Full Disclosure: The Unexpected Ambits and Annals of the Adequate Disclosure Doctrine

Florida law favors transparency in the administration of trusts, which means trustees have to regularly update beneficiaries on the trust. Trustees are protected from being sued for breaking the rules as long as they tell the beneficiaries what’s going on with the trust, but it’s not always clear what counts as “adequate disclosure.” Recently, a Florida court made a decision about what counts as adequate disclosure, and it might change the way courts all over the state handle similar cases. Beneficiaries can’t sue a trustee for certain things after a certain amount of time has passed. The time limits depend on whether the trustee told the beneficiary about what they did, and there are different time limits for different situations. Generally, beneficiaries have 4 years to sue if the trustee told them about everything, 6 months if the trustee told them and gave a special notice, or 4 years if the trustee didn’t tell them everything. There’s also a rule that says beneficiaries can’t sue 10 or 20 years after the trust ends or the trustee leaves, and they definitely can’t sue 40 years after that. They might be able to sue later if they can prove the trustee hid important information. The limitations statute for trusts sets out different time limits for beneficiaries to bring claims against a trustee. The trustee must give the beneficiary a report that tells them about any potential claims and the time limit for bringing a claim. The trustee has to provide this report within a year. After that, the beneficiary has a limited amount of time to bring a claim, which could be as short as five years. The trustee has to make sure the beneficiary gets the report and notice of the time limit. If the trustee does this, it helps protect them from claims later on. The Turkish v. Brody case involved a family dispute over a trust set up by Ada Turkish Trask. After Ada passed away, her children, Arthur and Carole, disagreed about how the trust funds were being used. Carole believed that Arthur was unfairly favored in the distribution of the trust money. When she questioned this, a settlement was reached, but Carole later claimed that important information about the trust had not been properly disclosed to her. The court ultimately ruled that Arthur did not fully disclose important information to Carole, and that the settlement was therefore invalid. The court also found that the trust documents did not adequately communicate important information to Carole, which would have prompted her to ask further questions. The court said that just because the trustees told the beneficiaries about a transaction, that doesn’t mean they disclosed everything they should have. The court said the trustees should have told the beneficiaries that the note they used was basically worthless, because that would have affected the beneficiaries’ decision. The court also compared the disclosure requirement to a different legal standard, but it’s not clear why they did that. The court’s decision seems to be stricter than what the law actually requires for trustees to disclose. The court’s analysis of the inquiry prong was too short, and it’s a problem for lawyers looking for guidance. In this case, the beneficiary had her own lawyer and was actively involved in the trust issues. The trustee didn’t say anything about the mom’s money problems, but the beneficiary should have noticed that the mom didn’t have enough money to pay the note. So, can a trustee ever rely on the inquiry prong?

This case might be unusual, but it could also be a sign of a new trend. It raises a lot of issues for trustees, like being responsible for what happens with the trust, how to handle the trust, and the rights of the people who benefit from the trust. It seems like this case makes it easier for beneficiaries to not have to ask about what’s happening with the trust. It might change how trusts are managed in Florida. Trustees have a duty to keep beneficiaries informed about the trust’s significant transactions and assets. They don’t have to give exhaustive details, but they need to provide a reasonably understandable report. However, a recent court case has made it clear that trustees need to consider exactly how much to disclose in their reports. For example, if a trust has a lot of one stock and its value has dropped, the trustee might need to disclose more information about why the stock dropped in value in order to fulfill their duty to inform the beneficiaries. If a trustee charges excessive fees and doesn’t properly disclose how they were calculated, the beneficiary could sue the trustee for breach of trust. Also, if the trustee doesn’t fully disclose the purpose of distributions from the trust, the remainder beneficiaries could also bring a claim against the trustee. In short, the Turkish decision will make it harder for trustees to win cases quickly and easily. This could lead to more disputes and lawsuits. Trustees may have to give more information to beneficiaries, which could cost more money. Beneficiaries might have a harder time understanding all the information they receive. To fix this, courts may start expecting beneficiaries to take more responsibility for understanding their trust and asking questions about it. Some other states already do this. In a legal dispute about a trust, a court found that a beneficiary didn’t need to know about important details of the trust, even though they actually knew about it. The court also said the beneficiary didn’t need to check public records to confirm information. This decision goes against the rules of the Uniform Trust Code and has been rejected by other states. It seems like the court is saying it’s okay for beneficiaries to ignore important information. In Tennessee, the law says that trustees have to give beneficiaries enough information in a report so they know if there might be a problem with how the trust is being handled. If they do, the time limit for beneficiaries to make a claim is only one year. It’s similar to the law in Florida, but in Tennessee, the report doesn’t have to specifically say that the time limit is shortened. The beneficiaries sued the trustee, claiming the trustee mismanaged trust real estate. The trustee argued that the lawsuit was filed too late, but the court disagreed. The court found that the trustee’s communications with the beneficiaries did not adequately disclose the potential claims, so the beneficiaries’ lawsuit was not barred by the one-year statute of limitations. This decision led to a change in Tennessee law, which now states that a lawsuit for breach of trust cannot be filed more than one year after the beneficiary was sent information about the potential claim or gained actual knowledge of the potential claim. The law says that if a beneficiary of a trust knows about a potential problem with how the trust is being managed, they have to act on that knowledge and can’t just ignore it. This means they have a limited amount of time to do something about it. The trustee still has a duty to keep the beneficiaries informed, but the beneficiaries also have to take responsibility for acting on what they know. In a recent case in Ohio, the court ruled that the beneficiaries of a trust could not sue the trust company for negligence because they had signed a release agreeing not to sue. The court said the beneficiaries should have known about the problems with the trust because the business it owned had lost a lot of money and the beneficiaries had received statements showing this. This ruling may affect how long people have to sue for problems with trusts in Florida. It might make it harder for people to use the law to protect their rights. The inquiry prong in trust law may not be very helpful to trustees if courts follow the standard set in the Turkish case. The case involved a beneficiary who knew all the details about a loan given to her mother, including that it was unsecured and that her mother needed it to pay taxes. The court didn’t provide much guidance on what would make a reasonable beneficiary inquire further about the loan. The law sets a high bar for trustees to prove that a beneficiary should have known about a potential claim. Two attorneys, Patrick J. Duffey and Cady L. Huss, work with families and charities to manage their money and assets. They also handle legal issues related to wills, trusts, and disputes over money and property. They help their clients with tax filings and other legal paperwork. We, the Real Property, Probate and Trust Law Section, want to help people by following important principles and improving the legal system. This is from the rules that govern lawyers in Florida.

Source: https://www.floridabar.org/the-florida-bar-journal/full-disclosure-the-unexpected-ambits-and-annals-of-the-adequate-disclosure-doctrine/