The Florida Trust Code is fully set forth in Florida Statutes, Chapter 736. This not complete, only a summary of the provisions that I believe to be relevant to Elder Law and Medicaid Planning.
PART I. General Provisions and Definitions
(1) The Florida Trust Code applies to express trusts, charitable trusts, non-charitable trusts, and trusts created pursuant to a law, judgment that requires the trust to be administered in the manner of an express trust.
(2). The Florida Trust Code does NOT apply to constructive trusts, resulting trusts, conservatorships, custodial relationships pursuant to Florida Transfer to Minors Act. business trusts, common trust funds, trusts created by the form of the account of by the deposit agreement at a financial institution, voting trusts, security arrangements, liquidation trusts, trusts for the primary purpose of paying debts, dividends, interest, salaries, wages, profits or employee benefits. Also, it does not apply to land trusts.
(2) Affiliate: any person or entity that controls or is controlled by the fiduciary. Could be an investment advisor, broker, etc…
(3) Ascertainable Standard: standard relating to an individual’s health, education, support or maintenance as set forth in IRS Code Section 2041(b)(1)(A) or 2514(c)((1).
(4) Beneficiary: someone who has a present or future interest in a trust.
(5) Charitable Trust: trust or portion of trust created for a charitable purpose as defined in 736.0405(1).
(6) Distributee: a beneficiary who is currently entitled to receive a distribution.
(9) Guardian of the Person: one who is appointed by court to make decisions regarding HEMS of a minor or incapacitated adult. This does not include a guardian-ad-litem.
(10) Guardian of the Property: one who is appointed by court to administer estate of a minor or incapacitated adult.
(16) Qualified Beneficiary: a living beneficiary who, on the date qualification is determined:
(16)(a) is a distributee or permissible distributee of trust income or principal;
(16)(c) would be be a D or PD of TI or TP if the trust terminated in accordance with its terms on that date.
(17) Revocable: means revocable by settlor without consent of the trustee or person holding an adverse interest.
(18) Settlor: person, including testator, who creates or contributes property to a trust. If more than one person contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion.
(19) Spendthrift Provision: term of a trust the restrains both voluntary and involuntary transfer of a beneficiary’s interest.
(21) Term of a trust: means the manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust document or as might be established by other evidence that would be admissible in a judicial proceeding.
PART II. Judicial Proceedings
736.0201(4). A judicial proceeding involving a trust may relate to the validity, administration or distribution of a trust.
(5). A proceeding for the construction of a testamentary trust may be filed in the probate proceeding for testator’s estate.
PART III. Representation
736.0301 - 736.0306
PART IV. Creation, Validity, Modification and Termination of Trusts
736.0402(1)(a)-(e). In order to create a trust, the settlor must have capacity and intent to create a trust. The trust must have a definite beneficiary (or be a charitable trust; trust for the care of an animal per 736.0408; or a trust for noncharitable purpose per 736.0409). The trustee must have duties to perform and the same person cannot be the sole trustee and the sole beneficiary.
736.04113. Judicial Modification of Irrevocable Trust.
- The court may modify the terms of a trust that is not then revocable if
- The purposes of the trust have been fulfilled or have become impossible, wasteful or impracticable to fulfill; or
- Because of circumstances not anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair the accomplishment of a material purpose of the trust; or
- A material purpose of the trust no longer exists.
(3) In exercising discretion to modify a trust under this section, the court shall:
- Consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and extrinsic evidence relevant to the proposed modification;
- Consider the spendthrift provisions as a factor in making a decision, but the court is not precluded from modifying just because of spendthrift provisions.
736.04115. Judicial Modification of Irrevocable Trust When Modification is in Best Interest of Beneficiaries.
(1) If compliance with the trust is not in the best interests of the beneficiaries, a court may at any time modify a trust - even if an irrevocable trust. Court will consider terms, purpose, surrounding circumstances in its decision.
736.0412. Nonjudicial Modification of Irrevocable Trust.
(1) After settlor’s death, a trust may be modified at any time upon unanimous agreement of the trustee and all qualified beneficiaries - even if (2) spendthrift provision specifically states otherwise.
736.0414. Modification/Termination of Uneconomic Trust.
(1) After notifying all trust beneficiaries, if the total value of trust is less than $50,000, the trustee may terminate the trust (if trustee determines that value of trust property does not justify the cost to administer the trust.
(2) Court can modify, terminate or remove trustee and replace trustee.
(3) Upon termination, trustee must distribute remaining trust property in accordance with the trust purposes.
(4) A spendthrift provision does not make this section inapplicable unless the trust document specifically provides that the trustee may not terminate the trust pursuant to this section 736.0412(4).
736.0415. Reformation to Correct Mistakes. Court may reform terms of trust to conform with settlor’s intent (even in the face of unambiguous language to the contrary if clear and convincing evidence shows that the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law). In determining settlor’s original intent, the court may consider any evidence relevant to settlor’s intent even if that evidence contradicts apparent plain language in trust document.
PART V. Creditors’ Claims; Spendthrift Trusts; and Discretionary Trusts
736.0501. Rights of Beneficiary’s Creditor. Court may authorize a creditor to reach the beneficiary’s interest by attachment to present or future trust distributions - unless subject to a spendthrift provision.
736.0502. Spendthrift Provisions.
- A spendthrift provision is only valid if it restrains both voluntary and involuntary transfers of a beneficiary’s interest.
- A term in the trust saying “the interest of the beneficiary held subject to a spendthrift trust” or words of similar effect is sufficient.
- As long as beneficiaries do not transfer interest in trust in violation of an otherwise valide spendthrift clause, a creditor may not reach the interest or a distribution by trustee before receipt of the interest distribution by the beneficiary.
736.0503. Exceptions to Spendthrift Provisions. A spendthrift trust will not protect against court order for child or spousal support or maintenance.
736.0504. Discretionary Trusts (when distributions are subject to trustee’s discretion). Regardless of existence of spendthrift clause, creditors cannot compel a distribution subject to the trustee’s discretion.
736.0505. Creditor’s Claims Against Settlor.
(1)(a) Property of revocable trusts is subject to claims of settlor’s creditors during settlor’s lifetime to the extent property would not otherwise be exempt by law if owned directly by settlor (e.g. homestead).
(1)(b). Property of irrevocable trust can only be reached by creditors to the extent that trust property can be distributed to settlor or for settlor’s benefit.
736.05053. Trustee’s Duty to Pay Expenses/Obligations of Settlor’s Estate.
(1) A trustee of a trust described in F.S. 733.707(3) (where the settlor has a right of revocation) must pay the personal representative of the settlor’s estate any amount the PR certifies in writing to trustee are required to pay the expenses of administration and obligations of settlor’s estate. The interests of all trust beneficiaries are subject to this provision.
736.05055. Notice of Trust. (1) Upon death of settlor, trustee must file a notice of trust with the court in county settlor’s domicile or court having jurisdiction of the settlor’s estate.
(2). Notice of trust will contain: name of settlor, settlor’s date of death, title of trust, date of trust, and name/address of trustee.
(3). If settlor’s probate proceeding has commenced, clerk shall notify the trustee in writing the date the proceeding commenced and the file number.
PART VI. Revocable Trusts
736.0602. Revocable Trusts allow the settlor to revoke or amend the trust.
(2). If a revocable trust is created or funded by more than one settlor:
- To the extent that the trust contains community property, the trust may be revoked by either spouse acting alone but may only be amended by joint action by both spouses.
- To the extent that the trust contains non-community property, each settlor may revoke or amend the trust with regard to the portion of the trust property attributable to that settlor’s contribution.
(6) a guardian of the property of the settlor may exercise a settlor’s power with respect to revocation/amendment/distribution of trust property as provided in 744.441 (Florida Guardianship Code).
(7) A trustee who does not know that a trust has been revoked or amended is not liable for distributions made and other actions made on the assumption that the trust has not been amended or revoked.
736.0604. Limitations on Action Contesting the Validity of Revocable Trust. Contesting the validity of a trust is barred if not commenced the earlier of (1) time provided in chapter 95; or (2) six months after trustee sent the person a copy of the trust document and notice informing the person of the trust’s existence, of the trustee’s name/address and of the time allowed for commencing a proceeding.
PART VII. Office of Trustee. 736.0701 - 736.0709.
736.0701. How to accept or deny trusteeship.
736.0702. Court may require trustee to secure a bond.
(1) Cotrustees who are unable to reach unanimous decision may act by majority decision.
(4) If cotrustee is unavailable to perform duties because of absence, illness or other incapacity, and prompt action is necessary to achieve the purposes of the trust / avoid injury to trust property, the remaining cotrustee or majority of remaining cotrustees may act for the trust.
(6) Except as provided in section (7), a cotrustee who does not join in an action of another cotrustee is not liable for the action.
(7) Except as provided in section (9), cotrustees must take action to prevent a cotrustee from committing a breach of trust and take action to redress a breach of trust.
736.0705. Resignation of Trustee. Provide 30 days notice to settlor, qualified beneficiaries and cotrustees.
736.0706. Removal of Trustee. Settlor, beneficiary or cotrustee may request court to remove a trustee.
736.0708. Compensation of Trustee. If terms do not specify otherwise, a trustee is entitled to compensation that is reasonable under the circumstances. Court may intervene to add or deduct based on work performed. 736.0709 allows for reimbursement of expenses.
PART VIII. Duties and Powers of Trustee (736.0801 - 736.0817)
Duty of good faith, loyalty, prudently, with impartiality (if more than one beneficiary) etc..
736.0802(3)(a)(1)-(4). Sale or transaction involving investment or management of trust property is a conflict of interest if transaction is entered into by the trustee with: trustee’s spouse, trustee’s siblings/parents or their spouses, etc…
736.0806. Trustee’s Skills. A trustee who has special skills or expertise, or is named trustee in reliance of same, shall use those special skills or expertise.
736.0807. Delegation by Trustee. Trustee may delegate duties and powers (i.e. investment advisor).
736.0810. Recordkeeping and Identification of Trust Property. Trustee shall keep clear, distinct and accurate records of administration of the trust. No comingling with trustee’s own property.
736.08125. Protection of Successor Trustees. Successor trustees not liable for actions taken by prior trustee.
PART IX. Trust Investments (736.0901 - 736.0902)
PART X. Liability of Trustee / Rights of People Who Deal with the Trustee (736.1001 - 736.1018).
PART XI. Rules of Construction (736.1101 - 736.1108)
736.1101. General Provisions. The trust document controls, but this section sets default rules of construction and apply unless a contrary intent is indicated in the trust document.
736.1103. Gifts to Multigeneration Classes to be Per Stirpes. Class gifts to descendants, issue and other multigeneration classes shall be per stirpes.
736.1105. Dissolution of Marriage; Effect on Revocable Trust. Unless trust document states otherwise, or judgement for dissolution of marriage or divorce states otherwise, if a revocable trust is executed by husband and wife as settlor prior to annulment or dissolution or divorce, any provision of the trust that affects the settlor’s spouse will become void upon annulment of the marriage or entry of judgment dissolving the marriage/divorce, and any such trust shall be administered as if the settlor’s spouse had died on the date of annulment or on entry of judgment for dissolution/divorce.
736.1108. Penalty Clause for Contest. A provision that penalizes an interested person for contesting the trust document is not enforceable.
PART XII. Charitable Trusts (736.1201 - 736.1211)