Trustees play a vital role in managing and administering trust assets for the benefit of beneficiaries. However, the position of a trustee carries significant responsibilities, and trustees must adhere to a high standard of fiduciary duty. In Florida, like in many other jurisdictions, trustees can be held personally liable for misconduct or breaches of their duties. This blog post will delve into the legal framework governing the personal liability of Florida trustees for misconduct, citing relevant Florida case law and statutes to provide a comprehensive understanding of the topic.

Fiduciary Duty of Florida Trustees

A trustee owes a fiduciary duty to the beneficiaries of the trust, which encompasses several key obligations, including the duty of loyalty, the duty of prudence, the duty of impartiality, and the duty to account. Florida case law has consistently recognized these duties and established a framework for holding trustees personally liable when they breach their fiduciary obligations.

Personal Liability of Florida Trustees

When a trustee breaches their fiduciary duty, they may be held personally liable for any resulting damages. Florida Statute § 736.1001 states that a trustee is personally liable for a breach of trust committed in the trustee’s capacity, unless they can establish a valid defense. This statute codifies the general rule of personal liability for trustees in Florida.

Misconduct and Personal Liability of Florida Trustees

Misconduct by a trustee can take various forms, such as self-dealing, mismanagement of trust assets, failure to make distributions, or conflicts of interest. 

Self-Dealing and Conflict of Interest

In the case of In re Estate of Fletcher, 568 So. 2d 1332 (Fla. 1990), the Florida Supreme Court held that a trustee’s self-dealing and conflict of interest constituted a breach of fiduciary duty. The court ruled that the trustee was personally liable for any losses suffered by the trust due to their self-interested transactions.

Mismanagement of Trust Assets

In Barlow v. Watkins, 966 So. 2d 427 (Fla. Dist. Ct. App. 2007), the court held that a trustee’s negligent management of trust assets, resulting in substantial losses, warranted personal liability. The court emphasized the trustee’s duty of prudence and held that the trustee’s failure to exercise reasonable care constituted a breach of fiduciary duty.

Defenses against Personal Liability for Florida Trustees

While trustees can be held personally liable for misconduct, they may avail themselves of certain defenses to mitigate or avoid liability. Florida Statute § 736.1008 outlines these defenses, which include: (1) ratification by beneficiaries, (2) release or waiver of liability, (3) limitations on actions against trustees, and (4) court approval of the trustee’s conduct.

Remedies for Beneficiaries

Beneficiaries who have suffered harm due to a trustee’s misconduct can seek various remedies under Florida law. These may include removal of the trustee, surcharge or disgorgement of profits obtained through the breach, injunctions, and monetary damages to compensate for losses incurred.

Conclusion

Florida trustees bear significant responsibilities and are expected to act with utmost care and diligence in fulfilling their fiduciary duties. When trustees engage in misconduct or breach their obligations, they may face personal liability for resulting damages. It is crucial for trustees to understand their duties and obligations to avoid potential liability and ensure the protection of beneficiaries’ interests.  If you are the trustee or a beneficiary of a Florida trust and have questions about a trustee’s personal liability, contact the attorneys at Purcell, Flanagan, Hay & Greene today.