Naming a trustee to administer your trust is an important decision that should be afforded thoughtful consideration. One should consider the proposed individual’s qualifications, ability, professionalism, and ethics. Equally important is the decision to accept appointment as trustee of another’s trust. Oftentimes, a trusteeship is accepted without prior knowledge of the duties and responsibilities involved.
Under Florida statute, those serving as trustee have several legal duties to the beneficiaries of the trusts that they administer, which can be found in Chapter 736 of the Florida Statutes. Below are ten crucial duties and responsibilities that cannot be overlooked by Florida trustees.
- Duty to Administer Trust – §736.0801.
A trustee has a duty to administer a trust in good faith, in accordance with the trust’s terms and purposes, and in the best interest of the trust’s beneficiaries. In order to comply with this duty, the trustee must manage the trust assets in accordance with the terms of the trust instrument and the settlor’s intent.
- Duty of Loyalty – §736.0802.
A trustee also has a duty of loyalty to the beneficiaries of the trust. This duty requires that the trustee act in the best interest of the trust beneficiaries when administering the trust. Conversely, this duty also requires that the trustee refrain from acting in ways that are not in the best interests of the trust beneficiaries.
- Duty of Impartiality – §736.0803.
The duty of impartiality requires that trustees remain neutral as between multiple beneficiaries of the same trust. Thus, in trusts where there are two or more beneficiaries, the trustee must act equitably between them. This holds true even when a trust has different classes of beneficiaries, such as present beneficiaries and future beneficiaries. For example, a trust may contain property in which one beneficiary has a present possessory interest, for a term, and another beneficiary has a remainder interest that will vest at a future date. In those cases, the trustee must strike a balance between those differing interest and manage the assets in such a way that will maximize the benefit to both parties.
- Duty to Act Prudently – §736.0804.
The duty to act prudently means exercising reasonable care, skill, and caution in administering the trust. This duty has been interpreted as meaning that the trustee should act as if the assets contained in the trust are their own when administering the trust. This applies to investments, sales, and distributions of the trust assets.
- Duty Protect Trust Assets – §736.0809.
Once appointed, a trustee has a duty to take control of and protect trust assets. The importance of this duty cannot be overstated. This may mean purchasing insurance for property, diversifying assets, or placing items in safety deposit boxes. Any actions that would be reasonable under the circumstances and which are within the trustee’s power should be taken to ensure the trust assets are protected.
- Duty to Use Special Skills or Expertise – §736.0806.
In some cases, a trustee may be appointed because of special skills or expertise that they possess. In those instances, the trustee must use those special skills or expertise in administering the trust. For example, a CPA will have greater knowledge of accounting principles and tax laws than a layperson. Due to that advanced expertise, a trustee who is a CPA will be expected to use their skills in accounting and their knowledge of tax in their role as trustee.
- Duty to Delegate – §736.0807.
Similar to the duty to use special skills or expertise is the duty to delegate. It is important that a trustee also recognize their limitations and know when to seek help from those better suited to a particular task. This may mean consulting with an accountant, financial advisor, appraiser, or attorney.
- Duty of Enforcement and Defense of Claims – §736.0811.
With regard to claims made against trust assets, a trustee has a duty to defend those actions. That means that when a claim is made against the trust that the trustee knows or believes to be fraudulent, the trustee has a duty to defend those claims. Inversely, a trustee also has a duty to enforce claims that the trust may have against third parties. If there is a debt owed to the trust by a third party, the trustee must take reasonable action to enforce the repayment of the debt.
- Duty to Inform and Account – §736.0813.
The duty to inform and account means that the trustee must keep the beneficiaries reasonably informed of the trust and its assets. Thus, a trustee must provide qualified beneficiaries with a complete copy of the trust instrument as well as an accounting of the trust’s assets and liabilities upon reasonable request.
- Duty to Distribute Trust Income – §736.08147.
Finally, the trustee has a duty to distribute trust income. Distributions can be either mandatory or discretionary. For example, if the trust instrument provides that distributions of income shall be made annually, then the trustee is obligated to make those distributions at least once per year. However, it is not uncommon to leave distributions entirely to the discretion of the trustee. In Florida, this is often done to protect from creditors of a beneficiary because creditors cannot force distributions or make claims against a beneficiary’s interest in a trust if the distributions are discretionary. In these circumstances, the trustee must make distributions at least as often as will accomplish the trust’s purposes. Thus, even when distributions are discretionary, they cannot be unreasonably withheld.
While these are some duties that pertain to acting as a trustee in Florida, this list is not meant to be exhaustive. If you are named a trustee in Florida, it is advisable that you contact a Florida attorney specializing in trusts and estate law to ensure that you understand your duties and that you are acting in accordance with the law.