Articles Posted in Family Trust Company

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).

Trust Protectors: An Extra Layer of Protection

Traditionally, a trust has three main participants, a settlor, a trustee, and one or more beneficiaries.  A settlor creates and/or contributes property to the trust.  A trustee manages and holds the property in the trust for the benefit of other people who are said to have a “beneficial interest” in the trust.  Beneficiaries are the people who have those beneficial interests.  For example, a father, acting as a settlor, might create a trust, naming his wife as the trustee, to distribute money for the benefit of their children, who are the beneficiaries of the trust.  However, a fourth participant has increasingly been used in trusts: the trust protector.

Historically, trust protectors were mainly used in offshore trusts and rarely in domestic trusts.  A trust protector acts as an extra layer of protection for the settlor.  A trust protector is customarily appointed to supervise the trust and ensure that the settlor’s intent is effectuated.  A trust protector may have the power to modify terms of a trust to ensure that the settlor’s intent is carried out.

In 2014, the Florida Legislature passed the Florida Family Trust Company Act, which established a structure for the formation, operation, and regulation of Family Trust Companies (“FTCs”). An FTC is a corporation or limited liability company, exclusively owned by one or more family members, that provides trust services to a related group of people. FTCs can serve as trustees and provide other fiduciary duties, such as investment advisory, wealth management, and administrative services. There are many advantages of forming a FTC, including:

  • Increased flexibility and control over asset management
  • Greater protection of family privacy
  • Increased liability protection for fiduciaries
  • Continuity of the trustee upon death, resignation, or removal of a decision maker
  • The ability to integrate the younger generation into the family wealth management

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