11 Sep DON’T FORGET THE MANDATORY PROVISIONS OF THE FLORIDA TRUST CODE
In a recent case, Wallace v. Comprehensive Personal Care Services, Inc. etc., the appellate the court determined that certain provisions in the Florida trust code override the terms of the trust document as to the removal of a trustee.
Milton Wallace (“Milton”) and his wife, Patricia, created an irrevocable trust for which they were trustees until Patricia’s death. Milton remained as trustee after Patricia’s death. Milton’s sons, Hardy and Mark, sought to remove Milton as trustee. Apparently, Milton had made large and “inappropriate” gift to new friends.
The trust contains provisions for the removal of a trustee for disability or for cause. Under the trust agreement, an individual is considered disabled if unable to manage his or her personal affairs or assets because of a mental or physical impairment and such determination must be made by either by a court or a written agreement by two- thirds of a certain group of people.
Mark filed an action to remove Milton, as Trustee, not as provided by the trust agreement, but pursuant to Sections 736.105(2)(e) , 736.0706 and 736.1001(2) of the Florida statutes (the “Trust Code”).
The lower court dismissed the action and agreed with Milton that Mark “cannot, as a matter of law, seek relief in this case that is contrary to the terms of the Irrevocable Trust and contrary to the procedural safeguards [for establishing a guardianship of a ward]….”
Mark then appealed to the Third District Court of Appeal. The appellate court determined that generally the terms of the trust control EXCEPT “as may be necessary in the interests of justice”.
The appellate court also noted that the court had the ability to remove a trustee and the Trust Code provides remedies for a breach of trust which includes the removal of a trustee.
Milton argued that such removal, overriding the terms of the document would, in effect, make him lose control of his property by removing him as trustee and declaring him a “ward” and depriving control of his own property.
The appellate court disagreed and stated that the law of removal of trustee is not the same as imposing a guardianship. Milton would still have control of the property he owned personally and any distributions from the trust. Further, even though Milton had contributed assets to the irrevocable trust, once contributed, those assets are assets of the irrevocable trust not Milton’s personal assets.
ADVICE: This case reminds individuals that, while the trust document, controls for the most part, the Trust Code has mandatory provisions that may apply. Always read the Trust Code as to the applicable provisions. Even though the document may not provide the result you need, the Trust Code may provide a solution.
WORD OF THE WEEK: Irrevocable Trust is a trust that is created that is “supposed” to be “unchangeable” or not able to be revoked by the person who created the trust. Because of changes in circumstances, the Trust Code provides several methods, such as private settlement agreements, judicial modification, decanting, etc. to modify or change an irrevocable trust after its creation. An irrevocable trust can be very helpful in estate tax planning and even in Medicaid planning.
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