FL Bar magazine features Richard DeNapoli
ActionLine - A Publication of The Florida Bar Real Property, Probate & Trust Law Section
Navigating Multiple Fiduciaries: Florida Uniform Directed Trust Act and Co-Trustee Considerations
By Stacy B. Rubel, Esq., The Virgil Law Firm, Coral Gables, Florida and
Richard DeNapoli, Esq. Coral Gables Trust Company, Coral Gables, Florida.
It is common for settlors to name more than one trustee in a trust instrument, such as multiple children of the settlor, individual and corporate trustees, or a mix of family and non-family members. Reasons for naming multiple trustees can range from not hurting anyone's feelings (e.g., naming all children together) to ensuring compliance with the settlor's intent (e.g., provide neutral corporate trustee) to providing checks and balances (e.g., prevent misuse by a single trustee). However, naming multiple trustees can create a number of issues as well, especially when decisions are deadlocked, the trustees do not get along, or they refuse to communicate with each other. Sometimes in lieu of naming multiple trustees with the same authority, a settlor will provide certain trustees or non-trustee(s) the authority in the trust to make certain decisions relating to the trust administration. Historically, there has been very little statutory authority regarding trusts that grant a person other than a trustee (e.g., a trust director) a power over some aspect of the trust administration.
This changed when on June 29,2021, Governor DeSantis signed into law Senate Bill 1070 (the "Legislation") which, among other things, created the Florida Uniform Directed Trust Act (the "Act"). The Act, which took effect on July 1,2021, highlights the requirements and regulations for trust directors, including clarifying the fiduciary nature of the role, the application to co-trustees, and the duties and liabilities of those making decisions and complying with decisions. It creates a new section of the Florida Trust Code, Part XIV, titled Directed Trusts. The legislation also includes revisions to other parts of the Trust Code, as needed to coordinate with the new Part XIV. The Act applies only to decisions or actions occurring on or after July 1 2021, even if the trust was created before that date.1 For trusts where the principal place of administration is changed to Florida on or after July 1, 2021, the Act applies only to decisions or actions taken after the move.2 This article features some of the most significant revisions to the Trust Code pursuant to the legislation and the Act.
Many of the provisions in the Act can be overridden by the trust instrument itself,3 so it is important to review the terms of any different trust. There are also certain powers that are not considered powers of direction for purposes of the Act unless the terms of the trust expressly provide otherwise.4 Examples of powers that are not powers of direction are a power of appointment and a power to appoint or remove a trustee.5
Historically, many trusts used the term "trust protector" when referring to a third person's ability to make decisions on behalf of a trust. The legislation adds multiple definitions including trust director, which is defined as "a person who has a power of direction under the trust terms to the extent exercisable while that person is not a trustee."6 A "directed trustee" is a trustee subject to the direction of a trust director and a "directed trust" is any trust which includes a power of direction.7 The Legislation also adds definitions for "power of direction" and "terms of a trust."8
A trust director has the authority granted under the terms of the trust. As well any further power "appropriate to the exercise or nonexercised of a power" unless the trust indicates otherwise.9 This includes the ability of the trust director to hire an attorney or others to assist in the performance of their duties, and to direct payment of fees and costs from the assets of the trusts.10
If there are multiple trust directors with the same powers, they must act by a majority.11
Duties and Liabilities
A trust director generally has the same fiduciary duty and liability as a trustee or co-trustee in a position or under similar circumstances.12 The trust can modify duties and liabilities to the same extent that a trust can modify duties or liabilities to the same extent that a trust can modify the duties or liabilities of a trustee, and the trust can also impose an additional duty or liability.13
What liability, if any, do employees of a trustee have? In Beaubien v. Cambridge Consolidated, LTD.,14 the court held that an individual acting on behalf of a corporate trustee may be personally liable for their actions, even if acting as an agent for the corporation. As a result, and after review of the law by the Real Property, Probate and Trust Law Section of The Florida Bar, the Legislation also specifies that any claim barred against a trustee or trust director due to a statue of limitation is also barred against the directors, officers, and employees acting for the trustee or trust director.15
A directed trustee must take reasonable action to comply with a direction, and is not liable for such reasonable action.16 However, a directed trustee may not comply to the extent that by complying, the trustee would be engaging in willful misconduct.17 Note that willful misconduct is not a defined term in the Florida Trust Code, through it was already the standard applicable to an excluded trustee's liability under the Trust Code prior to the enactment of the Act.18 Additionally, before complying with a direction, a directed trustee must determine whether the exercise is within the scope of the power of direction.19 However, an exercise is not outside the scope of a power merely because it constitutes or may constitute a breach of trust.20 Also, consistent with trust director statues, a settlor may impose additional duties and liabilities in the trust document.
When a trust names multiple trustees, the terms of the trust dictate the role of each trustee. When the trust is silent on whether unanimity is required for decisions, co-trustees may act by majority decision.21 Additionally, if there is a trustee vacancy, the remaining trustees or majority of the remaining co-trustees may act for the trust.22 A co-trustee may not delegate to another trustee the performance of a function the settlor reasonably expected the co-trustees to perform jointly.23
However, the settlor does not reasonably expect joint performance if the trust provides one or more co-trustees, to the exclusion of other trustees, the power to direct or prevent specified actions of the trustees.24 In this scenario, the excluded trustees generally have the same duty and liability as a directed trustee.25 Similar to Florida Statues prior to the Act, the trustee(s) with the power as if the excluded trustee(s) were not in office.26 The trustee(s) with power also have the exclusive obligation to account to and defend any action brought by the beneficiaries relating to the exercise.27
What about the liability of a co-trustee when decisions must be made together? In this scenario, each co-trustee must exercise reasonable care to prevent a co-trustee from committing a breach of trust or compel a co-trustee to redress a breach of trust.28 Also, if a dissenting trustee joins at the direction of the majority, they will not be liable, as long as they notify their co-trustees of their dissent at or before the time of the action.29
What if a trustee or a beneficiary is uncertain whether a trust director has accepted, or will accept the role? A written demand may be made on the designated trust director by a trustee, beneficiary, or even the settlor, to accept or confirm prior acceptance of the trust directorship in writing.30 Within 60 days after receipt of the demand, the designated trust director must either accept, indicate prior acceptance, or decline, in writing, and deliver the writing to all trustees, qualified beneficiaries, and the settlor, if living.31
What if the trust director accepts and exercises a power but the trustee is uncertain about its duty to comply? A directed trustee that has reasonable doubt about its duty can apply to the court for instructions, with attorney fees and costs to be paid from assets of the trust.32
The legislation provides clarity to both those drafting and administering directed trusts. The determination of fiduciary duties is relevant to any litigation relating to a trust administration, particularly breach of trust cases. A key question is whether and when a decision-maker, whether a trustee or non-trustee, has a fiduciary duty to the beneficiaries.
The answer is clarified by the Act. Drafting attorneys should be mindful of this when advising clients and choosing those with decision-making authority. Litigation attorneys also need to understand which decisions impose duties, and therefore may result in litigation.
Stacy B. Rubel is a partner at The Virgil Law Firm focusing on probate, trust and guardianship litigation and administration. She currently serves on the Executive Council for the RPPTL Section, is the chair of the Guardianship, Power of Attorney & Advance Directives Committee and a Co-Chair of the Ad Hoc Guardianship Law Revision Committee. Ms. Rubel is also a graduate of the Florida Fellows Institute for the American College of Trust and Estate Counsel (ACTEC), is a Vice-Chair of the Florida Probate Rules Committee and is a Executive Board Member of the Professional Fiduciary Council of Florida.
Richard DeNapoli has more than 20 years of experience in law and trust services and is the Chief Trust Officer and Fiduciary Counsel for Coral Gables Trust Company. He is a longtime member of the Florida Bar's Real Property Probate and Trust Law Section and has been featured in many local and national publications for trust and estate planning topics. Richard is a graduate of the University of Miami School of Law (2008, LL.M., Estate Planning), Fordham Law School (2002, J.D.) and New York University (1999, B.A. Politics; B.A. Italian), and served as a Florida Real Estate Commissioner (2007-2013).
1 Fla. Stat. § 736.1403(1)(a) (2021).
2 Fla. Stat. § 736.1403(1)(b) (2021).
3 Fla. Stat. § 736.0105 (2021).
4 Fla. Stat. § 736.1405 (2021).
6 Fla. Stat. § 736.0103(25) (2021).
7 Fla. Stat. § 736.0103(6)-(7) (2021).
8 Fla. Stat. § 736.0103(16) (2021), Fla. Stat. Â§ 736.0103(24)(2021).
9 Fla. Stat. § 736.1406(2)-(3) (2021).
10 Real Property, Probate and Trust Law Section: Florida Uniform Directed Trust Act [White Paper].
11 Fla. Stat. § 736.1406(3)(b) (2021).
12 Fla. Stat. § 736.1408(1)(b) (2021).
13 Fla. Stat. § 736.1408(3) (2021).
14 652 So. 2d 936 (Fla. 5th DCA 1995).
15 Fla. Stat. § 736.1008(7) (2021).
16 Fla. Stat. § 736.1409(1) (2021).
17 Fla. Stat. § 736.1409(2) (2021).
18 Fla. Stat. § 736.0703(9) (2020). The RPPTL White Paper indicates that willful misconduct â€œshould require the directed trustee's own intent to harm the trust or its beneficiaries.
19 Fla. Stat. § 736.1409(3) (2021).
20 Fla. Stat. § 736.1408(3) (2021).
21 Fla. Stat. § 736.0703(1) (2021).
22 Fla. Stat. § 736.0703(2) (2021)
23 Fla. Stat. § 736.0703(5) (2021). There is an exception for investment functions pursuant to Fla. Stat. § 518.112 (2021).
24 Fla. Stat. § 736.1412 (2021).
25 Fla. Stat. § 736.1412(2) (2021).
26 Fla. Stat. § 736.1412(3) (2021).
28 Fla. Stat. § 736.0703(7) (2021).
30 Fla. Stat. § 736.1416(2) (2021).
32 Fla. Stat. § 736.1409(6) (2021).