What happens if the life beneficiary contacts the trustee and demands that the trustee invade the trust corpus and distribute funds for the life beneficiary’s maintenance and support, but the remainder beneficiaries object? Aside from being bound to “administer the trust in good faith” and “act impartially in administering the trust property,” the Florida legislature gives trustees little guidance as to what the best course of action is. The potential issues that the trustee faces include the following: (1) what level of maintenance and support is the surviving spouse entitled to; (2) must the trustee consider the standard of living that the surviving spouse had at the time the trust was created, at the death of the settlor, or at the time of the request; (3) how searching must the trustee’s review of the life beneficiary’s other assets be; (4) what situations must the trustee must distribute funds to the surviving spouse; and (5) are there certain situations where funds cannot be distributed to the surviving spouse?
Florida case law on this subject matter is not particularly well developed, especially when it comes to defining exactly what the trustee is to do in these situations. Peter Tiernan, in a 2005 Florida Bar Journal article, sought to define the exact contours of the discretion that a trustee possesses when faced with the following clause:
The trustee may pay to [the life beneficiary] such amounts of the income and/or principal of the trust estate from time to time as the trustee, in its discretion, deems necessary for [the life beneficiary]’s support, taking into account his income from all sources known to the trustee. Any undistributed income shall be added to the principal of the trust estate.
According to Mr. Tiernan, a trustee faced with this clause would be bound under Florida law to consider the needs of the life beneficiary, and “if an objective determination indicates that [the life beneficiary]’s income is not sufficient to completely provide for his support taking into account his station in life,” then the trustee would be required to pay the life beneficiary “an amount which is between the minimum and maximum amount that is reasonably necessary to meet those needs based on his station in life at the creation of the trust, less his current income.” Mr. Tiernan concluded, however, that the trustee would still retain the discretion to determine the exact amount of the distribution, provided it complies with the aforementioned requirements.
While Florida Courts have directly gone as far an enunciating the standard stated in the Florida Bar Journal article, this interpretation would seem to align with generally accepted standards addressing a trustee’s discretion. Marsman v. Nasca, though a Massachusetts state court case, is an oft-cited case in this area of the law. 573 N.E.2d 1025 (Mass. App. Ct. 1991). The relevant provision of the trust in Marsman stated that “after having considered the various available sources of support for him, my trustees shall, if they deem it necessary or desirable from time to time, in their sole and uncontrolled discretion, pay over to [a life beneficiary], or use, apply and/or expend for his direct or indirect benefit such amount or amounts of the principal thereof as they shall deem advisable for his comfortable support and maintenance.” Id. at 1027. At some point after the death of the settlor, the life beneficiary requested funds from the trustee, indicating that “business was at a standstill and that he really needed some funds.” Id. Rather than investigating the financial situation of the life beneficiary, the trustee simply sent him a check for $300.00 and asked him to “explain in writing the need for some support and why the need had arisen.” Id. The life beneficiary never responded, however, and ultimately lost his home after falling into poverty.
The estate of the life beneficiary ultimately won a decision at the trial level after the Court found that the trustee breached the duty to inquire into the life beneficiary’s needs. On appeal, the court found that the relevant clause “clearly placed such a duty upon” the trustee to provide the funds necessary to “maintain the life beneficiary ‘in accordance with the standard of living which was normal for him before he became a beneficiary of the trust.'” Id. at 1029. The court held that the trustee breached the “duty of inquiry into the needs of the beneficiary,” and “did not meet his responsibilities either of inquiry or of distribution under the trust.” The import of this decision was that it established that the trustee had a duty first to inquire into the needs of the beneficiary, then, depending upon what the inquiry uncovers, to distribute in accordance with the terms of the trust.
If you or someone you know would like to create or has questions about a support trust, please do not hesitate to contact the experienced estate planning attorneys at Chepenik Trushin LLP.