BREACH OF TRUSTEE’S OR SUCCESSOR TRUSTEE’S FIDUCIARY DUTY
“The prudent heir takes careful inventory of his legacies and gives a faithful accounting to those whom he owes an obligation of trust.” John F. Kennedy
When a Revocable Trust is executed, the Trustee is usually the person who executed the trust. The settlor of the trust could also appoint another person or financial institution as the Trustee of his or her revocable trust. When the Trustee dies or is no longer able to serve, a successor trustee is named in the trust instrument, which directs and authorizes the successor trustee to perform their fiduciary duties as successor trustee. Florida Statute 736.0401 and 736.0402. What happens if the trustee or the successor trustee does not perform their fiduciary duties as trustee? The beneficiaries and residual beneficiaries of the trust should take careful inventory of their legacy. They are entitled to a yearly trust accounting from the trustee or successor trustee pursuant to Florida Statute 736.08135 and 736.0810. In the event the beneficiaries of the trust request from the trustee or the successor trustee an annual accounting, and fail to receive one, the trustee is in violation of their fiduciary duty as trustee pursuant to Florida Statute 736.08135.
The language of the trust document should be reviewed by competent counsel to determine if and when the trustee or successor trustee may invade the principal of the trust. The polestar of trust or will interpretation is the settlor’s intent. Bryan v. Dethlefs, 959 So.2d 314 (Fla. 3rd DCA 2007); Arellano v. Bisson, 847 So.2d 998 (Fla. 3rd DCA 2003); Phillips v. Estate of Holzmann, 740 So.2d 1(Fla. 3rd DCA 1998). The intent of the settlor is ascertained from the four corners of the document through consideration of all the provisions taken together, rather than from detached portions or any particular form of words. Bryan v. Dethlefs, 959 So.2d 314 (Fla. 3rd DCA 2007); Arellano v. Bisson, 847 So.2d 998 (Fla. 3rd DCA 2003); Phillips v. Estate of Holzmann, 740 So.2d 1(Fla. 3rd DCA 1998).
If the trustee or successor trustee inappropriately invades the principal of the trust in direct violation of the terms of the trust, the trustee or successor trustee has violated specific terms of the trust by misappropriating a portion of the entire principal of the trust. Therefore, the trustee or successor trustee has breached their fiduciary duty to administer the trust, as well as breached their duty of loyalty, impartiality, prudent administration, and control and protection of the trust property. Florida Statutes 736.0801, 736.0802, 736.0803, 736.0804, 736.0809.
If the trustee or successor trustee wrongfully invaded the principal of the trust for their own personal benefit, this creates a conflict of interest between the trust’s beneficiaries and the trustee’s fiduciary duty, and a beneficiary of the trust can retain competent counsel to render the transaction voidable. Florida Statute 736.0802(2); Brigham v. Brigham, 11 So.3d 374 (Fla. 3rd DCA 2009); J.P. Morgan Trust Company, N.A. v. Siegel, 965 So.2d 1193 (Fla. 4th DCA 2007); Keye v. Gautier, 684 So.2d 210 (Fla. 3rd DCA 1996). A trustee or successor trustee is a fiduciary and owes to the beneficiaries the duty to refrain from self-dealing, the duty of loyalty, and the overall duty to not take unfair advantage, and must act in the best interest of the trust’s beneficiaries. Capital Bank v. MVB, Inc., 644 So.2d 515 (Fla. 3rd DCA 1994). A trustee has the duty to administer a trust diligently for the benefit of the beneficiaries of the trust. Friedman v. Friedman, 11 So.3d 374 (Fla. 3rd DCA 2009); Brigham v. Brigham, 11 So.3d 374 (Fla. 3rd DCA 2009).
Also, Public Policy of Florida, as articulated in numerous court decisions, frowns upon a trustee using trust funds for his own benefit and, as a result of this action, placing these funds unnecessarily at risk. Keye v. Gautier, 684 So.2d 210 (Fla. 3rd DCA 1996); Crawford v. Crawford, 129 Fla. 746, 176 So. 838 (Fla. 1937); Jungbluth v. American Bank & Trust Co, 101 Fla. 289, 134 So. 618 (Fla. 1931); Bailey v. Leatherman, 615 So.2d 810 (Fla. 3rd DCA 1993); Barnhart v. Hovde, 490 So.2d 1271 (Fla. 5th DCA), review denied 510 So.2d 543 (Fla. 1986); Centrust Savings Bank v. Barnett Banks Trust Co., 483 So.2d 867 (Fla. 5th DCA 1986); Shriner v. Dyer, 462 So.2d 1122 (Fla. 4th DCA 1984).
In Barnhart v. Hovde, 490 So.2d 1271 (Fla. 5th DCA), review denied 510 So.2d 543 (Fla. 1986), Hovde was named trustee for the beneficiaries, who were her stepchildren. Hovde sold a trust asset (an apartment complex) without obtaining a court order to do so in violation of Fla. Stat. 737.403(2). Hovde had conflicting interests with the beneficiaries of the trust, and the sale of assets resulted in a benefit to the trustee and a detriment to the beneficiaries. Id. The Trustee had interests that definitely conflicted with those of the other beneficiaries, which resulted in a benefit to the trustee and a detriment to the other beneficiaries, and the Court found that Hovde violated the terms of the trust and applicable state statutes. Id.
In the event you believe a trustee or successor trustee has breached their fiduciary duty which resulted in a benefit to the trustee and a detriment to the beneficiaries of the trust, it is imperative that you contact competent counsel to review the trust document and any amendments to the trust document and to seek the appropriate relief in order to ensure that the trust assets are not unnecessarily at risk which could be a detriment to the beneficiaries of the trust.
