In many trusts, the trustee has the power to decide how much money or property to give to the beneficiaries. This is to make sure the needs of the beneficiaries are met even if they weren’t planned for. But it can be hard to know exactly how much power the trustee has in each situation. So, these rules can be confusing and hard to understand. This article discusses the limits of a trustee’s authority when it comes to making decisions about distributing trust assets to beneficiaries. It looks at Florida law and compares it to the Restatement (Third) of Trusts. It also explains the difference between a trust with discretionary powers and a pure discretionary trust. Before we get into the details, it’s important to understand the different levels of control a trustee might have. There are two types: “simple” and “absolute” discretion. Simple means the trustee has a small amount of control, while absolute means they have a lot. But in Florida, even with absolute discretion, a trustee still has to act in good faith. This means they can’t just do whatever they want. So, just because a trustee has absolute discretion, it doesn’t mean they have total freedom to decide what to do, when to do it, and how to do it. In Florida, when a trustee has absolute discretion in a trust, they must still act reasonably and cannot go against the main goals and intentions of the person who set up the trust. This means that even though they have a lot of power, they still have to use it in a way that follows the original purpose of the trust. If they don’t, the court can step in and make them change their actions. This is different from the rules in some other places, like the Restatement (Second), which put more emphasis on the trustee’s good faith. The trustee can give my son money from the trust when they think he needs it for support. Any extra money that isn’t given to my son will be added to the trust fund. The trustee’s responsibility is to consider the needs of the beneficiary and make sure they have enough money for support. The trustee can decide how much to give the beneficiary, but it has to be within a reasonable range. If the trustee gives too little or too much, a court can review their decision. The trustee has to act in good faith and consider the beneficiary’s circumstances when making decisions. The trustee’s only discretion is in deciding the amount to be distributed, within a reasonable range. A court should not interfere with the trustee’s decision if it falls within this range. If the trustee has absolute discretion, it means they can do whatever they decide is best for the son without any other rules. This could result in a different outcome compared to the previous example where the trustee had to follow specific guidelines. In Florida, a trustee with absolute discretion must still act reasonably and in good faith, especially when it comes to meeting a beneficiary’s support needs. So, it doesn’t give the trustee a lot of extra power. Some people say that courts might be more likely to think a trustee is being unreasonable if they only have simple discretion, rather than absolute discretion. Absolute discretion might allow a trustee to be a bit more generous with distributions, as long as it doesn’t go against the trust’s purpose. But the trustee still has to consider the interests of the other beneficiaries and might need their approval for very generous distributions. This article talks about trusts that give the trustee the authority to decide how much money or support to give to the beneficiary, but not whether to give it at all. These are often called “discretionary trusts,” but the author argues that this is not the right term. A true discretionary trust is one where the trustee can decide whether to give any money at all to the beneficiary, without any guidelines or standards to follow. In Florida, there is only one case that discusses this type of trust, and it agrees with this definition. In Florida, there are still some unanswered questions about what rights a beneficiary has in a discretionary trust. One question is whether a beneficiary can force the trustee to give them money from the trust. It seems that under Florida law, a beneficiary only has a hope and not a real right to demand money from the trust. The trustee also doesn’t have to give the beneficiary money for basic needs, as long as they consider the beneficiary’s request and don’t act in a bad way. So, it’s up to the trustee to decide if they want to give money to the beneficiary, as long as they are fair and honest about it. In Florida, a trustor can’t give a trustee complete control without any accountability. However, a trustee of a true discretionary trust has a lot of authority over distributing the trust’s assets. If the trustee wants to give everything to the current beneficiary, they may need a court order or the consent of all other beneficiaries. In order to properly plan a trust, it may be better to include a power of appointment or give the trustee personal powers over distributions. This means that the trustee can use their judgment to decide when and how to give out the money in the trust, and no one else can question their decisions. This gives the trustee a lot of control and discretion over the trust. In Florida, there is not much difference between a trustee having simple discretion and absolute discretion when it comes to a trust set up for a specific purpose. If you want to give your trustee full authority over distributions, you should consider creating a pure discretionary trust. However, even with a pure discretionary trust, the trustee still has a duty to the remaindermen, which could limit their actions.
Source: https://www.floridabar.org/the-florida-bar-journal/a-trustees-duties-and-responsibilities-under-discretionary-invasion-provisions/
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