If a person is serving as a trustee of a discretionary trust (trustee has the right and authority to distribute income and principal) then he has complete authority over trust distributions and according to the trust document answers to no one. However, what if the trustee of the trust exercises his authority to distribute the entire trust corpus to the current beneficiary or worse distribute all of the trust assets to himself? Can this be stopped and can the trustee really clean out all of the cash? If the trustee takes this action, there arises a question as to what the trustee’s fiduciary duty is to the other beneficiaries of the trust. The case of Mesler v. Holly, 318 So. 2d 330 (Fla. 2d DCA 1975) provides, “even unlimited power of invasion is subject to implied limitations to protect remaindermen.”
Mesler involved a situation where the trustee was also a beneficiary entitled to distributions from the trust; therefore, it was argued there was an actual conflict of interest involved. A trustee’s duty to remaindermen beneficiaries extend beyond the conflict scenario where the trustee is wearing two hats – one of a trustee (fiduciary) and one of the beneficiary – to the case of an independent trustee who had discretion over trust distributions but was not the beneficiary himself. See NCNB National Bank of Florida v. Schanaberger, 616 So. 2d 96 (Fla. 2d DCA 1993).
