By Phil Rarick, Esq.
The sole reason most trusts exist is to serve the needs of the beneficiaries. It is not an employment program for the trustee or any other person. Therefore, a core test for whether a trust is performing – and performing efficiently – is to examine whether the needs of the beneficiaries are being met as instructed by the trust, and whether the purposes of the trust are being fulfilled.
If you are a beneficiary of a trust, here are some warning signs that a trust is not performing in an efficient way to meet your needs:
- The trustee fees are excessive. The trustee is entitled to receive compensation as specified in the trust. If the trust is silent regarding trustee compensation, the trustee is entitled to “compensation that is reasonable under the circumstances”. F.S. §736.0708(1). This standard is generally what a professional trustee located in Florida would charge.
- The trustee fees are not disclosed. The trustee has a duty to account to the beneficiaries, and this accounting should include, among many other things, compensation paid to the trustee and the trustee’s agents – such as his or her attorney. F.S. §736.08135(b).
- The trust is failing to produce income. The trustee has a duty to make the trust productive of income. Example: All trust assets are invested in commercial real estate holdings. However, the maintenance and property taxes consume all the rental income generated by the properties. In this situation, the trustee may be compelled to liquidate part or all of the trust properties and invest in a conservative equities and bond portfolio that generates income.
- The trustee is favoring one beneficiary over another. If there are two or more beneficiaries the trustee has a duty to be impartial, giving due regard to the beneficiaries’ respective interests. F.S. §736.0803. The trustee cannot favor one beneficiary over the other unless there is clear and specific trust language stating such.
- The trust expenses are high. The trustee can only incur expenses that are reasonable in relation to the trust property, purposes of the trust, and skills of the trustee. F.S. §736.0804. As mentioned above, the beneficiary is entitled to an accounting of all trust “receipts and disbursements.” F.S. §736.08135.
A trust beneficiary has numerous legal remedies if he or she believes the trust is not performing as intended by the trustmaker. Remedies include:
- Demand for trust accounting
- Removal and replacement of the trustees
- Modification or decanting of the trust (decanting is the transferring the assets of the old trust to a new trust)
- Termination of the trust
A trust beneficiary has many important rights. For a summary of these rights see our report, 10 Basic Rights of A Florida Trust Beneficiary.
For more information, contact Rarick & Bowden Gold, Miami trust attorneys, at (305) 556-5209 or info@raricklaw.com.
Special Note
The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Miami trust attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.