Trusts Litigation attorney

Trusts: When do they terminate and assets distributed to beneficiaries?

Trusts last will and testament In Florida, a common estate planning scenario is to create revocable trusts, sometimes referred to as a “Living Trust” and place all or most of the assets into the trust. The Settlor, the one setting up the trust, is typically named the initial trustee and deals with the trust property in the same fashion as if the assets were still owned by and in the name of the Settlor, with the absolute right to amend or revoke the trust and without having to account for any beneficiary.

Upon the death of the Settlor, everything changes. As the Settlor can no longer amend the trust, it becomes “irrevocable” at which time the beneficiaries named in the trust become established or vested. Many of these “Living Trusts” are set up to provide that upon the death of the Settlor the trust terminates and distribution is made of the trust assets to the named beneficiaries, similar to a will, but without court supervision.

Trusts and TrusteeBefore anything can be done with the assets in a Living Trust which terminates after the death of the Settlor, a successor trustee must assume the trusteeship of the trust. Typically, the Settlor has identified and nominated someone – someone highly trusted – to be the successor trustee to take over the trust upon the Settlor’s death. Many times, a Trust Company is named as the successor trustee. The nominated successor trustee should immediately engage an attorney to guide him or her through administering a trust.

The Florida Trust Code then requires that a successor trustee, within 60 days after finding out that a formerly revocable trust has become irrevocable (which usually means within 60 days of the Settlor’s death), to give notice to the beneficiaries of the trust’s existence, the identity of the Settlor or Settlors, the right to request a copy of the trust instrument and the right to accountings under that section of the Code.[i]

Once the successor trustee is in place to discharge the duties as trustee, are the assets then immediately distributed to the beneficiaries named in the trust? The answer is usually no even though the successor trustee is under a fiduciary duty to make distribution when the trust terminates. The termination date of a trust means the time at which it becomes the duty of the trustee to wind up the administration of the trust. “The period for winding up the trust refers to the period after the termination date and before trust administration ends with the complete distribution of the trust estate”.[ii]

Trusts estate planningFollowing a trust’s termination date, the trustee has a duty within a reasonable time to distribute the trust property to the persons entitled to it and to make preliminary distributions as appropriate within the wind-up period.[iii]  The Florida Trust Code provides that the successor trustee shall proceed expeditiously to distribute the trust property to the persons entitled to the property, subject to the right of the trustee to retain a reasonable reserve for the payment of debts, expenses, and taxes.[iv]  The Code also provides that on termination of the trust, the successor trustee continues to possess the powers appropriate to wind up the administration of the trust and distribute the trust property to the persons entitled to the property, subject to the right of the trustee to retain a reasonable reserve for the payment of debts, expenses, and taxes.[v]  Many practitioners refer to this period between the Settlor’s death and final distribution as the “windup” period or the “windup” trust.

The common law is clear that a successor trustee’s powers and duties do not end on the trust’s termination but continues for a reasonable amount of time to wind-up the administration of the trust prior to making the distribution in a manner consistent with the purposes of the trust and the interests of the beneficiaries.[vi]

Trusts trustees distribution

What is a reasonable amount of time to wind-up the administration of a trust and make distribution? 

This question has no clear answer as each case is different depending on the assets held in the trust, whether those assets are easily valued and distributable and determining and satisfying any trust obligations including any tax liabilities. Each trust would be judged by the facts unique to its administration. There should be a legitimate reason for the trustee to have a long “wind-up” period, other than wanting to collect additional fees and remain in control of the trust assets. On the trust’s termination, the assets belong to the beneficiaries only subject to the “wind-up” period.

As part of the wind-up process, the successor trustee should provide a final accounting which should include a plan of distribution for any undistributed assets shown on the final accounting.[vii] The successor trustee cannot be held liable for not making distributions before the expiration of the six-month limitation period within which beneficiaries can challenge the final accounting, provided the beneficiary receives a limitations notice with the final accounting. The beneficiaries can always waive the six-month period by approving the accounting and releasing the successor trustee from liability as providing a final accounting is the only mechanism available to the trustee to determine and limit liability. As an alternative, the trustee may request judicial approval of the accounting but this procedure would invariably take longer than six months and be an unnecessary expense to the trust.

Trusts litigation courtWhen these “Living Trusts” terminate upon the Settlor’s death, a successor trustee who fails to distribute assets and bring the trust administration to a conclusion in a timely fashion after the death of the Settlor has committed a breach of fiduciary duty and can be held accountable.[viii]

The breach of the fiduciary duty to timely make distribution is usually not done in isolation but typically involves other breaches committed by the successor trustee, including failing to provide an annual accounting and either mismanaging the trust assets or using those assets for his or her own benefit.

[i]Fla. Stat. §736.0813(1)(b).
[ii]89 Restatement of The Law on Trusts 3d, comment b.
[iii]89 Restatement of The Law on Trusts 3d, comment (e).
[iv]Fla. Stat. §736.0817
[v]Fla. Stat. §736.0816(25)
[vi]Restatement of the Law Third, Trusts §89; Bogert’s The Law of Trusts and Trustees §1010.
[vii]Fla. Stat. §736.08135(2)(f)
[viii]DeBello v. Buckman, 916 So.2d 882 (Fla. 4DCA 2005)

Trustee Provide an Accounting

When Must the Trustee Provide Accounting?

trustee provide accounting to trustFundamental to trust law, a trustee is always under a duty to give information to a beneficiary. So when must the trustee provide accounting? Most states have enacted statutes specifically dealing with this duty to account. In Florida Fla. Stat. 736.0813 provides that a trustee shall provide a trust accounting to the trust beneficiaries at least annually and on the termination of the trust.

The trustee has a whole year to operate as trustee without being required to provide an accounting to the beneficiaries. But, the trustee must provide an accounting annually. This accounting is the primary method a beneficiary can hold a trustee accountable. Without an accounting, a beneficiary is virtually powerless and at the mercy of the trustee.

Calendar for trustee provide accountingMany have asked the question – exactly when is the accounting due? While none of the trust statutes specify a specific time frame when the accounting is due once a year has elapsed, common sense would suggest that a trustee has a reasonable amount of time to provide the accounting.

When must the trustee provide accounting? In my opinion, a reasonable amount of time would approximately 90 days from the close of the accounting period. This provides the trustee sufficient time to gather up the final month’s information and assemble the actual trust accounting.

What if the trustee does not provide the trust accounting? I would suggest that you write to the trustee shortly after the accounting period is up to request an accounting. If the trustee fails or refuses to provide an accounting, you may be justified in arguing that the trustee has committed a breach of fiduciary duty and even a fraud and should at the very least, be removed for intentionally refusing to provide the accounting.

Trustee provide accounting art courtIf the accounting is not forthcoming a beneficiary can compel the accounting by filing a lawsuit for an accounting. I strongly urge trust beneficiaries to be vigilant in monitoring the trustee and making sure a timely accounting is provided.

To schedule an appointment with Jay Fleece:  

Phone: 727-471-5868  

Personal Representative Compensation

Personal Representative Compensation

personal representative compensation, attorney fees, and other professionals whose services ARE required in administering the probate estate – are entitled by law to reasonable compensation.

Personal RepresentativePersonal representative compensation is usually determined in one of these five ways:

1. As set forth in the will; 

2. As set forth in a contract between the personal representative and the decedent;

3. As agreed among the personal representative and the persons who will bear the impact of the personal representative’s compensation;

4. The amount presumed to be reasonable as calculated under Florida law, if the amount is not objected to by any of the beneficiaries; or 

5. As determined by the judge

Personal Representative CompensationA Personal Representative Must Be Appointed by a Judge Before He or She Can Serve.

If the decedent’s will designated a personal representative, the judge will decide if that person is qualified to serve. A circuit court judge supervises or presides over probate administration and also rules on the validity of the decedent’s will. If the decedent died without a will, the judge will consider evidence to confirm the identities of the decedent’s heirs as those who will receive the decedent’s probate estate.

If the designated personal representative meets the statutory qualifications, the judge will issue “Letters of Administration,” also referred to simply as “letters.” These “letters” are important evidence of the personal representative’s authority to administer the decedent’s probate estate.

The judge will hold a hearing, as necessary, to answer any questions or to resolve disputes that arise during the course of administering the decedent’s probate estate. The judge’s decision will be set forth in a written direction called an “order.”

To schedule an appointment with Jay Fleece:  

Phone: 727-471-5868  

Some of the content of this information is courtesy of The Florida Bar and represents general legal advice. Because the law is continually changing, some provisions in this blog may be out of date. It is always best to consult an attorney about your legal rights and responsibilities in your particular case.

Wills and probate

Lost or Destroyed Will? It can be contested in probate court.

Lost or Destroyed Willwill cannot dispose of any of the decedent’s property until it is admitted to probate.

Lost or destroyed will? In order for a will to be admitted to probate, it must be executed in accordance with the formalities required by Florida law. The testator must sign his will at the end in the presence of two attesting witnesses. The attesting witnesses must sign in the presence of each other and in the presence of the testator. If the testator attaches a self-proof of will, the will may be admitted to probate without further proof. Without a self-proof of will, an oath of one of the attesting witnesses may be required before the will is admitted to probate.

Lost or Destroyed WillUpon the testator’s death, if a will, executed by the testator and kept in their possession, cannot be found, there is a presumption, absent other evidence, that it was destroyed with the intention of revoking it. However, this presumption may be overcome and the will may be admitted to probate if an interested person is able to establish the full and precise terms of the lost or destroyed will. The content of the lost or destroyed will be proven with a correct copy of the will and the testimony of one disinterested witness. Without a correct copy, the content may be established through the testimony of two disinterested witnesses.



IRS and Estate Taxes

The IRS, Estate Taxes and Personal Representative

IRS and estate taxesA personal representative has the responsibility to pay estate taxes owed by the decedent or the estate to the IRS.

Estate taxes are normally paid from probate assets in the decedent’s estate, and not by the personal representative from his or her own assets. However, under certain circumstances, the personal representative may be personally liable for taxes due to the IRS  if they are not properly paid.

Estate taxes and the IRSThe estate will not have any tax filing or payment obligations to the State of Florida. However, if the decedent owed Florida intangibles taxes for any year prior to the repeal of the intangibles tax as of January 1, 2007, the personal representative must pay those taxes to the Florida Department of Revenue.

The decedent’s death has two significant tax consequences. It ends the decedent’s last tax year for purposes of filing the decedent’s federal income tax return, and it establishes a new tax entity, the “estate.”

The personal representative may be required to file one or more of the following returns, depending upon the circumstances:

The decedent’s final Form 1040, Federal Income Tax Return, reporting the decedent’s income for the year of the decedent’s death.

  • IRS estate taxesOne or more Forms 1041, Federal Income Tax Returns for the Estate, reporting the estate’s taxable income.
  • Form 709, Federal Gift Tax Return(s), reporting gifts made by the decedent prior to death.
  • Form 706, Federal Estate Tax Return, reporting the decedent’s gross estate, depending upon the value of the gross estate.

The personal representative may also be required to file other returns not specifically mentioned here. 

To schedule an appointment with Jay Fleece:  

Phone: 727-471-5868