Sunday, June 3, 2018
Court Stops Beneficiaries From Commuting Trust [Florida]
In Florida, a settlor created a trust that would provide her son with the income interest and named three educational institutions as remaindermen after the death of her son. Upon the settlor's death the trust became irrevocable. The son, as beneficiary, and the three remaindermen agreed to commute and dissolve the trust and to divide the proceeds, but to do so required suing the trustee under Florida Statutes 736.04113 and 736.04115. §736.04113 allows for judicial modification of an irrevocable trust on petition of a trustee or a qualified beneficiary if: (a) the purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill; (b) 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 (c) a material purpose of the trust no longer exists. §736.04115 allows judicial modification if compliance with the terms of a trust is in the best interests of the beneficiaries, taking into account the intent of the settlor and the current circumstances and best interests of the beneficiaries.
At the trial court both parties moved for summary judgement and the judge ruled in favor for the son, quoting it was in the best interest of the beneficiaries and would circumvent unnecessary trust administration costs. On appeal, however, the court reversed the trial courts decision and entered summary judgement for the trustee. The appellate court stated that the fees, costs, and principals of the trust were normal, and that the most important factor in the case was the settlor's intent, and trust termination due to simple desire and normal circumstance would thwart that intent.
See Chuck Rubin & Jenna Rubin, Court Stops Beneficiaries From Commuting Trust, Rubin on Tax, May 31, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.