In 2012, a Florida Bar Journal article called “Bacardi on the Rocks” talked about how former spouses of people who have trusts in Florida could still access the trust’s assets, even if the trust was meant to protect the beneficiary’s inheritance. This means that even if a trust is set up to protect a child’s inheritance in case of a divorce, the former spouse could still get to those assets. Attorneys may have been giving their clients incorrect advice about the effectiveness of Florida discretionary trusts in protecting a child’s inheritance in the event of a divorce. A group of lawyers in Florida are working to clarify some laws about trusts after a court case raised questions. They are trying to make it clear that certain types of trusts, called discretionary trusts, are protected from certain types of creditors. However, the courts have not all agreed with this interpretation. Now, they are trying to figure out if a spouse with a court judgment for support can access money from a discretionary trust. The Florida Trust Code and a court decision called Bacardi have caused confusion about whether a former spouse can take money from a trust set up for someone else. The law is unclear and risky in Florida, but other states like Nevada and South Dakota have clearer and more protective laws for trust beneficiaries. After some changes, it’s still not clear if the Bacardi decision has been overridden. A recent court case called Berlinger may provide some guidance on this issue. The court ruled that the law from a previous case called Bacardi still applies in Florida. In this case, a man tried to avoid paying alimony to his ex-wife by using money from a discretionary trust. The court said he couldn’t do that. In 2012, Casselberry filed a motion to make Berlinger pay his alimony. The court agreed, and ordered SunTrust to take money from Berlinger’s trust funds to pay Casselberry. But the new trustee argued that the money was for things like bills and household expenses, and couldn’t be taken by Casselberry. In the end, the court decided that Casselberry could keep taking money from Berlinger’s trust funds to pay the alimony. In the Berlinger case, the court said that a former spouse can still get money from a trust, even if it’s supposed to be only for the beneficiary. This is different from what the law says about spendthrift trusts. Some people think the law should change to protect the trust from former spouses, but others think it should stay the same. If you want to make sure your kids are protected, you might want to set up a trust in Alaska, Delaware, Nevada, or South Dakota. If you already talked to a lawyer about this, you should think about updating your plans based on this new information. The court ruled that a beneficiary of a trust in Florida could not use the trust assets to live a luxurious lifestyle while ignoring support payments to an ex-spouse. This means that it might be risky to move the trust to a different state to protect assets. It’s best for trust creators to decide if they want to create and manage the trust in a different state. Another court might rule differently in the future, but for now, it’s safer to keep the trust in Florida. Discretionary distributions from a trust mean that the trustee can choose whether or not to give money to a beneficiary. Even if a trust has a spendthrift provision, creditors cannot force the trustee to give money to the beneficiary or take the money for themselves. If a trustee uses their discretion to give money to themselves, creditors can only take the money if the beneficiary would also be able to access it. Some states, like Alaska and Delaware, have made changes to their laws about discretionary trusts. In a recent Florida court case, the court decided that a trustee’s decision to give money to a beneficiary was protected from the beneficiary’s creditor. This article was written with help from Judith S. Nelson and Michael A. Sneeringer. It’s based on a previously published article about a case called “Berlinger v. Casselberry.” The article will also be published in Trusts and Estates magazine. It was written on behalf of the Real Property, Probate and Trust Section.
Source: https://www.floridabar.org/the-florida-bar-journal/bacardi-the-hangover/
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