpose of the trust, and in the interest of the beneficiaries. The Florida Trust Code sets forth specific fiduciary duties that all trustees must follow.
1. Act in Loyalty to the Beneficiaries
Acting with loyalty means that the trustee never acts in a way that benefits the trustee more than the beneficiaries. If the trustee engages in a sale or another transaction involving the investment of trust property that is personally beneficial to the trustee, it is voidable by a beneficiary of the trust. Additionally, the duty of loyalty prevents a trustee from self-dealing. Examples of self-dealing include taking loans from the trust or charging unreasonable fees for services the trustee provides to the trust.
2. Act Impartiality
If the trust has two or more beneficiaries, the trustee must treat the beneficiaries equally. The trustee cannot favor one beneficiary over others and must act with the same degree of care to protect the interests of all the beneficiaries. Income and remainder beneficiaries often have competing interests, and it is the trustee’s job to balance these interests. For example, they cannot invest trust assets solely in aggressive growth stocks that produce little or no income for the current income beneficiaries.
3. Preserve Trust Assets and Make Them Productive
The trustee has a duty to invest and manage the trust assets as a prudent investor would considering the purpose, terms, distribution requirements, and other circumstances of the trust. The trustee should incorporate risk and return objectives reasonably suitable to the trust. The trust portfolio should be broadly diversified. When analyzing whether the trustee has met this duty, the court will not look at the investments in isolation. Instead, it will look at the trust’s investment portfolio as a whole.
A trustee can delegate the investment of the trust assets to another individual. However, the trustee must exercise reasonable care, skill, and caution when selecting their agent. Additionally, the trustee must periodically monitor the agent’s performance and compliance.
4. Keep Trust Assets Separate
The trustee is not permitted to comingle trust assets with personal assets. All the trust property must be separate from the trustee’s personal property.
5. Communicate With Beneficiaries
The trustee must keep beneficiaries reasonably informed of the trust and its administration. Whenever a beneficiary makes a reasonable request, the trustee must provide the beneficiary with all relevant information about the trust’s assets, liabilities, any particulars relating to the trust administration, and a complete copy of the trust agreement.
6. Provide a Full Accounting of the Trust to the Beneficiaries
Trustees must give the beneficiaries an annual accounting of the trust. In addition to the annual accounting, the trustee must provide a trust accounting when the trust terminates or changes trustee. Among other things, accounting must include an identification of all cash and property transactions and all significant transactions affecting administration during the accounting period.
What Happens If a Trustee Breaches Their Fiduciary Duty in Florida?
Under Florida law, if a trustee fails to follow the terms of the trust or breaches their fiduciary duty, they can be removed as the trustee and held personally liable for damages. Trustees should seek guidance from a trust administration lawyer to limit their personal liability exposure.
Furthermore, if a claim is filed against the trustee for breach of fiduciary duty, they may have to use their own assets to defend against the lawsuit. The trustee must give the beneficiaries notice, and they can choose to have a judge decide whether or not the trustee can use trust assets to defend themselves.
Call A Naples Trust Administration Lawyer
If you have questions about trust administration, you should contact an experienced Naples attorney. James R. Nici is an experienced Naples attorney with over 25 years of experience. Contact our office today at (239) 449-6150 or use our web form to set up a free consultation.
