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   jfleece@legacyprotectionlawyers.com  

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   jfleece@legacyprotectionlawyers.com  

Trust estate litigation

Trust estate litigation: breach of fiduciary duty

Many of the same contested issues in a probate estate also exist in trust estate litigation matters.

Trust estate litigationThe main difference is that an independent civil action needs to be filed in order to invoke the jurisdiction of the court and have summonses issued to the Defendants. As Florida trust administration is not court-supervised, it is up to the beneficiaries, rather than the probate judge, to make sure the trustee is discharging his duties in accordance with the trust terms and with the law. For the most part, the only way a beneficiary can review what the trustee has done is through the annual accounting which the trustee must provide each qualified beneficiary every year. If the accounting is not provided, the trustee has breached his fiduciary duty to keep beneficiaries informed, which could result in trust estate litigation, and the trustee is held liable.

Duty to Account: A trustee has broad discretion in dealing with trust property, subject to the duty of loyalty, a duty of impartiality and the other fiduciary duties imposed on the trustee. The trustee operates with very little oversight by anyone over the trust’s assets. The trustee is not Trust estate litigation and the trustee's responsibilityunder court supervision unless the court’s jurisdiction is invoked and is only accountable to the beneficiaries of the trust. Practically the only time a beneficiary can review what the trustee has done and have an opportunity to challenge those actions is when the trustee provides an accounting to the beneficiary, if not it is the grounds for trust estate litigation.

As the equitable owner of the trust property, the beneficiary has a vested interest in the management and administration of the trust and has an enforceable right to an accounting from a trustee. Furthermore, because the trustee has a fiduciary obligation to the beneficiary, the beneficiary must be accurately informed as to what the trust property consists and how it is being managed. The beneficiary must be accurately informed about the administration of the trust in order to hold the trustee to the proper standard of care and honesty and to enforce his [the beneficiary’s] rights in the trust.

Trust estate litigation accountingA trustee has a duty to maintain clear, complete and accurate books and records regarding the trust administration and at reasonable intervals must provide beneficiaries with reports or accounting. It is important for the trustee to keep accurate records so that the beneficiary can tell whether the trustee has acted with prudence, loyalty, and impartiality and whether the costs of administration have been reasonable and appropriate.

To schedule an appointment with Jay Fleece:  

Phone: 727-471-5868   jfleece@legacyprotectionlawyers.com  

Estate trustee litigation

Estate and Trust Litigation: Holding the Trustee Accountable

Avoid estate and trust Litigation: TRUSTEE IS UNDER A STRICT FIDUCIARY DUTY TO KEEP AND RENDER A COMPLETE AND ACCURATE RECORD.

A trustee is a person who has broad discretion with very little oversight over someone else’s assets. Practically the only time a beneficiary can review what the trustee has done and have an opportunity to challenge those actions, through possible trust litigation, is when the trustee provides an accounting to the beneficiary. As such, one of the many duties a trustee has is the duty to inform and account. This fiduciary duty is critically important to ensure that the trustee is properly discharging his or her fiduciary duties in managing the affairs of the trust.

A TRUSTEE HAS A DUTY TO INFORM AND TO ACCOUNT

Trust litigation and estate planningThe law of trusts has always imposed a duty on the trustee to keep the beneficiary informed as to the administration of the trust and to account to the beneficiary for all actions taken by the trustee. Without a proper accounting disclosing how the trustee has handled the trust affairs, there is little chance of a trustee being held accountable and therefore, the trustee’s duties could be breached at will without any means of redress.

To avoid estate and trust litigation, the burden of proof is on the fiduciary to show that they have fully performed their duties, and the means for such proof is by providing a sufficient and proper accounting.

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“A trustee has a duty to maintain clear, complete, and accurate books and records regarding the trust. It is important for the trustee to keep clear and complete records so that the beneficiary can tell whether the trustee has acted with prudence, loyalty, and impartiality and whether the costs of administration have been reasonable and appropriate.”