When administering a trust, you must know to whom exactly a trustee owes his or her duties, to understand a trustee’s exposure to liability for breach. The answer to this question hinges on two considerations: (1) whether a trust is revocable or irrevocable and (2) whether the settlor has capacity to revoke his trust. Florida law leaves enough ambiguity to warrant discussion of trustee’s duties in each of these scenarios.
In Florida, unless the terms of a trust provide a trust is irrevocable, then the trust is revocable and may be revoked or amended by the settlor.[1] While a trust is revocable, “the duties of the trustee are owed exclusively to the settlor.”[2] Thus, a beneficiary does not have standing to sue the trustee because the trustee’s duties are owed exclusively to the settlor.[3] The rationale behind barring a beneficiary from suing while the settlor is alive is the settlor may choose to amend his or her trust and divest the beneficiary’s interest at his or her discretion during his lifetime.[4]
As noted above, the distinction between revocable and irrevocable is critical because while a trust is revocable, the trustee has no duty to provide an accounting to anyone other than the settlor.[5] However, once a trust becomes irrevocable, the object of this duty shifts. A qualified beneficiary of an irrevocable trust may sue the trustee for “breach of a duty that the trustee owed to the settlor/beneficiary which was breached during the lifetime of the settlor and subsequently affects the interest of the vested beneficiary.”[6] A trustee only has a duty to keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration when the trust is irrevocable, not while the trust is revocable.[7] For example, trustees are required to provide a trust accounting to each qualified beneficiary at least annually, on termination of the trust, and on change of the trustee.[8] But, this duty to beneficiaries is only triggered with the irrevocability of the trust. Thus, a qualified beneficiary cannot sue the trustee for pre-death accountings, i.e., for the period during which the settlor was alive and the trust was revocable, absent any claim of breach of fiduciary duty by the trustee.[9]
In Hilgendorf v. Estate of Coleman, Florida’s 4th District Court was asked to determine “whether an estate or beneficiary of a revocable trust created by the decedent may compel the trustee to render an accounting . . . made during the life of the decedent, where the trust did not require accountings, the settlor never requested accountings during her lifetime, and there is no showing of any breach of fiduciary duty on the part of the trustee.”[10] The Hilgendorf court expressly held that absent any claim by a beneficiary that a trustee breached his or her fiduciary duty in carrying out the terms of the trust, “there is no authority to impose that duty [to account to the estate or beneficiary] retroactively after the settlor is deceased and the trust becomes irrevocable . . . .”[11] As such, the beneficiary was not entitled to any pre-death accountings and did not have standing to sue the trustee.
It is important to note the beneficiary in Hilgendorf did not sue for violation of a specific trust provision – she sought only a pre-death accounting not required by the terms of the trust or any statute.[12] Had the beneficiary sued the trustee for breach of a duty owed to the settlor or beneficiary during the settlor’s lifetime and which subsequently affected the beneficiary’s vested interest, she may have had standing. Once a trust becomes irrevocable, a qualified beneficiary does not have standing to sue the trustee for pre-death accountings or for a breach occurring while the trust was revocable unless the trustee breached a specific duty owed to the settlor or beneficiary which subsequently affected the beneficiary’s vested interest.
Pursuant to Fla. Stat. § 736.0603(1) (2021), trustees owe duties to the settlor exclusively while the trust is revocable. In Florida, litigants often attempt to argue that § 736.0603 does not apply when the settlor becomes incapacitated, because the trust is technically no longer revocable once the settlor lacks capacity to revoke it. There are isolated instances of Florida courts “dancing” around the incapacity issue decades ago, but there is no clear case in Florida holding that § 736.0603(1) is inapplicable when a trust settlor becomes incapacitated. Suggesting a trust becomes irrevocable upon the settlor’s incapacity is irreconcilable with established law in Florida recognizing the ability of testators to have lucid intervals amidst long-term incapacity.[13]
Given the lack of Florida case law on the issue, an analysis of the Uniform Trust Code (“UTC”) provides some insight into legislative intent, as the Florida Trust Code is modeled in part after the UTC. Specifically, Fla. Stat. § 736.0603 (2021) is modeled after UTC § 603. Pursuant to UTC § 603(b), “[t]o the extent a trust is revocable [and the settlor has the capacity to revoke the trust], the rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.” Drafters added the brackets around the language referencing settlors’ capacity after the 2004 amendment to UTC § 603. In comments, the drafters stated this portion was now optional for two reasons: First, in any given case, it may be difficult to determine “whether the settlor has become incapacitated and [if] the settlor’s control of the beneficiary’s rights have ceased.” Second, the drafters were concerned UTC § 603 allowed for unequal treatment of revocable trusts and wills, because under § 603, a remainder beneficiary has a right to know about the trust upon the settlor’s incapacity whereas in the case of a will, devisees have no right to know of dispositions made for their benefit until the testator’s death. As a result, the drafters concluded uniformity among the states on this issue was not essential – leaving each state free to adopt their own definition of incapacity or to omit the language altogether. The comment to UTC § 603 states if a settlor loses capacity, subsection (b) no longer applies and thus, the beneficiaries are not subject to the settlor’s control and are entitled to request information concerning the trust. Therefore, the UTC provides upon a settlor’s incapacity, the trustee’s duties extend past the settlor to the beneficiaries. However, the UTC language and comments themselves leave discretion to adopting states whether to include the bracketed language of UTC § 603.
Florida specifically omitted the bracketed language referencing a settlor’s incapacity, suggesting the capacity issue is irrelevant in determining to whom the trustee owes a duty while the settlor is alive. Other states that adopted some form of the UTC took different approaches when enacting § 603. For example, Ohio’s Revised Code Section 5806.03 (2008), while based on UTC § 603, was modified to read as follows: “[d]uring the lifetime of the settlor of a revocable trust, whether or not the settlor has capacity to revoke the trust, the rights of the beneficiaries are subject to the control of the settlor, and the duties of the trustee . . . are owed exclusively to the settlor.”[14] Ohio’s specific mention of the settlor’s capacity in the statute removes any doubt as to whether trustees of revocable trusts owe duties exclusively to a settlor, even when that settlor is incapacitated.
The Nebraska Uniform Trust Code is likewise modeled after § 603 of the UTC, and, like the Florida Trust Code, does not include any language referencing a settlor’s incapacity. The Nebraska legislature removed the bracketed language to confirm the duties of a trustee of a revocable trust are owed exclusively to the settlor regardless of incapacity.[15] Section 30-3855(b) of the Nebraska Uniform Trust Code now provides “[w]hile a trust is revocable, rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.” Nebraska courts construe this statute to mean the capacity of a settlor is irrelevant to determining to whom a trustee’s owes a duty.[16]
In Manon v. Orr, the Nebraska Supreme Court held a settlor’s alleged incapacity did not affect the revocable status of his trust.[17] The court read the words of the statute with their ordinary meaning and found nothing in the plain language of § 30-3855(b)[18] to suggest the revocable status of a trust is affected by a settlor’s alleged incapacity.[19] As a result, the court found the Manon plaintiffs lacked standing to bring an action challenging the settlor’s sale of trust property because, at the time, they were contingent beneficiaries and only had a mere expectancy in the trust property.[20] The alleged incapacity of the settlor was immaterial because it did not change the fact that pursuant to § 30-3855(b), while the trust was revocable, the rights of the beneficiaries and duties of the trustee were owed exclusively to the settlor.
Despite arguable ambiguity in its statute, the case law is clear in Nebraska that while the settlor is alive and the trust is revocable, the trustee’s duties are owed exclusively to the settlor regardless of whether the settlor is incapacitated.
In stark contrast to Florida, Ohio, and Nebraska’s application of UTC § 603, Illinois chose to include the bracketed language. 760 ILCS 3/603(b) (2020) provides: “To the extent a trust is revocable by a settlor, and the settlor personally has capacity to revoke the trust, rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.”[21] The logical rationale behind Florida’s omission of the capacity restriction is our legislators did not intend for a settlor’s capacity to influence whether a trust is considered revocable or irrevocable, and further, if beneficiaries have standing to enforce a trustee’s duties.
States take differing approaches to determine to whom a trustee owes a duty when the settlor of a “revocable” trust loses capacity to revoke. Nebraska omitted the UTC’s language referencing the settlor’s incapacity, whereas Ohio law provides specifically a trustee’s duties are owed exclusively to the settlor, irrespective of settlor’s capacity. Although these approaches differ in form, both lead to the conclusion that regardless of a settlor’s capacity to revoke, while a settlor is alive and the trust is revocable, the trustee does not owe any duties to the beneficiaries. Had Florida’s lawmakers intended courts make a capacity determination prior to finding a trustee of a revocable trust owes a duty to beneficiaries, they could have codified this intent as Illinois did. Given Florida’s purposeful omission of the UTC’s bracketed language and viewed in the context of other states’ interpretation of same, it follows that Florida law requires even upon a settlor’s incapacity to revoke a trust, a trustee owes a duty to the settlor exclusively.
[1] Fla. Stat. § 736.0602(1) (2021).
[2] Fla. Stat. § 736.0603(1) (2021) (emphasis added); Brundage v. Bank of America, 996 So. 2d 877, 882 (Fla. 4th DCA 2008); Ullman v. Garcia, 645 So. 2d 168, 169 (Fla. 3d DCA 1994).
[3] See also Smith v. Bank of Clearwater, 479 So. 2d 755, 757 (Fla. 2d DCA 1985) (stating a contingent remainderman was not in a position to exercise any of the rights of a trust beneficiary while the settlor was alive, and the trust was revocable).
[4] See Brundage, 996 So. 2d at 882; Ullman, 645 So. 2d at 169.
[5] See Fla. Stat. § 736.0813(1)(d) (2021) (noting that a trustee’s duties under this section only extend to an irrevocable trust); Hilgendorf v. Estate of Coleman, 201 So. 3d 1262, 1265 (Fla. 4th DCA 2016) (“[A] statutory duty to account to the qualified beneficiaries does not arise until a trust becomes irrevocable.”).
[6] Brundage, 996 So. 2d at 882. See also Siegel v. Novak, 920 So. 2d 89, 96 (Fla. 4th DCA 2006) (applying New York law and holding beneficiaries of a trust had standing to sue the trustee, once the trust became irrevocable, for breach of fiduciary duties that occurred while the trust was revocable).
[7] Fla. Stat. § 736.0813 (2021).
[8] Id. at Fla. Stat. § 736.0813(1)(d) (2021).
[9] See Hilgendorf v. Estate of Coleman, 201 So. 3d 1262, 1265 (Fla. 4th DCA 2016) (“[A] statutory duty to account to the qualified beneficiaries does not arise until a trust becomes irrevocable.”).
[10] Id. at 1263.
[11] Id. at 1265-66.
[12] Id. at 1264.
[13] See Raimi v. Furlong, 702 So. 2d 1273, 1286 (Fla. 3d DCA 1997).
[14] See also Puhl v. U.S. Bank, N.A., 34 N.E.3d 530, 535 (Ohio Ct. App. 2015) (stating during the lifetime of the settlor of a revocable trust, the duties of the trustee are owed exclusively to the settlor).
[15] Manon v. Orr, 856 N.W.2d 106, 110 (Neb. 2014).
[16] Id. See also In re Trust of Margie E. Cook, 28 Neb. App. 624, (Neb. Ct. App. 2020) (holding contingent beneficiaries lacked standing to challenge sale of property while trust was revocable, and the result would not change regardless of whether settlor had the requisite capacity to execute the trust).
[17] Manon, 856 N.W.2d at 110.
[18] Note: at the time this opinion was written in 2014, the applicable provision was § 30-3855(a), which has since been changed to § 30-3855(b).
[19] Id. at 109-110.
[20] Id. at 111.
[21] 760 Ill. Comp. Stat. Ann. 3/603 (2020), emphasis added.
© 2023 This article was originally published in the Winter 2023 issue of ActionLine, a Florida Bar Real Property, Probate & Trust Law Section publication.
Litigation Shareholder Theo Kypreos is an experienced trial and appellate attorney who focuses his practice in the areas of probate and trust litigation, trust and estate administration, guardianship law, and fiduciary litigation.
He represents corporate and individual fiduciaries, beneficiaries, and heirs in all probate, trust, and guardianship settings including will and trust contests, breach of trust actions, trustee removal and accounting actions, will and trust reformation and modification proceedings, contested guardianships, elective share proceedings, Florida homestead disputes, exploitation and tortious interference litigation, and matters relating to probate creditors’ claims.
Theo served as the 2014-2015 President of the Palm Beach County Bar Association, and he is a frequent lecturer for both the PBCBA and The Florida Bar on topics related to probate, trust and guardianship law. He is consistently recognized by peer and industry publications, and was named the 2023 "Lawyer of the Year" for Litigation - Trusts & Estates in the West Palm Beach metro area by Best Lawyers in America.
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