What are the successor trustee’s responsibilities to beneficiaries?

By Attorney Truman Scarborough

 

In last month’s article we looked at how a trust can avoid the cost and delays of probate. When

someone dies, assets held just in the decedent’s name without beneficiaries are frozen. A

Will by itself cannot transfer property to the heirs. The person named in the Will to administer

the estate needs “Letters of Administration” from the Probate Court to access accounts.

Before distribution can be made to beneficiaries the Probate Court must be shown that all the

requirements of the Florida Statutes and Probate Rules have been met. By creating a trust and

transferring assets to the trust, probate can be avoided. When the creator of the trust dies, the

successor trustee has immediate control of the assets without going through the probate court.

In this article I would like to review some of the legal responsibilities the successor trustee

has to the beneficiaries of the trust. When someone must rely on the honesty and diligence of

someone else to protect his/her interest it creates a fiduciary relationship. Fiduciaries are held

to the very highest legal standards. Under the law, there are different levels of proof to show

misconduct. At one end of the spectrum is the proof needed to show “beyond a reasonable

doubt” that someone is guilty of a crime. At the other is the responsibility of a fiduciary to

affirmatively show he is protecting the beneficiaries’ interests.

 

If a fiduciary intentionally misused the property for personal gain, it could result in criminal

penalties. But even an unintended breach of fiduciary responsibilities may result in personal

liability for damages. A fiduciary can innocently breach his duty by not understanding the full

extent of these responsibilities.

 

A fiduciary duty exists in many relationships, including powers of attorney, probate estates, and

trusts. While the underlying fiduciary principles are similar, the dynamics can vary. In this article,

our discussion will be limited to several basic fiduciary responsibilities the successor trustee has

after the creator of the trust has died.

 

The Florida Trust Code has rules to prevent a successor trustee from neglecting his/her

responsibilities to the beneficiaries which include following the terms of the trust and protecting

trust assets. Without information beneficiaries have no way of knowing if the trustee is properly

administering the trust. Therefore, the Trust Code provides that beneficiaries have a right to

information about the trust administration. The Trustee must keep accurate records and provide

the beneficiaries with annual and final accountings. Merely failing to provide complete and

accurate information is a violation of the Trust Code.

 

The Florida Trust Code states that “a trustee shall administer the trust solely in the interests

of the beneficiaries”. The trustee must avoid conflicts of interest. He must not comingle trust

funds with his own funds. Nor should a trustee acquire assets from the trust (even at full value)

without court approval or consent of all the beneficiaries.

 

The Trustee cannot favor one beneficiary over other beneficiaries. This can be a particular

problem when the Trustee is also one of the beneficiaries. If the Trustee places his interests as

a beneficiary above the other beneficiaries, he breaches this fiduciary responsibility.

In next month’s article, we will look at what recourse beneficiaries have if the successor trustee

fails to properly administer the trust.

 

For further information on estate planning you may be interested in Attorney Truman

Scarborough’s Booklet on Estate Planning in Florida. It is available without charge

or obligation by calling (321) 267 – 4770. His office is located at 239 Harrison Street,

Titusville, Florida.

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