Trustee Acting Squirrely?

When a Trustee Goes Bad: Removal of a Trustee

Trustees play a critical role in trust administration. Settlors, or creators of the trust, give trustees legal title and management authority over the settlor’s property for the benefit of the beneficiaries.  An unruly trustee could improperly deplete the trust property and leave nothing for the beneficiaries.  Florida recognizes the importance of the trustee’s role and has numerous statutes regulating trustees and protecting beneficiaries.  The provisions include, but are not limited to:

  1. The trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with the Florida Trust Code. 736.0801, Fla. Stat. (2006).
  2. A trustee shall administer the trust solely in the interests of the beneficiaries.
  1. If a trust has two or more beneficiaries, the trustee shall act impartially in administering the trust property, giving due regard to the beneficiaries’ respective interests. 736.0803, Fla. Stat. (2006).
  2. The trustee shall keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration. 736.0813, Fla. Stat. (2013).
  3. A trustee shall take reasonable steps to take control of and protect the trust property.
  1. A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution. 736.0804, Fla. Stat. (2006).

 

With all of these duties, being a trustee is like being an employee of the trust.  If an employee fails to satisfy his duties, he can be terminated.  Similarly, if a trustee fails to satisfy his duties, he can be removed as trustee under § 736.0706, Fla. Stat. (2007), which allows a settlor, co-trustee, or a beneficiary to request that the court remove a trustee.  Alternatively, the court, on its own initiative, may remove a trustee.

 

The statute states several grounds for the removal of a trustee.  Under 736.0706(2), Fla. Stat.  (2007), the court may remove a trustee if:

(a) The trustee has committed a serious breach of trust;

(b) The lack of cooperation among co-trustees substantially impairs the administration of the trust;

(c) Due to the unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or

(d) There has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable co-trustee or successor trustee is available.

 

The case McCormick v. Cox, 118 So. 3d 980 (Fla. 3d DCA 2013) provides an example of a trustee being removed for malfeasance.  In McCormick, the beneficiaries did not stand by idly as the trustee breached his numerous duties and they sought his removal.  The Third District Court of Appeal upheld the trustee’s removal under § 736.0706, Fla. Sta. (2006), because of his failure to a post a bond as required by the trust agreement, his failure to file annual accountings with beneficiaries for four years, and his unilateral payment of $1,217,528.00 to himself for trustee’s fees without prior clearance from the beneficiaries or a court order.

 

The statute is important because of the popularity of trusts as an estate planning tool.  It ensures that a trustee cannot neglect his duties under the trust code and trust agreement without consequences.  More importantly, it can allow the court, co-trustees, settlors, and beneficiaries to intervene before a rogue trustee causes significant harm.

 

The foregoing provides a brief overview of the removal of a trustee in Florida.  Those interested in more information on the topic should consult an attorney.  Please do not hesitate to contact the attorneys of Chepenik Trushin LLP, who are ready, willing, and able to assist with your estate planning needs.