TRUSTS

I.

Terminology Related to Trusts A. Trust: An instrument to transfer interest. An agreement where someone holds someone elses property to distribute to a beneficiary. 1. Standard tools for transferring property between a family within a single generation or to younger generations. 2. Can be powerful tools for implementing a clients charitable goals. 3. Can be used to avoid most aspects of probate, reduce certain taxes, protect the privacy of the estate plan, avoid estate taxation, and shield trust assets from creditors. i. Probate creates a public record, while the details of a trust are private. 4. Can avoid someone contesting a will it is less likely that a trust will be voided due to undue influence. 5. Some people create trusts because they provide them with dead hand control: The continued control through a trust after your death which can continue for years. B. Express Trust: An intentional agreement that separates legal and equitable title to property and provides for management of that property for the benefit of the trusts beneficiaries. 1. An express trust can either be private or charitable. C. Inter Vivos Trust: The establishment of a trust by the property owner during their lifetime. 1. There are 2 types of inter vivos trusts: i. Revocable Trust: A trust which can be revoked by the settlor without the consent of the trustee or a person holding an adverse interest. a. The settlor can either revoke the trust completely or simply modify the trust in some way. b. For federal tax purposes, a settlor who has the right to revoke or amend the trust is viewed as the true owner of the trust assets and as such will continue to be responsible for federal income taxes on the trusts income, even if the settlor is not the beneficiary, during the settlors lifetime. 1. Similarly, the assets held in a revocable trust are included (at their fair market value) in the settlors gross estate for federal tax purposes. 2. However, there are no federal gift tax consequences when a settlor makes an inter vivos transfer to a revocable trust because the gift is not deemed complete. ii. Irrevocable Trust: A trust which once it is created by the settlor cannot be revoked or modified.

2. Assets held in an inter vivos trust (whether revocable or irrevocable) do not

need to be re-titled through the probate process because those assets are not held in the decedents name at death. 3. 736.0602 provides that unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust. i. NOTE: Because this is a change in the law, it does NOT apply to trusts created before July 1, 2007. 4. Assets in an inter vivos trust deemed to be revocable, as opposed to irrevocable, could become accessible to the settlors creditors even if the settlor is not a beneficiary and even if the trust was created years before the creditors claims arose. 5. Pour over Provisions (from a will): 732.513: i. A devise can be made to the trustee of a trust and the property being disposed of in probate will go into the trust and be disposed of by the trust. D. Testamentary Trust: The establishment of a trust by the property owner in their will, thereby taking effect only upon the settlors death. 1. Because created at the death of settlor/testator, it is by its nature, irrevocable by the settlor once it becomes effective. 2. Testamentary trusts do NOT avoid probate because it is a type of devise that needs to be transferred during probate as it does not become effective until death and must probate the assets that were placed in the trust. E. Settlor/Grantor: The person who transfers property into a trust (the creator of the trust). 1. There can be more than one settlor of a trust. i. Example: See 736.0602(2): A trust can be created or funded by more than one settlor and be funded with community property or non-community property. F. Trustee: The person responsible for administering the trust property. 1. Can have one trustee or co-trustees, whereby majority rules. 2. The trustee can be an individual person or a corporation, a third party, the settlor, or one of the beneficiaries. i. A law firm can be a trustee. 3. The settlor has a significant amount of flexibility when designing a trust with respect to when income or principal can or must be distributed to the beneficiaries. As such, the responsibility of the trustee as to the distribution of income or principal, or both, may vary from case to case. i. The trustee could be required to distribute income currently to a beneficiary on a periodic basis.

ii. If there are several beneficiaries the trustee could be required to distribute

the income to more than one of the named beneficiaries or to a class of beneficiaries. iii. The trustee could be required to distribute principal prior to the trusts termination date. iv. The trustee could be given discretion with regards to the distribution which could be either to distribute income, principal, or both, to the beneficiary(ies). v. The trustee could be limited to distributing to the beneficiary based on their health, education, support, or maintenance. vi. The settlor could give the trustee unlimited discretion in distributing to the beneficiary. However, the trustee, when exercising this discretion, must do so in good faith. vii. The settlor could require the trustee to accumulate income and not distribute it for a particular period of time, e.g., six years. G. Beneficiary: A person for whose benefit the trust is administered. H. Res: The subject matter of a trust, the property/assets in the trust. II. Introduction to Trusts A. Changes in Trust Laws in Florida: 1. 736.1303: The new trust laws apply to all trusts created before, on, or after July 1, 2007. 2. 736.0105: There are 22 provisions which are mandatory for trusts created in Florida which prevail over any terms stated in the trust. They are broken down into 5 categories including substantive elements, procedural matters, public policy restrictions, provisions on court powers, and duties of trustees, which must be taken into account when creating the trust. B. Parties in Private Express Trust 1. The parties to a typical private express trust are: (See 736.0103): i. The settlor: Which is either referred to as the grantor, creator, trustor, or transferor; AND ii. The trustee: The one charged with managing the trust assets for the benefit of the beneficiaries (possesses legal interest in the trust); AND a. Can have co-trustees usually a successor trustee if the first one cannot perform their duties. iii. The beneficiaries: Those with equitable interest in the trust and for whom the trust is administered. 2. NOTE: A person can serve more than one role in a trust. For example the settlor can serve as a beneficiary (and it would be deemed a self-settled trust) or the settlor could also serve as trustee.

However, 736.0402(1)(e) provides that a sole trustee CANNOT be the sole beneficiary. If that were to be permitted there would be no separation of legal and equitable ownership. C. Methods for Creating an Express Trust 1. An express trust can be created in 3 ways: 736.0401: i. Trust Created by Transfer: A trust can be created when the settlor transfers funds to a third party who serves as trustee. ii. Self-Declared or Created by Declaration: A trust can be created when a settlor declares themselves trustee of the trust assets for the benefit of the beneficiaries. iii. A holder of a power of appointment can create a trust by exercising the power. III. In order for a trust to survive a challenge to its validity, it must have: A. 1) Met the substantive elements of an express trust (See IV Below); AND B. 2) Been executed with the requisite trust formalities (See V Below). IV. Substantive Trust Elements A. Trust Elements for Express Trusts: 1. There are 5 elements required for the valid creation of a private express trust which may NOT be altered by the settlor or by agreement: i. The trust must have a res; AND ii. The settlor must indicate the intent to create a trust; AND iii. The trust must have a trustee with fiduciary duties; AND iv. The trust must have identifiable beneficiaries; AND v. The trust must be have a lawful purpose. B. Res: Property or assets in the trust. 1. The res requirement can be satisfied by any type of recognized property interest including a contingent interest, an executory interest, or an equitable interest. i. 733.808 also permits death benefits to qualify as a property interest in a trust, which one obviously does not have a valid interest in until the death occurs. a. Death benefits include life insurance policy, accident policy, etc. ii. 732.513 also permits the possible expectancy of receiving, when named as a beneficiary, a devise under a will to satisfy the res requirement. 2. Something as little as $1 is enough to create res in a trust. 3. A res must be something that you would definitely receive. Cannot create a trust with the winnings you might receive from the Florida lottery when you havent even bought a ticket yet. 4. Future profit from a stock does not qualify as a res. C. Settlor Intent and Capacity: 1. An express trust requires the manifestation of trust intent which has 3 facets:
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i. The transferor must have intended a trust; AND ii. The settlor must have capacity to formulate the requisite trust intent; AND a. This facet creates an inquiry as to the settlors capacity to create the trust. iii. The intent to create a trust must be a present intent. 2. Express Intent to Create a Trust: i. Sole question is whether the settlor manifested an intent to create the trust. a. Do not need to use the words trust or even trustee but better to be clear

from the beginning otherwise the court will be left to interpret your intent. ii. Intent to create a trust can either be express or implied the Florida statutes have not specifically codified which is required, mere intent is all that is required. 3. Precatory Language: Statements such as: I wish, I strongly desire, I fervently hope, and I request. i. This type of language can create confusion as to the settlors intent and can be construed as either: a. 1) Manifesting an intent to create a trust with its attendant enforceable legal obligations on the trustee; OR b. 2) As merely indicating a desire on the part of the transferor to impose a moral obligation, which is legally unenforceable. ii. The testators use of precatory language may establish a trust, the language and surrounding legal circumstances however may not demonstrate an intention to impose a legal duty upon the legatee to carry out the desired purpose and leave the legatee free to carry it out or not, even though the testator had hoped the legatee would carry out his desire. a. Example: Testator did not include the granddaughter in trust, he hoped that her 4 uncles would care for her, but the language used did not impose the legal obligation for them to do so, therefore the uncles did not have to. 4. Capacity of Settlor: i. 736.0601: The capacity required of a settlor to form a revocable trust is the same as that required for a will. a. Any person who is of sound mind and who is either 18 or more years of age or emancipated minor may make a will. 1. Would be the same requirement for the creation of a testamentary trust. ii. The capacity required of a settlor to form an irrevocable trust is the same required to give a gift. There is NO statute, this is based on common law. 5. Present Intent to Create a Trust: i. Must be NOW, at the time of creation.
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ii. Testamentary trust has the same requirement as the creation of a will. iii. An inter vivos trust isnt valid if you say when Im older Ill set up a trust. D. Trustee with Duties 1. There are 2 parts of the trustee element: i. The trust must have a trustee; AND a. 736.0201(4)(b): Failure to have a trustee at any particular point in time

generally will not invalidate the trust because the court can appoint one. Therefore, if the settlor fails to name the actual trustee or names a trustee who refuses to serve, dies, or becomes incapacitated, the court could appoint a trustee to fill the role. ii. The trustee must have trust duties to perform. E. Beneficiaries 1. 736.0402(1)(c): There must be at least one definite beneficiary presently ascertainable or ascertainable within the applicable Rule Against Perpetuities. i. Cannot include unborn children, must at least been in gestation. a. Example: An 80 year old woman cannot have a trust for the benefit of their unborn child because it is highly unlikely they will ever be able to have one. ii. Can include adopted children as the beneficiary. iii. The ascertainable beneficiaries may be present or future beneficiaries with vested or contingent interests. iv. 736.0402(3) provides that a trust is valid even if the trustee is given the power to select a beneficiary from an indefinite class (with the particular beneficiary not yet being identified from that class). a. The selection must be done within a reasonable time or else the power fails and the trust fails all together. 2. A valid trust only exists if there is separation of legal and equitable interests. Because beneficiaries have equitable interest, if there is only one beneficiary, they cannot also be the trustee. 3. Merger Doctrine: If there is no separation of legal and equitable title, the titles have merged, the trust is invalid and will be dissolved. i. Example: Mother was the settlor, daughter was the trustee. Both mother and daughter were beneficiaries. While the mother was alive this was permissible because there was more than one beneficiary. However, upon mothers death the daughter was the only beneficiary and was also the trustee. There was no separation of legal and equitable title, therefore the trust was dissolved. F. Valid Trust Purpose 1. 736.0404: A trust may created only to the extent the purposes of the trust are lawful, not contrary to public policy, and possible to achieve. The trust and its terms must also be for the benefit of its beneficiaries.
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A trust is invalid if: a. Its purpose is for unlawful or the performance calls for the commission of a criminal or tortious act; OR b. It violates the Rule Against Perpetuities. ii. If certain persons are likely to engage in the commission of certain crimes, a trust to pay the fines of any of them who may be convicted of committing such acts is invalid. iii. A trust would be invalid if it was established to pay someones liability for operating a nuisance. iv. Cannot create trusts that advocate discrimination, terrorism, etc. V. Trust Formalities A. 3 Factors determine the formalities required for a valid trust (the first 2 apply in most states, the third is Florida specific): 1. Whether the trust is testamentary or inter vivos; AND 2. Whether the trusts res is real property or personal property; AND 3. Whether the trust is revocable, and if so, whether it contains any testamentary aspects. B. Testamentary Trust Formalities: 1. In all states, a trust created as part of a will (i.e.: testamentary trust) must comply with the states requirements for proper execution of a will. Unless the will that creates the trusts complies with the formalities for executing a will, the testamentary trust will fail. i. 732.502: 4 requirements for the valid execution of a will: a. The settlor/testator must sign the will at the end; AND b. The settlor/testator must sign (or acknowledge his signature) in the presence of at least two attesting witnesses; AND c. At least two witnesses must attest to the settlor/testators signature or the settlor/testators acknowledgment of his signature; AND d. The attesting witnesses must sign in the presence of the settlor/testator and each other. C. Inter Vivos Trust Formalities: 1. Formalities depend on whether the trust res is personal or real property. i. Real Property: Must comply with the Statute of Frauds for Trusts: 689.05: a. An oral express trust is NOT valid. 1. The trust must be in writing and signed by the settlor. i. The writing must manifest the trust intention and reasonably identify the trust property, the beneficiaries, and the purposes of the trust. a. A properly signed memorandum or letter signed by the trustee is sufficient to satisfy the requirements of the Statute of Frauds.
i.

ii. Must be signed by the settlor before or at the time of the declaration

of the creation of the trust or after the time of the declaration but before the transfer of property. b. However, a constructive trust or a resulting trust could be imposed in cases where the elements for either are met. ii. Personal Property: In most states, trusts consisting of personal property need not comply with any formalities, other than the substantive elements discussed above. D. Formalities for Testamentary Aspects of Revocable Trusts 1. 736.0403(1): The trust is validly created if the creation complies with the law of the jurisdiction in which the instrument was executed or the law of the jurisdiction in which at the time of creation the settlor was domiciled. 2. 736.0403(2)(b): Testamentary aspects of a revocable trust, executed by a settlor who is a domiciliary of Florida at the time of the execution, are invalid unless the trust instrument is executed by the settlor with the formalities required for the execution of a will in this state. i. Requires the testamentary aspects of all revocable trusts (whether the res is real or personal property) executed by a Florida domiciliary to comply with the formalities for wills contained in 732.502. ii. Therefore, the testamentary aspects of a written revocable trust of land that complied with the Statute of Frauds for Trusts could still fail if those provisions were not executed in accordance with the formalities for a will. iii. Additionally, the testamentary aspects of a revocable trust containing personal property must also follow the formalities for the execution of a valid will. E. Summary: Inter Vivos Trust Testamentary Trust Revocable Irrevocable Personal Property Testamentary aspects None Will formalities must be executed like 732.502 will 736.0403(2)(b) Real Statute of Frauds for Statute of Will formalities Property Trust of Land 689.05 Frauds for 732.502 and Testamentary Trusts of Aspects must be executed Land Like will 736.0403(2)(b) 689.05

VI. Constructive Trusts and Resulting Trusts A. Constructive Trust: Arises through the operation of law where one through fraud,

abuse of confidence, or other questionable means gains property which in equity or good conscience he should not be permitted to retain. 1. An equitable remedy that can be imposed to prevent unjust enrichment in certain cases. 2. If an oral trust cannot be enforced because it does not satisfy the Statute of Fraud for Trust of Land, the intended beneficiary of the oral trust could ask the court to impose a constructive trust on the property. 3. A constructive trust can be imposed when the transferee at the time of the transfer was in a confidential relationship with the transferor. 4. A constructive trust can be imposed if the transfer of the trust was procured by fraud, undue influence, or duress. 5. The constructive trust will be created with the assets that can be traced. B. Resulting Trust: 1. A resulting trust arises in 2 circumstances: i. A resulting trust arises because an express trust failed or because the express trust did not completely dispose of the trust assets. a. An express trust can fail for reasons such as its purposes became illegal, the trustee successfully assets the statute of frauds on trust of land as a defense to enforcement of the trust. b. An express trust may not completely dispose of trust assets when for instance the trust assets exceed those necessary to fulfill its purpose. c. The resulting trust arises in this case because the trustee is not entitled to keep the assets that were in the express trust. Rather, the beneficial interest reverts (results) back to the settlor or the settlors successors in interest. 1. The interest reverts back to the settlor based on a legally inferred intent that if the settlor had contemplated these results they would have intended the property to revert. 2. It is an equitable reversionary interest implied by law. ii. Purchase Money Resulting Trust: Can arise when the purchase price of the property is paid by one person but title is taken by another. The law presumes that the person holding title is holding it in trust for the person who paid the purchase price. a. Example: Celebrities that dont want the public to know they own the property. b. However, this presumption can be rebutted. 1. Can be rebutted by the title holder showing that it was a gift.

2. Can be rebutted if the payor was under a legal obligation to provide

for the title holder. VII. Revocable Trust and Properly Funding Trusts A. Revocable Trust: A trust which is revocable by the settlor without the consent of the trustee or a person holding an adverse interest. 1. It does not matter that a revocable trust may have testamentary characteristics such as not taking effect in enjoyment or possession until the death of the settlor, because the interest still passes to the beneficiary during the settlors life, it is not a testamentary trust. 2. Revocable Trusts and Probate: i. Although 736.0403 requires the testamentary aspects of a trust to be executed using will formalities, a revocable trust is NOT treated as a testamentary trust. a. Therefore, the trust res is NOT part of the settlors probate estate. ii. Generally a revocable trust avoids the probate process because the settlor already transferred title to the assets prior to their death, therefore the assets are in the trustees name. iii. 736.05053: Assets in a revocable trust may be used to pay certain expenses and obligations of the decedent/settlors estate. 3. Designing a Revocable Trust: i. A revocable trust is usually designed with distribution provisions that apply during 2 different time periods: a. 1) During the settlors lifetime; AND 1. 689.075: During the settlors lifetime, the settlor may choose to be the trustee or co-trustee and may retain the right to direct the distribution and administration of the trust assets. b. 2) After the settlors death. ii. A trust can contain provisions that if trustee becomes incapacitated a successor trustee is appointed and would administer the trust and make distributions for the benefit of the settlor. iii. Trust may provide for outright distributions when the settlor dies or may provide for assets to continue to be held in trust for the beneficiaries. a. The trust provisions would be an alternative to the use of a testamentary trust. b. Outright distributions or continuing trust provisions would be deemed to be testamentary aspects of the trust for purposes of 736.0403(2)(b). iv. Settlor may have will that provides for the residuary to be distributed to the revocable trust, i.e.: pour over desire. 4. Rules Governing Revocable Trusts:

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 736.0601: The capacity required of a settlor to create, amend, revoke, or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will. ii. 736.0602(1): If an inter vivos trust is silent as to revocability it is presumed that the trust is revocable. iii. 736.0602: Revocation or amendment of a revocable trust. a. If a trust is revoked or amended the trustee must deliver the property as the settlor directs. b. An agent with power of attorney or a guardian of the settlors property can exercise the settlors right to revoke, amend, or distribute the trust property. c. A trustee who does not know that the trust has been revoked or amended is not liable for distributions made or other actions taken. iv. 736.0603(1): While the trust is revocable (meaning before the settlors death), the duties of the trustee are owed exclusively to the settlor. v. 736.0604: Statute of Limitations for contesting trusts that were revocable immediately prior to the settlors death. vi. 736.0403(2): Rules governing revocable trusts with testamentary aspects. vii. 736.0406: Either a revocable trust, in whole or in part, is void if creation was procured by fraud, duress, mistake, or undue influence. viii. 736.0505(1)(a): Whether or not the revocable trust contains a spendthrift provision, the property within the trust is subject to the claims of the settlors creditors during the settlors lifetime to the extent that the property would not otherwise be exempt by law if owned directly by the settlor. ix. 736.0813(4): While the trust is revocable (meaning during the settlors lifetime) the trustees duty to account is owed to the settlor. x. 736.1105: A provision in a revocable trust in favor of a former spouse is generally void upon annulment or dissolution unless the trust instrument or the judgment for dissolution provides otherwise. 5. Modification or Termination of a Revocable Trust: 736.0602: i. A settlor of a revocable trust may revoke or amend such a trust by substantial compliance with a method provided in the terms of the trust. ii. If the trust instrument does not include a method, the statute provides that modification or revocation of such a trust can be accomplished by: a. A later will or codicil that expressly refers to the trust or specifically devises property that would otherwise have passed according to the terms of the trust; OR b. Any other method manifesting clear and convincing evidence of the settlors intent. 6. Summary of the Formation of a revocable inter vivos trust:
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i. Settlor acts as trustee or transfers property to someone else as trustee. ii. A settlor transfers assets to himself OR transfers assets to somebody else as

trustee, which is typically done in writing. iii. Usually a writing where settlor retains right to revoke. iv. Unless 736.0602, as of July 1, 2007 the trust is deemed revocable unless you state otherwise. v. Settlor does retain some benefits for himself during his lifetime and then upon death assets are either distributed to other beneficiaries or held in trust for other beneficiaries. vi. Contains distribution provisions during 1) benefits that occur during settlors lifetime (trust was created where income is given to S during Ss life) and 2) after Ss death (ex: to S for life and then to Ss children or spouse or to S for life then to Ss spouse for life, then to Ss children). vii. Trust can terminate upon death or continue. viii. If settlor stays quiet about what happens to the trust after his death, it goes back to his estate, so then you dont avoid probate. ix. Title that would have gone to minor children would go to guardianship if trust doesnt specify. B. Funding a Revocable Trust: If the settlor wants to obtain the benefits of avoiding probate and continuity of asset management after their death, the trust must be properly funded before their death. 1. For any trust to be valid you must have a res/asset. 2. Transferring assets into a trust requires: i. Assessing the nature of the assets; AND ii. Complying with the requisite formalities for transferring the assets to the trustee. a. Transferring Real Property to the trustee is generally accomplished by means of a properly executed deed recorded in the county where the real property is located. 1. The deed must be 1) signed by the settlor; 2) signed in front of 2 witnesses; 3) delivery of the deed to the trustee must be effectuated; 4) notarized; and 5) should be recorded. 2. Should state on the deed that it is being transferred for purposes of a trust and who the beneficiary is, otherwise the trustee will take the deed in fee simple. 3. Generally, the settlor may fund the res with any type of property: i. 733.808 permits the res to consist solely of death benefits or insurance proceeds. ii. Res can also consist solely of pour over assets from the will. iii. However, some assets are more appropriate than others:
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a. For example, if you have vacation property located in North Carolina, it

would be easier to include that property in an inter vivos trust rather than having to go through ancillary administration of that probate asset in North Carolina. iv. Not a good idea to fund a revocable trust with homestead property because the home could then be subject to bankruptcy creditors, depends on the court. a. However, if done the owner that is devising the homestead still retains the homestead while they are alive and still retain homestead protection against creditors. b. Unless you want to prevent your family from selling the homestead immediately after your death there is really no need to put the homestead in a revocable trust because they will be protected from creditors anyways. v. Intangible Personal Property: a. You can create a trust with $1. Cash can be transferred by writing a check payable to the trustee. b. Stocks, bonds, and other securities will need to be re-registered in the trustees name(s). vi. Tangible Personal Property: Depends on what it is, but cars and boats for instance need to be re-titled. More value tangible personal property such as jewelry and furniture that are without title are typically transferred by making an assignment or bill of transfer which provides written evidence that you are giving the property to the trustee. vii. Life insurance and retirement plans: Name trust as beneficiary of the policies. C. Funding an Irrevocable Trust: Can be done with the same assets and in the same manner as a revocable trust, but more care should be taken when funding because the assets are irrevocable. D. Funding a Testamentary Trust: Funding is done by means of a devise. The devise may be specific, demonstrative, general, or residuary. The trust will actually become funded when the personal representative distributes the assets to the trustee. VIII. Crossover Issues with Wills & Trusts A. Mistake, Reformation, and Construction 1. Mistake: i. Three types of Mistakes in Wills: a. Mistake in Inducement (mistaken belief about something); b. Mistake in Drafting (scriveners error); c. 732.5165: Mistake in Execution (mistaken belief as to what you were actually signing). This is the ONLY mistake that will invalidate a will. ii. When there is a mistake in the terms of a trust refer to 736.0415:
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a. The court may reform the terms of a trust, even if unambiguous, to

conform the terms to the settlors intent if it is proved by clear and convincing evidence that both the accomplishment of the settlors intent (inducement) and the terms of the trust (either drafting or execution of the trust) were affected by a mistake of fact or law, whether in expression or inducement. 2. Reformation: The changing of terms or fixing a mistake. i. If a will is executed with a mistake in inducement or a scriveners error it will NOT be reformed, it will stand as is. a. Mistake in execution does not reform either; it voids the provision(s). ii. A court will fix mistakes, ambiguities, or conflicts with regards to a trust, giving a court more power with trusts than with wills. 3. Ambiguity: i. There are 2 types of ambiguities: a. Latent: Look outside the document bringing in extrinsic and intrinsic evidence. b. Patent: Looks at the four corners of the document. ii. In a will if there is an ambiguity the court will interpret the will as to the testators intent. The court will not reform (rewrite) the will if there is an ambiguity. iii. Court will interpret an ambiguity in a trust, as they will also do with a will. B. Undue Influence: 1. 736.0406: A trust is void in whole or in part if procured by fraud, duress, mistake, or undue influence. (This is the same for wills). 2. To raise a presumption of undue influence in a will must show: i. Confidential relationship; AND ii. Active procurement; AND iii. Substantial beneficiary. C. Lapse and Antilapse: 1. Common Law: i. No property interest is created when the devisee fails to survive the testator, thus, a beneficiary of a testamentary trust who predeceases the testator/settlor never obtains his recognized property interest. ii. Property interest created when inter vivos trust is created because the beneficiary obtains his property interest when the trust is created and unless there was express language providing otherwise, survivorship was not necessary. a. Interest was vested upon creation and for a beneficiary to receive a gift they did not have to survive to the time of possession. 2. Florida Law:
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 736.1106 requires a beneficiary of a future interest under either a testamentary trust or an inter vivos trust to survive to the distribution date. ii. A beneficiarys property interest in an inter vivos trust still arises when the trust comes into existence, whether a present or future interest. a. The future interest is treated as a contingent interest, whereby it is contingent upon the beneficiary surviving to the distribution date, as opposed to being treated as a vested interest. iii. 736.1106(2): Unless a contrary intent appears in the trust instrument, if a beneficiary fails to survive to the distribution date, their descendants will receive the gift, taking per stirpes what the beneficiary would have been entitled to. iv. 736.1106(3)(a): If the trust instrument has words of survivorship and the beneficiary fails to survive to the distribution date this is valid intent to show that the beneficiarys descendants will not receive the gift. v. 736.1106(4): The order in which property will pass from a trust if there is no surviving beneficiary or taker. 3. Difference with Wills and Trusts: i. In order to take from the antilapse statute under a will, you must be a descendant of the testators grandparent. However, with a trust, you have to be a descendant of the beneficiary 736.1107 Changes in Securities; accession; nonademption Look up, pay close attention to distribution date. (1) (2) Brundage v. Nak of America pg. 466 D. Divorce: 1. 736.1105: If the settlor created the revocable trust before the annulment of dissolution of a marriage, and unless the trust instrument or dissolution decree provides otherwise, any provision in the trust that affects the settlors spouse will become void, and the trust will be administered or construed as if the spouse had died on the date of the annulment or dissolution. i. NOTE: Terms of the trust are changed for a revocable trust, but not for an irrevocable trust. ii. Loook at 732.703. E. Killer: 1. 736.1104: A beneficiary of a trust who unlawfully or intentionally kills or unlawfully or intentionally participates in procuring the death of the settlor or another person on whose death such beneficiarys interest depends (such as another beneficiary who will share in their benefits does not only apply to the killing of the settlor), is not entitled to any such trust interest, including
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homestead, dependent on the victims death, and such interest shall devolve as though the killer had predeceased the victim. i. Applies to BOTH revocable and irrevocable trusts.
IX. Trusts Providing Protection from Creditors A. Creditor Access: 1. Generally, following standard creditor access principles, if an equitable interest

is clearly determinable and freely alienable by the trust beneficiary, the beneficiarys creditor can generally reach that interest. 2. Spendthrift Provision: 736.0502: Generally include language restricting a beneficiary from selling, giving away, assigning, or otherwise alienating his beneficial interests. These provisions also include language restricting the beneficiarys creditors from accessing the interests in trust. i. Exampls on 474 -> 3 different Types ii. Spendthrift Clause - > pg 475 iii. The settlor can include a provision in the trust document explicitly restricting a beneficiarys right to voluntarily and involuntarily alienate his interest. iv. Restricts the beneficiarys creditors from getting access to interests in the trust. v. Example: No interest of any beneficiary in the income or principal of this trust shall be assignable in anticipation of payment or be liable in any way for the beneficiarys debts or obligations and shall not be subject to attachment. vi. Originally created so that the settlor could protect their assets that they were leaving to benefit another if that other was known to be a spendthrift, someone who was liable to overspend. a. Now, spendthrift provisions are included in virtually every trust. 1. If a spendthrift provision is NOT included 736.0501 applies: A creditor MAY reach the beneficiarys interest by attachment of present or future distributions. 3. Super Creditors Gov, Kids, Attorneys Fee -> 736.0502 i. Assuming it is not a discretionary trust/clause ii. 0504 -> Discretionary Trust: Is subject to a 4. Exceptions that Give Creditors Access: i. Florida law will look at 2 factors to determine whether a spendthrift provision or additional creditor protection feature of a trust will in fact block a creditors access to the debtor/beneficiarys trust interest: a. 1) Type of Creditor: 1. 736. 0503(2):There are 3 types of creditors (known as special creditors) that a spendthrift provision is invalid against:
16

i. A beneficiarys child, spouse, or former spouse can obtain a judgment

if the beneficiary is liable to them for support maintenance. ii. A creditor who has provided services for the protection of a beneficiarys interest in the trust. a. Example: A lawyer. iii. A claim of the State of Florida or the United States. 2. NOTE: To break through the spendthrift provision the creditor must have a court order. They can attach to present or future interests. The court can limit the award, and can only be used as a last resort. b. 2) The type of interest the debtor/beneficiary has in the trust. 1. Mandatory Provision: A trustee must make distributions pursuant to the settlors instruction. i. Example: Trustee shall distribute all trust income quarterly to A. ii. Special creditors may reach interests in mandatory trusts whether or not there is a spendthrift provision. The creditors can only take up to the amount that can be distributed to the beneficiary. 2. Discretionary Provision: A trustee can make certain decisions as to when to distribute to the beneficiary. i. Example: A trustee can be given the right to decide which beneficiary out of a group will receive the income. ii. A discretionary trust with a spendthrift provision CANNOT be reached by creditors. a. This applies to discretionary support trusts as well. iii. The maximum that the trustee can potentially give to the beneficiary can be reached by the creditor. 3. Support Provision: Settlor places assets in trust for the care, comfort, maintenance, and education of a designated beneficiary. i. Example: Trustee shall distribute income as necessary for As support, health, and education. ii. Support provision can be considered a hybrid between mandatory and discretionary provision. 4. All of these provisions can be intertwined and work together. And all can be reached by creditors. ii. Self-Settled Trusts: A trust in which the settlor is also a beneficiary. a. NOTE: Differs from a self-declared trust whereby the settlor and the trustee are the same person. b. If a settlor creates a trust and names themselves a beneficiary, the interest the settlor retains in the trust can be reached by creditors. Cannot create a trust to protect their own interests from creditors.

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1. 736.0505(1)(b): With regards to an irrevocable trust, a creditor of

the settlor may reach the maximum amount that can be distributed from the trust to or for the settlors benefit. i. In contrast, 736.0505(1)(a) provides that the property in a revocable trust is subject to the claims of the settlors creditors. X. Additional Uses for Trusts A. Elective Share Trusts: 1. Based on the terms of the testators will, a spouse who is dissatisfied with the amount they are being devised may exercise their right to an elective share. 2. Rather than transferring property outright to a spouse, the client might transfer assets to an elective share trust. 3. Establishing an Elective Share Trust: 732.2025(2): i. There are 3 requirements for establishing a valid elective share trust: a. 1) The surviving spouse is entitled for life to the use of the property or to all the income payable at least as often as annually; AND b. 2) The surviving spouse has the right to require the trustee either to make the property productive or to convert it within a reasonable time; AND c. 3) During the surviving spouses life no one other than the surviving spouse has the power to distribute income or principal to anyone other than the surviving spouse. ii. Once a trust meets the requirements of an elective share trust the next step is to determine how the assets of the trust are valued for the purposes of satisfying the surviving spouses 30% elective share amount. a. The more rights the surviving spouse has in the elective share trust, the more the spouses interest in the trust can be used to satisfy the elective share amount. b. 732.2095(2)(b) provides that if the surviving spouse has an interest ina trust that meets the requirements of an elective share trust, the value of the spouses interest is 100% of the value of the trust if the spouse has both: 1. 732.2095(1)(c): Qualifying Invasion Power: A power held by the surviving spouse or trustee to invade trust principal for the health, support, and maintenance of the spouse; AND 2. 732.2095(1)(b): Qualifying Power of Appointment: General power of appointment exercisable by the surviving spouse in favor of the spouse or the spouses estate. i. The spouse receives only testamentary power, however, they must have the power to exercise it in favor of their estate without consent of any other person.
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3. 732.2095(2)(b)(2): If the surviving spouse receives only a qualifying

invasion power but no qualifying power of appointment, their interest is only valued at 80% of the trust. 4. 732.2095(2)(b)(3): If the trust does not include either power, or if includes a general power of appointment but no power of invasion, the value of the spouses interest in the trust is 50%. i. NOTE: The elective share trust does NOT have to include either provision. 4. Using Life Insurance for Elective Share Trusts: i. Under 733.808 trusts can funded with the expectation of receiving life insurance proceeds. ii. Instead of paying life insurance proceeds directly to the surviving spouse, the decedent may have those proceeds payable to the elective share trust. iii. Only the cash surrender value of the insurance policy, and not the much larger amount of the policy proceeds, is included in computing the elective estate. But the full proceeds payable to the spouse are counted in determining if the spouse has received the 30% elective share trust. a. Example: If an insured has a whole life policy with a face amount of $500K and a cash surrender value of $20K, only the $20K would be included in the elective estate. If the surviving spouse is the beneficiary, the full $500K would be counted toward satisfying the 30% share. B. Trusts for Animals: 1. The first exception to the requirement of having an identifiable beneficiary for a valid private express trust is 736.0402(1)(c)(2): if the trust is in care for an animal as provided in 736.0408. 2. 736.0408(2): The settlor can appoint someone in the trust instrument to enforce the trust on behalf of the pet. The settlor can also appoint someone to enforce the trust terms. i. Prior to the enactment of this legislation, such trusts were referred to as Honorary Trusts, under common law, because the trustee was on his honor to carry out these terms. 3. The trust can be created during the settlors lifetime (inter vivos) or as a testamentary trust. i. Any animal that is alive while settlor is alive can be included in the trust. ii. Cannot add animals after the settlor is dead. iii. If an animal is in gestation, presumably they should be included. iv. Trust terminates when last animal dies. v. Trust needs to be enforced by someone, animal cant enforce it. The trust can be enforced by someone named in trust or if silent the court can appoint someone or someone can ask to be appointed.
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vi. Money in the trust needs to be used for their intended purposes if funds are

excessive the court can distribute it back to the settlor if they are still alive or have it made part of the settlors estate. (Same regarding funds left over after the last animal dies). XI. Charitable Trusts A. A Charitable Trust must have a purpose that benefits the community generally. B. Formalities of a Charitable Trust: 1. The same requisite formalities for private express trusts apply to charitable trusts, therefore: i. Testamentary Charitable Trusts must be executed like a will and comply with 732.502. ii. Inter Vivos Charitable Trusts must meet same requirements as an inter vivos private express trusts, thus: a. If the res if the inter vivos charitable trust is land, the trust must comply with the Statute of Frauds for Trusts of Land, 689.05. b. In the rare case of a revocable charitable trust, any of the trusts testamentary aspects (regardless of its res) must comply with will formalities as required under 736.0403(2)(b). 1. A revocable charitable trust would be rare because the revocation feature would prevent the settlor from receiving federal income and transfer tax benefits. C. Substantive Elements of a Trust: Private vs. Charitable: 1. Substantive Elements of a Private Express Trust: 736.0404 i. Res; AND ii. Trust intent (and capacity to formulate intent); AND iii. Trustee with duties; AND iv. Identifiable beneficiary; AND v. Valid purpose. 2. Substantive Elements of a Charitable Express Trust: i. Res; AND ii. Trust intent (and capacity to formulate intent); AND iii. Trustee with duties; AND iv. Beneficiaries may be indefinite or charitable organization (definite) a. Be careful not to limit the beneficiary so much as to identify a particular person, but can be particular as to a specific charity. v. Purpose Element: May not be illegal and is capable of being fulfilled AND must be for a charitable purpose. a. Charitable Purpose: 736.0405(1): Included but not limited to: advancement of arts, sciences, education, religion, and the promotion of government or municipal purposes.
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1. 736.0405(2): The court can select a particular charitable purpose or

beneficiary when the settlor fails to do so. However, the selection must be consistent with the settlors intent and the court can only select a beneficiary if they are able to ascertain the settlors intent. D. Standing and Enforcement: Who has standing to enforce a trust? 1. Private Express Trust: i. Beneficiaries have standing to enforce. ii. A settlor DOES NOT have standing to enforce unless he is a beneficiary or if it is a revocable trust he can simply revoke it. 2. Charitable Express Trust: i. 736.0110(3): State Attorney Generals Office. a. Represents the people. ii. 736.0110(1): Charitable organization as beneficiary of a trust a. The people in the community cannot enforce the terms of the trust. iii. 736.0405(3): Settlor can enforce the terms of the trust. E. Rule Against Perpetuities and Charity to Charity Exception 1. Duration Exception to Charitable Express Trusts: i. The settlor of a charitable express trust has the option to establish the trust with indefinite duration, whereby the settlor of a private express trust is limited by the Rule Against Perpetuities: a. The interest must vest or fail to vest in 21 years, 90 years, or 360 years. ii. Not every gift to a charity is exempt from the Rule Against Perpetuities. The exception applies only to a purely charitable trust. a. If the trust has BOTH private and charitable beneficiaries (mixed) the exception does not apply and may be vulnerable to the Rule Against Perpetuities. b. Charity to Charity Exception: 689.225(5)(e): 1. A future interest in a charity is not vulnerable to the Rule Against Perpetuities if the preceding interest was also held by a charity. iii. A charitable trust does NOT have to be for an indefinite duration, the settlor could choose to have it terminate after a period of time. F. Cy Pres Doctrine: 736.0413: 1. Only applicable to charitable express trusts, does not apply to private express trusts. 2. A court will allow modification of a charitable trust using the cy pres doctrine if 2 conditions are met: i. 1) it has become impossible, impracticable, wasteful, or illegal to carry out the particular purpose; AND ii. 2) The settlor manifested a more general charitable intent with regard to the trust rather than a specific intent.
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3. NOT appropriate if the settlor provided an alternate disposition in the trust or

specific intent. 4. Cy Pres is used to approximate the settlors goal as closely as possible while maintaining the public benefits of the perpetual charitable trust. G. 21 Year Trusts for Non-Charitable Purposes 1. 736.0409(1): Except as otherwise provided in 736.0408, trusts for animals, or by any other provision of law, a trust MAY be created for a non-charitable purpose (private) without a definite or definitely ascertainable beneficiary or for a non-charitable but otherwise valid purpose to be selected by the trustee. 2. The trust cannot be enforced for more than 21 years (so is only valid for a limited duration). XII. Termination and Modification of Irrevocable Trusts A. EXAM NOTE Do NOT confuse with the termination or modification of a revocable trust which can be found in 736.0602. B. The Florida Statutes, 736.04112, 736.04115, & 736.0412, are all in addition to and not in derogation of the rights under the common law to amend, modify, terminate, or revoke an irrevocable trust. C. Common Law Rule for Prematurely Terminating an Irrevocable Trust: 1. An irrevocable trust could be prematurely terminated by the beneficiaries only if there was : i. 1) Unanimous consent of all the trust beneficiaries for such premature termination; AND ii. 2) The termination would not jeopardize a material purpose of the settlor creating the trust. 2. Under common law, there is no need for the settlors consent, the trustees consent, simply all of the beneficiaries must consent. 3. The common law rule was originally just for termination of an irrevocable trust, it has been extended to modification of an irrevocable trust. D. Common Law: Non-Judicial Termination and Modification of an Irrevocable Trust: 1. Material Purpose: i. Under the common law a trust was deemed to have a material purpose when: a. The trustee has discretion on when and how to make distributions to the beneficiaries, i.e., support trust, or discretionary trust. b. A spendthrift trust was deemed to give a trust a material purpose. c. And a postponement of enjoyment trust was created by the settlor with a material purpose. ii. Even if all the beneficiaries agree to terminate or modify the trust, it cannot be done if it would be inconsistent with the material purpose of the trust, unless the settlor consented, or after the settlors death, with authorization of

22

the court, it is determined that the reason(s) for termination or modification outweigh the material purpose. a. Lack of settlors consent has no effect if all the beneficiaries agree to the termination or modification. iii. The material purpose, unless stated specifically by the settlor in the trust, is often left to be inferred from 1) specific terms of a trust; 2) the nature of the various interests created; or 3) the circumstances surrounding the creation of the trust. 2. Unanimous Consent of Beneficiaries: i. Since the consent of all the beneficiaries is required, if there is a minor child, unborn child, or an incompetent person included in the trust as a beneficiary, a guardian can consent for them. a. If the consent of a person cannot be obtained, but the termination or modification will ultimately benefit them, the termination or modification will be permitted. E. Common Law: Judicial Termination and Modification of an Irrevocable Trust: 1. Where non-judicial requirements for termination or modification of an irrevocable trust could not be met, it can nevertheless be modified by a court if the requested modification was due to: i. Change in circumstances not anticipated by the settlor ii. And modification or deviation will further the purpose of the trust. F. Florida Statutory Law on Termination and Modification: 1. These statutes do not apply unless or until the trust has become irrevocable. 2. Type of Relief for both non-judicial and judicial termination and modification: i. Amend the administrative or distributive terms; OR ii. Terminate the trust in whole or in part; OR iii. Increase or decrease the acts a trustee is authorized to perform. G. Florida Law: Non-Judicial Termination and Modification of an Irrevocable Trust: 1. 736.0412(1): i. Settlor must be dead at the time of the modification or termination; AND a. In contrast to the common law provision where the settlor must consent, this statute only applies when the settlor is dead. ii. There must be unanimous consent of all qualified beneficiaries; AND a. 736.0103(14): A living beneficiary, who is a distribute or permissible distribute of trust income or principal. b. 736.0410: Any beneficiary can contest a non-judicial modification, i.e., guardian of an unborn child can contest. c. 736.0412(3): An agreement to modify a trust is binding on beneficiary who was represented in the agreement by another, i.e.: power of appointment, etc.
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iii. There must be consent of all trustees. a. In contrast to the common law provision where only the consent of all

beneficiaries is required. iv. The modification or termination must not be prohibited under 736.0412(4): a. Cannot modify a trust created prior to January 1, 2001. b. Cannot modify a trust created after December 31, 2000 if the settlor of the trust uses the shorter Rule Against Perpetuities period (21 or 90 year) instead of the 360 years for the trust, and the terms of the trust do not expressly allow for non-judicial modification. c. Cannot modify or terminate a charitable trust until all charitable interests in the trust are terminated. 2. 736.0412(2): i. Non-judicial modifications are still permitted even if the trust has a spendthrift provision. H. Florida Law: Judicial Termination and Modification of an Irrevocable Trust: 1. Florida law permits for Judicial Modification under 2 circumstances: i. 736.04113: Termination and Modification Consistent with Settlors Intent: a. Need to allege that the terms and purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill; OR b. Unanticipated change in circumstances, compliance with original terms would defeat or substantially impair a material purpose of trust or material purpose of trust no longer exists. ii. 736.04115: Termination and Modification for the Best Interest of the Beneficiaries: a. When the terms of the trust are not in the best interests of the beneficiaries, the court can modify the terms and should attempt to conform the changes to the extent possible to the settlors intent, taking into account current conditions and the best interests of the beneficiaries. 1. However, the beneficiarys best interest controls, therefore the court can modify the terms in derogation of the settlors intent. b. 736.04115(3)(b): The settlor can block this best interest modification by using the shorter Rule Against Perpetuities period (21 or 90 years) instead of 360 years by drafting the trust to comply with the shorter period and including trust provisions that expressly prohibit judicial modification. 2. Under both of these circumstances a trustee or a qualified beneficiary may ask the court to terminate the trust or modify the trusts terms. i. In making its determination the court will consider: a. 1) The terms and purposes of the trust; AND
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b. 2) The surrounding facts; AND c. 3) All relevant extrinsic evidence. 1. Therefore the court can go beyond the four corners of the trust

instrument. ii. A spendthrift provision is only one factor the courts should consider, it does NOT automatically bar modification. I. Other Termination, Modification, and Reformation Statutes: 1. 736.0413: Cy Pres Doctrine. See More Under Charitable Trusts Above. 2. 736.0410(1): A trust terminates to the extent the trust expires or is revoked (i.e. natural termination). i. A trust does not live beyond its purpose. a. Once it completes its purpose it terminates naturally. 3. 736.0414(1): Termination of an uneconomical trust with a total value less than $50K. i. The trustee can terminate the trust if they conclude that the value of the trust property is insufficient to justify its continued cost of administration. ii. A spendthrift clause does not block termination under this section. iii. If over $50K need a court order but must prove that it is unwise to continue the administration of the trust. 4. 736.04117: A trustee can modify the distributive provisions if the trustee has been given the absolute power to invade the principal. i. As long as power is not limited to specific or ascertainable purpose (i.e. a support trust). ii. Can take out principal and create a whole new trust. iii. New trust must include the same beneficiaries. XIII. Fiduciary Powers, Duties, and Liabilities A. NOTES: 1. 733.602: A Personal Representative is a fiduciary who should observe standards of care similar to those of trustees. 2. 736.0701(2): A person designated as a trustee may decline, because a person should not have that burden if doesnt want to act in that capacity. Cannot impose fiduciary duties on someone, they can decline and court can appoint another trustee. B. Powers of a Trustee: What the trustee is permitted to do, as limited by their duties. 1. Trustee derives powers from 4 sources: i. The express provisions of the trust document; ii. State statutes granting trustees certain powers; iii. Common Law or implied Powers; iv. Court orders to a trustee.

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2. The settlor may use the trust instrument to expand or limit statutory or common

law powers: i. Under 736.0815 a trustee has: a. (1) All the powers granted in the trust instrument; AND b. (2) Except as limited by the instrument, 1. (i) All the powers over trust property that an unmarried competent owner has over individually owned property; AND 2. (ii) The powers listed in the Code. 3. 736.0815(2): May not exercise a power that will violate a duty. 4. 736.0816 contains 25 extensive, detailed, and wide range lists of trustees powers. i. Powers that are listed in this section will apply unless the settlor limits in the trust instrument itself. C. Duties of a Trustee: 736.0801736.0817: i. You can not force a trustee to remain. See .0105(2) 2. General Duty of a Trustee: i. 736.0801: General duty to administer the trust in good faith and for the benefit of the beneficiaries. 3. Duty to Administer Trust in Good Faith: i. Mandatory provision. ii. Example: Bad faith for the trustee to sign checks on the trust bank account. 4. Duty of Loyalty: i. 736.0802(1): The duty of loyalty requires a trustee to administer the trust solely in the interests of the beneficiaries. ii. Generally prohibits self-dealing. (A conflict between the trustees fiduciary duty and personal interests). a. 736.0802(2): Under the common law it was an outright prohibition, now they are voidable rather than void. 1. This section lists 7 exceptions where it may be found that the trustee was not breaching their duty of loyalty, such as: i. The beneficiaries consented to the self-dealing or if it is a revocable trust, the trustee could get the settlors consent to do self-dealing. 2. Self dealing can include dealing with persons or entities that are associated with the trustee. b. 736.0802(5): There are certain lawful activities which are not considered self dealing, such as a bank that is the trustee investing funds in its own bank, because the purpose and interest will benefit the beneficiaries. 5. Duty of Impartiality:

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6.

7.

8.

9.

736.0803: A trustee must administer a trust impartially such that the administration is equitable to all trust beneficiaries. ii. Built in tension between income beneficiaries and remainderman beneficiaries trustee needs to remain impartial between the two. a. Cannot favor one set of beneficiaries over the other. b. Must have due regard for the diverse beneficial interests created by the terms of the trust. c. Must be able to be loyal to different beneficiaries competing economic interests. Duty to Administer Trust Prudently: i. 736.0804: A trustee must administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements and other circumstances of the trust. The trustee must exercise reasonable care, skill, and caution. ii. Prudent Investor Rule: 518.11(1)(a): To invest and manage the trust assets as a prudent investor. a. View the investment portfolio as a whole, rather than looking at each individual investment and encourages greater return. b. Encourages a modern portfolio investment theory. Duty to Incur Only Reasonable Expenses: i. 736.0805: The trustee should incur only expenses that are reasonable in relation to the trust property, the purpose of the trust and the skills of the trustee. Duty to Use Special Skills: i. 736.0806: If the trustee has special skills, or the trustee was selected on the basis of representations of special skills or expertise, the trustee is under a duty to use those skills. a. If you possess a greater degree of skill than you will be held to a higher standard. b. See Prudent Investor Rule here as well. Duty to Prudently Exercise Power to Delegate: i. 736.0807: A trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances, including the delegation of investment functions if not capable of making prudent investments themselves. a. Requires the trustee to exercise reasonable care, skill and caution in selecting an agent and establishing the scope and terms of the delegation. b. Reviewing the agents actions periodically, not just delegating and leaving it all up to them.
i.

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c. An executor stands in the position of a trustee holding the estate in trust

for the heirs, distributees, and creditors. ii. 518.112(1): Proper Delegation of Investment Function. Trustee can delegate duty to invest, but be careful in selection, and supervise. a. If the trustee complies with the terms of this section they are not liable for an action of the agent to whom the function of investing was delegated. 10. Duty to Control and Protect Trust Property: i. 736.0809: Trustee shall take reasonable steps to control and protect trust property. a. Have to have necessary powers to accomplish these duties. 1. 736.0806: Gives power for trustee to fulfill these duties: i. (9): Trustee is given power to repair buildings; ii. (12): Can buy insurance for the property 2. 736.0811: Imposes on trustee a duty to enforce/defend claims, so in order to control or protect property you have to sue. 3. 736.0812: Trustee has duty to compel the delivery of trust property from any previous trustee or any other persons holding that property. 11. Duty to Inform and Account: i. 736.0813: The trustee must keep the qualified beneficiaries reasonably informed as to the trust administration. a. Notify the qualified beneficiaries of the existence of a trust and make accounts detailing the nature of the trust and the amount of the trust and how you have been administering it. b. On a yearly basis, the trustee has to give an annual account so beneficiaries can see reasonable expenses, impartialities, prudent investor, etc. ii. 736.0813(1)(d): The annual accounting goes to qualified beneficiaries in an irrevocable trust. iii. 736.0813(4): If its a REVOCABLE trust the accounting goes to the settlor. iv. What if a trustee is also a beneficiary? A trustee has to be careful because trustee owes duty to everybody, not just him or herself. v. Can file an action against a trustee for failing to provide beneficiary with an accounting. vi. 736.0814: A trustee who is also the beneficiary of a trust with discretionary powers will be prohibited from making discretionary distributions unless a trust instrument states this statute does not apply. 12. Duty Not To Commingle: i. 736.0810(2): Absolute duty to keep trust property separate from trustees own personal property.
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a. 736.0810(4) provides exception to this duty: 1. A trustee is permitted to invest as a whole the property of 2 or more

separate trusts as long as distinct interests are clearly indicated. 2. Have to keep really good records. 3. Under 660.42 and 660.431 this is permitted by trust companies, because the more money in one fund the more interest that builds and the more money each trust will make. D. Liabilities: 736.1001736.1018: 1. Internal Liability: A trustee who violates any of the trustees duties can be held liable to the beneficiaries. i. Trustee is NOT automatically liable for an investment downturn. ii. 736.1001(2): The trustee can be enjoined from committing further breaches, ordering the trustee to account, removing the trustee, and compelling the trustee to pay money or restore property. 2. External Liability: A trustee may be also liable in tort, contract, or personally to persons who arent beneficiaries and to whom he owes no fiduciary responsibilities. 3. Damages: What happens is a trustee co-mingles assets, engages in self-dealing, there are losses to a trust, or trustee made profit for themselves? i. 736.1002(1): Beneficiary can collect from trustee because the trust could have made a profit had it not been for their wrongdoing. a. If theres a breach of duty, you can get greater of these two: 1. Restore trust to position it was in; OR 2. Get the trustees profits. b. Beneficiary decides what they want, they will usually pick whichever greater. 4. Liabilities to Beneficiaries: i. 736.08125: What is successors trustee position regarding duties and liabilities? a. Successor trustee is not personally liable to qualified beneficiaries for any actions taken by prior trustee. AND Not required to sue prior trustee under certain circumstances, if: 1. The settlor was a previous trustee and the trustee was a revocable trust; OR 2. If beneficiaries have waived accounting of a prior trustee, then successor trustee isnt required to sue prior trustee for bad accounting; OR 3. If a super majority of beneficiaries release successor trustee from liability; OR

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4. If the beneficiaries dont sue successive trustee within a certain time

period. 5. Liability to Third Parties: i. Under Common Law, trustee would be liable not only for own actions but also for acts of agents based on respondent superior. ii. 736.1013(2): A trustee is personally liable for torts committed in the course of administering a trust or for obligations arising from ownership or control of trust property only if the trustee is personally at fault. a. Example: Office building could be an asset in a trust and say that someone slips and falls because there is water on the floor. If the person slips and falls they may end up suing building that is owned by the trust. The trustee would not be personally liable (not cause of water being there). However if the trustee were at the place and was the one who spilt the water, then the trustee could potentially be liable because they caused the tort iii. 736.1013(1): Contractor claims by third parties against trustees: a. Generally, if trustee in contract discloses fiduciary capacity, a trustee isnt personally liable on a contract entered into by trustee in such fiduciary capacity; or if contract says otherwise. iv. 736.1016: Protects third parties who deal with trustees. a. Provides that a person other than a beneficiary who in good faith deals with a trustee is not required to inquire into the extent of trustees powers or the propriety of their exercise. XIV. Rule Against Perpetuities A. Introduction: 1. Designed to prevent the perpetual entailment of estates and to give them over with free and unhampered conveyances. 2. The rule does NOT apply to charitable trusts. B. Common Law Rule Against Perpetuities: No interest is good, unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. 1. Meaning: The vesting of an estate under a will or deed can be postponed no longer than a life or lives in being and twenty-one years plus the period of gestation. i. The Rule allows you to control property during your life and after your death dependent on the life in being. 2. Interests that are NOT vulnerable to the Rule Against Perpetuities: i. Present interests. ii. Future interests retained by the grantor. a. Including: possibility of reverter, right of re-entry, and reversion. iii. Future interests which are indefeasibly vested remainders.
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iv. Future interest with a vested remainder subject to complete divestment. 3. Interests that ARE vulnerable to the Rule Against Perpetuities: i. Contingent remainders. ii. Executory interests. iii. Any interests in a class. a. Including: A future interest with a vested remainder subject to

4. 5.

6.

7.

divestment. b. If any person could join the class after the perpetuities period, the entire gift is void. The Common Law declares the interest void at its inception if it does not vest within the required period. Questions to AsK; i. Is it the type of interest that we apply RAP? ii. Whom does that created interest vest in? a. Look to see if there are any natural persons that are alive they are the life in being. iii. When was the interest actually created? a. Testamentary Trust: Created at the time of the settlors death. 1. Look to who the lives in being are at the time of the settlors death and measure 21 years and see if the trust could vest or fail within that period. b. Irrevocable Trust: Created at the time the trust is created. c. Revocable Trust: Created either at the death of the settlor or when they are completely incompetent and it then becomes irrevocable. Perpetuities Savings Clauses: Settlor provides in the trust for it to terminate and for the remaining trust property to be distributed to then existing trust beneficiaries within the perpetuities period. These clauses typically tie the length of the trust to particular lives in being at the time the trust is created plus 21 years. i. Example of a Revocable Trust Perpetuities Savings Clause: a. Notwithstanding anything in the instrument to the contrary, this trust shall terminate 21 years after the death of the last surviving trust beneficiary living at [the settlors] death. If this trust terminates pursuant to this clause, the trustee shall distribute the trust principal and accumulated income to the beneficiary or beneficiaries of this trust who are entitled to receive discretionary or mandatory distributions of income, in the proportions to which they are entitled to said income, but if there are no set proportions, then equally. Charity to Charity Exception: A charitable future interest preceded by a charitable interest is not subject to the Rule.
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C. Florida Statutory Rule Against Perpetuities: 689.225: 1. A nonvested property interest in real or personal property is invalid unless: i. When the interest is created, it is certain to vest or terminate no later than 21

years after the death of an individual then alive; OR ii. The interest either vests or terminates within 90 years (the wait and see rule) after its creation. 2. The 360 year Wait and See Rule for Trusts: i. 689.225(2)(f): This section applies to a nonvested property interest or power of appointment that is contained in a trust which was created after December 31, 2000. Can substitute the 90 year rule above with 360 years, unless the terms of the trust require that all beneficial interests in the trust vest or terminate within a lesser period. D. NOTE: Know that a will can violate RAP if not properly drafted. XV. Documents Used in Wills and Trusts A. The following are documents that a testator or settlor may want to execute as a part of their estate planning. B. Power of Attorney: Gives someone the authority to act on your behalf. You can have an extensive power of attorney or limited. Must be very careful because you are giving another person a lot of general powers because they have a court document which says that they can act on your behalf. 1. Can be revoked by: i. Revocation ends power of attorney ii. Death iii. Incapacitation. 2. Durable Power of Attorney: Similar to a Power of Attorney, except it lasts beyond the grantors incapacity. So when you need that power of attorney after incapacitation, they are already there and you dont need to go to court for a guardianship because you have planned ahead of time. i. How do you create a Durable Power of Attorney? 709.08(1): a. Must contain the words This durable power of attorney is not affected by subsequent incapacity of the principal except as provided in 709.08. b. Must be in writing and contain the same formalities as required for the conveyance of real property. (Must abide by the Statute of Frauds). 1. Signed by the principal and 2 witnesses and must be notarized. ii. Who can serve as a durable power of attorney? 709.08(2): a. Any competent individual over 18. b. Financial institutions and charities can serve. iii. There are 2 options as to when the durable power of attorney becomes effective:

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a. 1) The agent is authorized to act as of the time the durable power of

attorney is signed; OR b. 2) The durable power of attorney only springs to life when the principal is incapacitated and a physician provides an affidavit attesting to the fact. iv. How do you terminate? a. By revocation or death. b. Incapacity of grantor DOES NOT TERMINATE. C. Living Will: Document which permits someone to pull the plug for the patient. 1. Why do people sign living wills? Dont want to inflict a burden on family (financially or having to decide when to pull the plug), death with dignity. 2. 765.303: Form of a living will. 3. 765.101: Definitions and general provisions. 4. Important for same sex couples because if not legally married you cannot make medical decisions for one another. 5. 765.203: A designated healthcare surrogate is like doing a durable power of attorney for medical/healthcare services ONLY. Giving them the power to make decisions for you when you cannot make them on your own. You can add additional instructions in the form if you wish to. i. Need 2 witnesses, 1 of the witnesses should not be the spouse or a family member. D. Anatomical gift by using a Uniform Donor Card 765.514: 1. Better to have as a separate document than in the will. 2. If always on you, doctors can act on it quickly. 3. Need 2 witnesses. E. DNR: Do Not Resuscitate Order: 1. For patients who may end up in a state in which resuscitation will just be to sustain life, not to save life. i. Requires a doctors signature. Homestead Analysis: Homestead protection protects a homeowner, or the owners family, from certain creditors and may also safeguard the family from transfers or disinheritance. Homestead protection applies to homestead property which is: 1) property owned by a natural person; AND is 2) up to 160 acres of contiguous land outside a municipality or acre of land within a municipality, or 3) personal property to the value of $1,000. The original person claiming the homestead exemption need not hold the property in fee simply title. Rather, it is sufficient that:
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The individual has legal or equitable interest which gives them the legal right to use and possess the property as a residence; AND The individual must have the intention to make the property their homestead; AND The individual actually maintains the property as their principal residence (either have to be a primary resident of Florida or have the intent to remain in Florida). You can only have 1 primary residence. Determined the same as domicile. The owner must actually occupy the residence or it must be being prepared for occupancy. Once the home obtains homestead status it remains homestead until abandoned. Additionally, it generally cannot be forcibly sold to pay a homeowners creditors. However, there are 3 exceptions to this. A homestead can be forcibly sold to pay: 1) debts for the payment of taxes and assessments; 2) debts for the purchase or improvement of the home; or 3) debts for labor performed on the real property. A homestead cannot be devised if the decedent owned it with their surviving spouse as tenants by the entirety; the surviving spouse takes the property as the surviving owner. Otherwise, the homestead owner may devise the homestead in their will or it will pass through intestacy. A homestead cannot be devised if the owner is survived by a spouse or minor child. If there is no minor child the homestead can be devised to the surviving spouse. If the owner is survived by a spouse and one or more descendants, the surviving spouse will take a life estate in the homestead with a vested remainder going to the descendants, passing per stirpes. If the owner has no surviving spouse the homestead will pass to their minor children. If the testator is not survived by a spouse or a minor child, they may devise homestead property to whomever they wish. Although a homestead may be devised, only the homestead owners surviving spouse and lineal descendants can claim the homestead exemption.

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