Trust Modification by Beneficiaries

A recent Florida Case…

Florida statutes allow for the modification of trust documents when the beneficiaries and trustees enter into a settlement agreement. The proposed changes have to further the grantor’s intent, meet the best interests of the beneficiaries or stem from another appropriate reason. But what if the trust specifically prohibits the proposed changes? Then, only in unique circumstances the will the court modify the trust as allowed by Fla. Stat. s. 736.0414 if the trust instrument forbids such changes.

For example, in a very recent Miami-Dade County District Court of Appeals decision, the Court decided it would not approve a settlement agreement entered into between the co-trustees (the two adult daughters of the settlors) and the corporate trustee. The settlement agreement would have allowed the corporate trustee of the trust to resign, release it from liability, and replace it with a corporate custodian to hold the trust’s securities and cash. A fourth co-trustee appealed the trial court decision which allowed the modification. The fourth co-trustee relied on language from the trust which provided: “If the corporate Trustee fails or ceases to serve, the remaining individual Trustees or Trustee shall choose a successor corporate Trustee, so that there shall always be a corporate Trustee after the Settlor ceases to serve.”

Furthermore, a later paragraph of the same trust provided: “[T]o the extent permitted by law, I prohibit a court from modifying the terms of this Trust Agreement under Florida Statutes s. 737.4031(2) or any statute of similar import.” Section 737.4031 of the Florida Statutes (2002), which is currently found in section 736.04113 of the Florida Statutes, allowed for the judicial modification of a trust under certain circumstances.

Given the clear language of the trust, the Court found that the settlor’s intent was to keep a corporate trustee active in administering the trust. Any attempt to modify this provision was not allowed. If you wish to create a trust instrument you need to be very careful to include language that expresses your intent. You can draft a trust to either allow or prohibit beneficiaries from modifying the trust. If you need an experienced attorney and live in the Miami-Dade County, Broward County or West Palm Beach area please feel free to contact Chepenik Trushin for an initial consultation. Our toll free phone number is (866) 626-9898.

References:
Margaret Bellamy LANGFITT, Lyell Bellamy McMerty, and Northern Trust, N.A., etc., et al., Appellees., No. 3D11–1099., Feb. 8, 2012.