PBCBA BAR BULLETINS pbcba_bulletin_november 2018 | Page 13

PROBATE C o r n e r Trustee’s Duty, Post-Death, To Provide Qualified Beneficiaries With Financial Information Regarding The Revocable Trust DAVID M. GARTEN As a general rule, while a trust is revocable, the duties of the trustee are owed exclusively to the settlor, and the beneficiaries of the trust lack standing to challenge the trustee’s actions. See §§736.0603(1) and 736.0813(4), F.S. However, once the trust becomes irrevocable, the beneficiary may sue for breach of a duty that the non-settlor/ trustee owed to the settlor/beneficiary which was breached during the lifetime of the settlor and which adversely affected the beneficiary’s interest in the trust. See Brundage v. Bank of America, 996 So. 2d 877 (Fla. 4th DCA 2008); Hilgendorf v. Estate of Coleman, 201 So. 3d 1262 (Fla. 4th DCA 2016); Smith v. Bank of Clearwater, 479 So. 2d 755 (Fla. 2nd DCA 1985); and Siegel v. Novak, 920 So. 2d 89 (Fla. 4th DCA 2006). himself to act as trustee, once the settlor dies and the trust becomes irrevocable, the remainder beneficiaries have standing to sue the trustee for breaches of fiduciary duty committed during the period of revocability. This standing gives the beneficiaries the right to demand an accounting and information from the trustee regarding trust assets and transactions during the time period before the trust became irrevocable. But what if the settlor of a revocable trust does not appoint someone other than himself to act as trustee, but instead appoints himself to be the trustee? Do the beneficiaries have the right to demand an accounting and information from the trustee regarding trust assets and transactions during the time period before Pursuant to the Florida Trust Code, once the the trust became irrevocable? This is an trust becomes irrevocable, the trustee has unresolved issue in Florida. However, the a duty to keep the qualified beneficiaries courts in California, Iowa, and New York of the trust reasonably informed of the have dealt with this issue. trust and its administration, including, but not limited to: (i) providing a trust In Babbitt v. Superior Court, 246 Cal.App.4th accounting annually and on termination 1135, 201 Cal.Rptr.3d 353(Cal. App. 2016), the of the trust or on change of the trustee, issue, as framed by the court, was whether and (ii) upon request, providing relevant the term “the internal affairs of the trust” information about the assets and liabilities includes an accounting of assets held by of the trust and the particulars relating to the trust while it was revocable where its administration. See §736.0813(d) and (e), the trustee and the settlor were the same F.S. This duty may include the period that person. Pursuant to the California Probate the trust was revocable. See Tseng v. Tseng Code, a trustee or beneficiary of a trust may (In re Second Amendment & Restatement petition the court concerning the internal of Pe Kuang Tseng Trust Agreement), 271 affairs of the trust. The term “internal affairs Ore. App. 657; 352 P.3d 74 (Ore. App. 2015) of the trust” includes information relevant (Where the settlor and the trustee were to the beneficiary’s interests, information not the same, the qualified beneficiaries necessary to enforce the beneficiary’s were entitled to be reasonably informed rights, and information that could prevent or about the administration of the trust and redress a breach of trust. The court held the of the material facts necessary to protect settlor’s death did not give the beneficiaries their interests, include the period that the a right to obtain information about the trust was revocable, where they sought disposition of assets while the trust was to ascertain whether the transfer of $1.8 revocable as “internal affairs of the trust”. million in funds out of the revocable trust The court reasoned, in part, that in the harmed their beneficial interests in the trust absence of any claim that the settlor was by wrongfully depleting trust assets); Estate incompetent or subject to undue influence, of Giraldin, 55 Cal.4th 1058 [150 Cal.Rptr.3d nothing that an accounting of such assets 205, 290 P.3d 199 (Cal. 2012), where the after his death might reveal could support California Supreme Court held that when a claim for breach of trust based on actions the settlor of a revocable trust appoints, that occurred before his death. during his lifetime, someone other than In In re Trust No. T-1 of Trimble, 826 N.W.2d PBCBA BAR BULLETIN 13 474 (Iowa 2013), the court held that a trustee, who owes no accounting to beneficiaries while the trust is revocable, should not face retroactive accounting duties for the same period upon the settlor’s death. In Matter of Malasky, 290 A.D.2d 631, 736 N.Y.S.2d 151(N.Y. App. Div. 2002), a husband and wife created a joint revocable living trust and named themselves trustees. After the husband died, his children from a prior marriage sought an accounting from their stepmother of the trust assets from the trust’s inception to the date of their father’s death. The court held that, because the settlors also acted as trustees and retained the power to revoke or amend the trust at any time, the stepchildren had no pecuniary interest in the revocable trust until their father’s death, and therefore could not seek an accounting of assets while the trust was revocable. October 2, 2018 Palm Beach County Commission Proclamation for Mediation Week PBC Commissioner Paulette Burdick, PBCBA ADR Committee Chair Rosine Plank-Brumback, and PBCBA President Greg Huber