What’s a beneficiary to do?
Many people utilize revocable trusts in an effort to avoid probate. Often, the primary asset of a revocable trust is real estate. The person who signs the trust (Settlor) customarily chooses the individual(s) to serve as a successor trustee upon the Settlor’s death or incapacity.
Once the Settlor dies and a successor trustee accepts the position, a set of laws mandates the trustee’s conduct under Florida law. These laws are found in Chapter 736 of the Florida Statutes, also known as the Florida Trust Code. In particular, sections 736.0801 (duty to administer trust), 736.0802 (duty of loyalty) 736.0803 (impartiality), and 736.0804 (prudent administration) are triggered. The Florida Trust Code was modified substantially in recent years and the current version took effect on July 1, 2007.
Regardless of whether the trust is essentially comprised of real estate, the trustee must follow the terms of the trust pursuant to Fla. Stat. section 736.0801. When real estate is owned by the trust, the Settlor may desire for the property to be sold and the proceeds distributed to the individual beneficiaries after his or her death. In fact, pursuant to Florida Statute section 736.0817 (distribution on termination), the trustee shall proceed expeditiously to distribute the trust property to the persons entitled upon the occurrence of an event terminating or partially terminating a trust.
Litigation often arises when the real estate in the trust is not sold as quickly as the beneficiaries would prefer. Similarly, litigation also arises when the real estate is sold prior to a sudden increase in the value of the said property or most often at a price that beneficiaries think is too low.
When is the trustee liable for dumping real estate at a fire sale? What options are available to the frustrated beneficiaries who sit month after month with little to no effort being made to sell real estate? What happens when the trustee refuses to sell the property for what he believes is fair market value?
Florida Statute section 736.0804 provides that “[a] trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust.” Thus, a trustee is responsible for the real estate in the trust, which may or not be occupied, rented, leased, or otherwise income producing. It is the trustee’s duty to ensure income is collected and taxes paid timely and make a real effort to list the real estate with a competent broker and aggressively get educated about the real estate market and adjust the listing price accordingly.
A trustee must dutifully follow F.S. section 736.0804, exercising “reasonable care, skill, and caution.” If the land is for sale, and the trust mandates sale as soon as practicable after the Settlor’s death, the trustee should endeavor to keep abreast of the comparable values for similar land and price the property accordingly. If a trustee is relying upon appraisals that are several years old or – worse – the tax roll value and is setting the asking price based upon the same, a beneficiary would be well served to seek the removal of that trustee. Regardless, the Florida Trust Code provides beneficiaries recourse in situations where the trustee of a trust is not being diligent in his duties.