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Florida Trust Administration [Key Guidance for a Successor Trustee]

Florida Trust Administration

Life circumstances often require that we rise to the occasion when duty calls.  One of these circumstances occurs when a loved one passes and it is time to assume the duty of successor trustee of a family trust.  If this is your call of duty, I congratulate you for being entrusted with this important responsibility.  Your call of duty as a successor trustee, in legal terms (in Florida) will likely involve a Florida trust administration.  This is an area of legal importance for you because, like most legal matters, it carries a risk of legal liability if important steps are missed or if actions are taken without proper care.

Important Legal Requirements For Florida Successor Trustees 

Florida Trust Law and Essential Requirements

If you’re a new trustee of a Florida trust, my first bit of advice is DO NOT try to go it alone. Most trusts provide, and the Florida trust law allows, a successor trustee to hire expert legal counsel as well as tax and financial experts.  I do encourage this, because as I always say, you simply don’t know what you don’t know. With that said, there are a few more basic steps to consider.

Florida trustee paying bills image

1.  Determine if Trust Bills Need to Be Paid

If a house was held within the trust, the mortgage may need to be paid.  Likewise, property taxes, insurance, utility bills, vehicle payments and other miscellaneous living expenses may require payment and typically may be paid from the trust.

2.   Notify Trust Beneficiaries

Florida trust law requires that beneficiaries receive a notice of trust and that they are entitled to a copy of the trust.  It will be up to the trustee to determine who the trust beneficiaries are; however, if the trust was written in legalese, you may need to consult your trust attorney.

3.   Inventory Trust Assets

Gathering a record of the assets held by the trust is very important.  Often, trustees are not clear about what it means to determine whether the trust holds the assets.  This is a question of whether the Florida trust was funded properly by titling the assets in the name of the trust.  The titling of assets may have been direct or may have been by designating the trust as beneficiary of a certain assets such as a life insurance policy for estate planning in Florida or an IRA as a Florida trust beneficiary.

4.  Determine if Probate of Any Assets is Required

For assets that were not properly titled in the name of the trust, a Florida probate administration may be required to either place that asset in the trust or otherwise to transfer the asset to a designated beneficiary outside of the trust.  Whether an asset goes to the trust (or not) will most often depend upon the Florida last will and testament.

5.  Do a Preliminary Accounting and Maintain Good Records

After determining where assets are titled in Florida (or elsewhere), whether in trust or not, is the function of the trustee to safeguard and manage the trust assets in Florida.  Part of this function is to do an accounting of, not only the assets held in trust, but also the value and balances of any financial accounts held within or otherwise directed to the trust.   Accounts held in trust may be simple checking and savings accounts, or may be other investment accounts such as stock trading accounts, mutual funds or CDs.  Most of the time, financial accounts such as IRAs and 401ks are not titled in the trust, but may designate the trust as beneficiary as a transfer upon death (TOD) in Florida so that account is thus directed to the trust upon the titled owner’s death.

Maintaining excellent records is essential and this includes balancing the checkbook and keeping a good record of expenditures.  Failure to properly account for expenditures or using the trust funds for improper purposes could result in the trustee being deemed liable to the beneficiaries for misappropriation of Trust assets.

Common Pitfalls for Florida Successor Trustees

Neglecting to Get Trust Administration Advice

Common Problems for Successor Trustees Usually Result From Neglecting to Get Professional Advice Concerning A Few Common Areas of Trust Administration As Follows:

At the risk of overemphasizing this point, the following common problems of successor trustees usually relate to a failure to get professional guidance. Typically, professionals would advise caution in the following areas.

  1. Transferring Assets Out of the Trust
  2. Handling Estate Debts
  3. Handling Payment for Estate Expenses and Trustee Fees
  4. Distributing Assets at the Request of Family Members

1.  Transferring assets out of a revocable living trust without proper guidance can create problems for successor trustees.

Assets in Florida are often transferred out of a trust for Florida Medicaid planning or asset protection purposes and this usually occurs during the life of the “settlor” of the trust.  As you might imagine, this can also result in disputes and complications with other beneficiaries down the road.

Generally, the rule is that a successor trustee of a Florida trust has absolute discretion to utilize the trust assets for the best interest of the settlor.  The backlash here is that the successor trustee isn’t you, and thus the successor trustee may be held to scrutiny by the other trust beneficiaries for actions taken concerning the trust assets even if measures were taken in order to take care of you.   This can become a very complex process for a successor trustee.

For example, it may become necessary to transfer assets out of the trust estate in order to reduce the estate for Medicaid planning.  To whom these assets will be transferred can become a key questions, particularly if a spouse is no longer alive.  Sometimes a trustee will transfer assets to themselves individually and although this may be permissible under certain circumstances, it may be looked at with scrutiny at a later date by other trust beneficiaries.

2.  Handling estate debts is can be intimidating for a successor trustee.

A common example, is where the settlor had leveraged the trust assets for loans and the question of whether, in a diminishing estate, it is wise to let the creditor have the asset?  Again, although the successor trustee has absolute discretion to allow it, this decision may be second guessed later.

3.  Handling estate expenses and determining trustee fees can be confusing for a successor trustee.

Expenses are usually pretty straightforward unless the object of the expense is a non-trust asset.  Then the question will become whether it was proper to pay the expense from the trust.   A well drafted trust and other documents such as a Florida durable power of attorney usually prevents this confusion.  Trustee fees are allowed by state law and range from about 1% to 3% of the trust assets.  They must be reasonable given the circumstances and thus 3% may be reasonable for a large and complicated estate requiring years of administration and 1% may be unreasonable for a simpler estate.  Again, these are very fact specific and the successor trustee should consider the response of the other trust beneficiaries down the road.

4.  Distributing assets to family members or other beneficiaries can be stressful for a successor trustee.

Similarly, sometimes the settlor as offered an item of personal property to a beneficiary and they wish to claim it while the settlor is still living.  Again, documentation is key and if possible, getting such gifts in writing from the settlor is always preferred to avoid family disputes over trusts and estates in Florida.

For all of the above, documentation is key for the successor trustee as is always providing a reason for transfers, payments, gifts etc., so these actions can be explained and justified later in the event of an inquiry by other beneficiaries.

As I’ve mentioned, serving as a trustee or other fiduciary in an estate is an important and esteemed role and following these simple tips can keep you from needless scrutiny from loved ones and their lawyers.

Steve Gibbs, Esq.

This is an update to an original post dated May 12, 2016.

 

 

 

4 comments… add one
  • Rick March 28, 2019, 1:02 pm

    If a life insurance policy ( which is a contract and only worth money when one passes away) is removed from a trust when the individual who created it is still alive and there is a trustee handling these affairs after that person has passed and this trustee get’s paid a commission at 3.5% , is this life insurance to be included as a part of that 3.5% commission? The other question I have is: There are two families to split this estate, a house is sold for $ 470,000.00 and to be split by the two families. Are the two trustee’s entitled to the 3.5% commission on the full sale price or only on the split between the two families? Being 3.5% commission on $ 235,000.00? Thanks again, Rick

    • gibbslawfl April 1, 2019, 10:58 am

      Hello Rick, thank you for your interest and comment; however, your question is simply to involved for a blog post answer. To provide a solid answer would require reviewing the trust and going through some Q & A to assure that I understand your questions. Feel free to contact our Legal Director Gene to schedule a conversation.

      Best,

      Steve Gibbs, Esq.

  • Carlos E Gutierrez July 23, 2019, 6:53 am

    Yes please help. I am a successor trustee of a self-settling declaration of Trust. I’m the third person. Both my parents were the settlors they are the principal and income beneficiary. In 2000 after my father co-trustee passed away the shares of the community trust estate were not split for the Surviving spouse limited access Trust. The IRS election was made I became her dependent all income was at her discretion age 55. The by-pass trust and Trust C does not meet the IRS Code. Mother remarried in 2002 divorced in 2006 with MSA, but in 2013 remarried the same man she was co-dependent living arrangement married in duress out of dying man wish and fears. My sister committed welfare fraud in California in 1997 was arrested I became a victim and labeled a snitch by my sister who through third party cause mutual combat and probation violation led to felony incarceration in 2005 court records and police reports show collusion was committed against me. the argument in this matter is successor trustee is a felon, elective share claim buy surviving spouse who 19 months after also passed away daughters are now claiming the elective share here in Florida and in California the omitted spouse. Decoration of Trust has domiciled in 1997 California under its probate code as well as the will and codicil to the will. I lived in California until 2013 requested to retire from her duties. At that time discovered my sister had been committing elder exploitation and well as her adult children. I called the adult hotline and was told she was not a venerable elder. assumed duties as a successor trustee and in 2017 my sister claimed breach of trust and has been trying to remove me as a Trustee. I am reading through the Florida statues and discovered her attorney did a 768.295 Strategic Lawsuits Against Public Participation (SLAPP) prohibited. there is more to this matter but I know the truth will prevail.

    • gibbslawfl July 29, 2019, 1:15 pm

      Hello Carlos and thanks for reading and your comment. Unfortunately, we no longer handle trust litigation matters. Best of luck with your efforts.

      Steve Gibbs, Esq.

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