By: Phillip B. Rarick, Weston Estate Planning Attorney
In 2008 Florida passed an amendment to our Trust Code designed to allow a Trustee to use trust funds to pay legal fees incurred in defending a breach of trust litigation without prior court approval, so long as the Trustee gave notice to qualified beneficiaries of its intent to do so.
On its face, Florida Statute, F.S. 736.0802(10), seems to give the Trustee access to Trust funds to defend itself, but on closer examination, it creates a potential conflict of interest sandtrap.
Yes, the Trustee can give notice to the qualified beneficiary of its intent to use trust funds to pay attorney fees. However, if the beneficiary moves to prevent the trustee from paying attorneys’ fees and costs from the trust, and is able to proffer sufficient evidence to establish a “reasonable basis for the court to conclude that there has been a breach of Trust,” F.S. 736.0802(10)(b) authorizes the court to enter an order prohibiting further payment and order a refund of any fees already paid, unless the court finds good cause not to do so.” So, if the court orders a refund, who pays? The Trustee? The Attorney? The Florida Trust Code is silent. Hence, the ethical quagmire. For a more complete analysis see, Hidden In Plain Sight: Avoiding Conflicts of Interest In Trust Litigation, Florida Bar Journal, Vol. 90, No. 1 January 2016, by Matthew Triggs and Jessica D. Zietz.
Solution For the Trust Drafter
F.S. 736.0105(2) provides that the terms of a trust override the Florida Trust Code with only a few exceptions not applicable here. Therefore, the Trust Settlor can avoid the morass of F.S. 736.0802(10) by: (1) explicitly stating that the Settlor does not want any Trustee to be reluctant to accept the duties of Trustee for fear of threats or lawsuits that might force the Trustee to pay fees and costs from the Trustee’s personal resources; (2) waiving any conflict of interest for trustee using trust assets to defend the trustee for breach of trust action; (3) stating that the Trustee can pay any and all attorney fees and costs from the Trust assets to defend the Trustee before and after a lawsuit is filed, excepting only acts of willful wrongdoing and gross negligence on the part of the Trustee; (4) waiving all statutory requirements and rights as set forth in F.S. 736.0802(10).
Take-Away Point For The Trust Drafter
- Consider a definitive conflict waiver and authorization for payment of attorney Fees and costs to defend a breach of trust action incorporating the four elements discussed above in all Florida Trust Agreements.
The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Weston estate planning attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.