By James W. Mallonee
There continues to be confusion about what rights a beneficiary has when it comes to a trust and the information a beneficiary is entitled to receive concerning a trust. The first thing to understand is which beneficiary of a trust is entitled to receive information. The answer is every qualified beneficiary. The definition of a qualified beneficiary is found in Florida Statute 736.0103(16) which states:
“Qualified Beneficiary means a living beneficiary who, on the date the beneficiary’s, qualification is determined: (a) Is a distributee or permissible distributee of trust income or principal; (b) Would be a trust distributee of trust income or principal if the interests of the distributees described in paragraph (a) terminated on that date without causing the trust to terminate; or (c) Would be a distributee or permissible distributee of trust income or principal if the trust terminated in accordance with its terms on that date.”
Fundamentally, what the statute says is that immediate beneficiaries and those one step below the actual first line beneficiaries would fall under the above definition of a Qualified Beneficiary. You may be wondering why is this important? The answer is, you simply cannot ignore the second level beneficiaries or for that matter any beneficiaries.
Consider the following case confronting the author: Mom and Dad prepare a joint trust. Within the trust, at the death of Dad, the trust assets for Dad become irrevocable making his joint portion of the trust fixed and irrevocable. At Dad’s death, who became a Qualified Beneficiary? Dad’s daughter steps up to be a Qualified Beneficiary. Mom remains a grantor, trustee and beneficiary of Dad’s trust. The problem is that Mom has taken over the trust and refuses to provide any information about the trust to Dad’s daughter. Does this seem right and what rights does the daughter possess?
Generally speaking, the Florida Trust Code provides that a trustee may not necessarily refuse to provide information to a beneficiary. The end result is usually a vision where the blind are leading the blind (in the case mentioned above), Mom believes that she owes no responsibility to Dad’s daughter in the form of information. It is this type of thinking that creates litigation and expensive outcomes to something that could have been avoided.
What are the types of information a trustee is required to provide to the Qualified Beneficiaries? First is the giving of notice to the Qualified Beneficiaries within 60 days of acceptance by another who is taking over the trust. This usually happens following the death of one of the Grantors to a trust or should the Grantor (who is likely serving as trustee) becomes incapacitated and is succeeded by another.
Second, is to give notice to the Qualified Beneficiaries within 60 days of the creation of an irrevocable trust, or the date a previously revocable trust became irrevocable (because of the grantor’s death). Provide information of the trust’s existence and identify the grantor. Inform the Qualified Beneficiaries of the right to request a copy of the trust instrument, trust accountings and the fiduciary lawyer-client privilege applying between the succeeding trustee and his or her attorney.
Third, is to provide an inventory and annual accountings as well as relevant information about the assets and liabilities of the trust to each Qualified Beneficiary. This requirement is not waivable, even if the trust inserts language that the accounting is waived, the trust statute does not allow such waivers. Additional requirements are taxes, where the trustee is required to prepare and file a trust’s taxes including K-1’s to the beneficiaries.
Lastly, it is the trustee’s duty to inform the beneficiaries when capital assets of the trust are going to be used for some large purchase or sale. The qualified beneficiaries have a right to object to those actions.
The message here is, that it is very important to provide the information concerning the trust assets to the beneficiaries and keep them informed. The good old days of just doing as you please are gone. This means that if you are not sure of what you are doing, it is highly recommended you obtain the lawyer of your choice and let him or her provide guidance. Failure to do so may result in litigation that will reduce the trust to no trust at all.
James W. Mallonee (Jim Mallonee) is a graduate with a B.A. degree from the University of South Florida and a Master of Science degree from Rollins College in Winter Park, Florida. He obtained his Juris Doctorate from the University of the Pacific, McGeorge School of Law in Sacramento, California. Prior to returning to Florida to practice law, Mr. Mallonee was employed by Intel Corporation for 22 years in such locations as New Jersey, Florida and California.
In addition to being a member of the Florida Bar since 2003, Mr. Mallonee serves on the Charlotte Community Foundation Committee for asset allocation and teaches Business Law at State College of Florida. Mr. Mallonee is also on the Board of Directors for the Military Heritage Museum located in Charlotte County, Florida.
His firm practices law in the following areas: Probate, Wills & Trusts, Guardianships, and Litigation in the areas of Real Estate, Guardianships and Estates. The firm has two locations in Venice and Port Charlotte, Florida.
James W. Mallonee, P.A.
946 Tamiami Trail, #206
Port Charlotte, FL 33953
(941) 206-2223
Facsimile (941) 206-2224
871 Venetia Bay Blvd., #225
Venice, FL 34285
(941) 207-2223
This article is intended for informational use only and is not for purposes of providing legal advice or association of a lawyer – client relationship