Making Principal Invasions under Florida Law when an Interested Party is Serving as Trustee

Sometimes, a client may want to name a family member, like a spouse, to be in charge of a trust they’re setting up. In the past, there were tax concerns and worries about fairness when a family member was named as trustee. But now, there’s a law in Florida that helps address the tax issue. However, there’s still a concern about whether the trustee can be fair to all the beneficiaries of the trust. There are different types of distributions from trusts, and some can be tricky to decide on, like using trust money for nonessential things. The third type of trust distributions are when the trust doesn’t allow for certain kinds of money to be given out, for example for luxury items when the trust is only supposed to be used for the beneficiary’s basic needs. Another example is when the trust only allows money to be used for the spouse’s health and support, but not for making gifts to their family.

The type of remainder provision in a trust is also important. “Option A” means that when the spouse dies, the money in the trust goes to the children. “Option B” means that the money goes to the children and their descendants, and the class of people who can get the money can keep changing until the spouse dies. There are two laws that apply when someone is serving as a trustee. The first law says that a trustee can’t use certain powers if they are also a beneficiary of the trust. This is meant to protect lawyers from getting sued for making trusts that give too much power to the trustee. The second law says that if a trustee’s duty conflicts with their personal interest, they need permission from a court to use their power. If a trustee has the power to give themselves money from the trust, it will affect how much is left for other beneficiaries, so they need court approval to do that. This law applies to different types of trusts and situations where there may be a conflict of interest. It also applies to different standards for how much money can be taken out of the trust. If the person who benefits from the trust is a minor or not born yet, someone will be appointed to make sure their interests are protected. Can you avoid the court process of getting permission for distributions from a trust by using consents from the people who would inherit the trust? In most cases, consents from beneficiaries can make the distribution binding, even if it’s not allowed by the trust agreement. However, if there are unborn or minor beneficiaries who could potentially inherit the trust, getting their consent can be a problem because their guardian is not allowed to make decisions that could harm their property. So, in some cases, it may not be possible to get around the court process for distributions. Basically, when it comes to giving money from a trust to someone, it’s important to follow the rules to make sure it’s done right. There’s a new law that says a guardian can make decisions for kids who will inherit from the trust, but it could cause problems if the guardian makes a bad decision. It’s better to plan ahead and think about how to avoid these problems. In Florida, an attorney could be held responsible for professional negligence if their actions harm someone who was meant to benefit from their client’s decisions. This includes minor or unborn individuals who are intended beneficiaries. The attorney should be cautious when advising a client on making distributions to themselves from a trust, as it could potentially harm the interests of these beneficiaries. It’s important for the attorney to ensure that any distributions comply with the law to avoid legal trouble. Steps can be taken to limit a trustee’s liability for making unauthorized distributions by having the recipients of the gifts agree to contribute to any claims arising from the distribution. When a spouse is appointed as trustee, they can be given the power to use the trust money for their health, support, education, or maintenance, which is allowed by the law. In simple terms, the issue is whether a surviving spouse who is also a trustee has too much power to distribute assets from the trust. The concern is that the language giving the spouse “absolute discretion” and the ability to distribute what she deems “desirable” may make it too easy for her to use the trust assets as if they were her own. There are specific rules about this in the law, and one of the rules says that a trustee’s power should be limited by certain standards, like the person’s needs for health, education, or support. But these standards need to be measurable and specific, not vague or open-ended. Ultimately, the question is whether the spouse’s power to distribute assets goes beyond what the law allows, making it a general power of appointment instead of a trustee’s power. In order for a trustee to have the power to distribute money from a trust, the amount must be based on the trustee’s needs and must be limited by a specific standard. This means the trustee can only distribute money that is necessary for their support, not just what they want. If the trustee has absolute discretion, they might have more freedom in deciding how much to distribute, and this could have tax consequences. The language used in the trust document is important, as it can affect how much the trustee can distribute. If the language is not clear, the trustee might have too much freedom in deciding how much to distribute. If a surviving spouse is given too much control over a trust, it could lead to taxes and a lot of legal trouble. To avoid this, it’s better to give the trustee some specific guidelines for when and how much money the surviving spouse can get from the trust. It’s also a good idea to combine this with a “five and five power” to limit the spouse’s control. If someone close to you is named as trustee of your trust, it’s important to think about these issues to avoid problems later on. The text includes references to various legal codes, cases, and articles related to trust law and estate planning. It also mentions two attorneys, one practicing in Hallandale and the other in Margate, who specialize in estate planning and tax matters. The column is submitted on behalf of the Tax Section of The Florida Bar. The mission of The Florida Bar is to promote duty and service to the public, improve the administration of justice, and advance the science of jurisprudence.

Source: https://www.floridabar.org/the-florida-bar-journal/making-principal-invasions-under-florida-law-when-an-interested-party-is-serving-as-trustee/