By James W. Mallonee
Florida’s Trust Code has added new provisions by adding new statutory sections in an effort to prevent many trusts from moving out of state. It is called the Florida Uniform Directed Trust Act. The Act is found in Chapter 736, Part XIV of the Florida’s statutes. Some of the major changes are Definitions, Defaults, Rules, Co-Trustees, Limits on Proceedings Against Trustees and Certification of Trusts.
Definitions include a directed trust where the terms of the trust grant a power of direction giving a director the ability to manage its assets. The term power of direction is defined as a power over a trust granted to a person by the terms of the trust to the extent the power is exercisable by a person who is not serving as the trustee. This may include the power over an investment, distribution of property and a power to amend the trust instrument.
The principal place of administration is determined wherever the trust is moved too. Thus, a trust prepared in New York and moved to Florida will have the jurisdiction of Florida law apply once the trust is moved, but only after such move is completed. The jurisdiction over a trust can also be based on the location of a Trust Directors principal place of business.
The statute provides that certain non-trustees who hold a power over a trust can be subject to the statute. Never-the-less, one of the powers that are excluded include Powers of Appointment (excluding the ability to modify, create or terminate a power of appointment). A power appointment is a non-fiduciary power to achieve certain tax objectives and is excluded.
Trust Directors are subject to the same rules as a trustee with regard to their duties and liabilities to the beneficiaries. However, those duties can be modified under the trust instrument in an equivalent manner as a Trustee’s duties can be altered by the creator of the trust. This same rule also applies to Trust Protectors but may not be applied to the Trustee.
A Directed Trustee is obligated to take reasonable action to comply with a direction received from a trust’s Trustee. However, a Directed Trustee should not comply to a direction given him or her where such direction would cause engagement of willful misconduct. This is the same conduct applied when dealing with a co-trustee who is directed to purchase a security investment that is questionable. The Directed Trustee is to take reasonable action in following such direction, but not to wait too long to react. Reasonableness is the key to avoiding problems.
The Trustee and Trust Director both have a duty to provide information to each other as well as qualified beneficiaries when requested. This also applies to a duty to monitor each other (Trust Director and Trustee); but, neither is required by statute to monitor the other.
As you can see, Florida is moving in the direction of allowing additional levels of protection to its citizens ability to manage a trust instrument. The idea being, that placing too much power in the hands of one individual without checks and balances can lead to disasters. The ability to have overseers to protect a beneficiary’s assets and require checks and balances when dealing with large purchases can be controlled using a Trust Director, Trust Protector and Trustee.
If you have questions about whether Florida’s new Uniform Directed Trust is right for you, it is recommended to call the attorney of your choice and have that conversation.
This article is intended for informational use only and is not for purposes of providing legal advice or association of a lawyer – client relationship
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.
946 Tamiami Trail, #206
Port Charlotte, FL 33953
(941) 206-2223
871 Venetia Bay Blvd., #225
Venice, FL 34285
(941) 207-2223