Understanding Trustee Discretion under Florida Law

Fri 30th Jun, 2023 Probate and Trust Litigation

Selecting an appropriate trustee is crucial for any trust arrangement because trustees play a vital role in ensuring the proper administration and distribution of assets. When trustees are granted discretionary powers, it is important to understand the limits imposed on their actions. In this blog post, we will delve into the significance of trustee selection and explore the limits of a trustee’s sole and absolute discretion under Florida law.

The Significance of Trustee Selection

Choosing a trustee requires careful consideration, as they will be responsible for managing the trust’s assets and fulfilling the grantor’s intentions. A competent and trustworthy trustee is likewise crucial to safeguarding the beneficiaries’ interests. When selecting a trustee in Florida, it is important to assess their financial expertise, integrity, and ability to carry out fiduciary duties diligently. The trustee should have a good understanding of the trust’s terms and ensure compliance with applicable laws.

Understanding Trustee Discretion

When a trustee is granted discretionary powers to make decisions regarding trust assets, distributions, and investment strategies, such discretion is not without limits. Under Florida law, trustees are bound by the “prudent investor” standard, which requires them to act with reasonable care, skill, and caution when managing trust assets. They must make informed investment decisions and avoid excessive risk-taking. Furthermore, trustees must adhere to the terms of the trust document and act in the best interests of the beneficiaries, prioritizing their needs and welfare.

The Concept of a Trustee’s Sole and Absolute Discretion

In some cases, a trust document may grant a trustee “sole and absolute discretion” over certain matters. This means that the trustee has the authority to make decisions as he or she deems fit without second-guessing by others. However, it is important to note that even under the standard of sole and absolute discretion, trustees are not completely exempt from their fiduciary duties and legal obligations.

Florida law places certain limits on a trustee’s sole and absolute discretion. Trustees are still required to act in good faith, avoid self-dealing or conflicts of interest, and exercise their powers consistent with the purpose and intent of the trust. Courts will review a trustee’s exercise of discretion to ensure it does not violate public policy or go against the fundamental principles of equity and fairness.  Fla. Stat. 736.0814(1).  Nevertheless, If the trustee has sole discretion, the courts will not find an abuse of discretion unless he acted with willful negligence or gross unfaithfulness, dishonestly, arbitrarily, or from an improper motive. See Griffin v Griffin, 463 So. 2d 569 (Fla. 1st DCA 1985); NCNB Nat. Bank of Florida v. Shanaberger, supraAmerican Cancer Soc., St. Louis Div. v. Hammerstein, 631 S.W.2d 858 (Mo App. 1981); Scott v. McDonald, 26 Cal. App. 5th 463, 237 Cal. Rptr. 3d 137 (Cal. App. 2018). 

Selecting a capable trustee is crucial to ensure the smooth administration of a trust and the protection of beneficiaries’ interests. Understanding the limits of trustee discretion, including the concept of a trustee’s sole and absolute discretion under Florida law, is essential for both grantors and beneficiaries. By selecting a trustee carefully and ensuring their compliance with legal obligations, one can establish a robust and well-managed trust arrangement.  If you are the trustee or beneficiary of a Florida trust, contact the attorneys at Purcell, Flanagan, Hay & Greene, P.A. to discuss trustee discretion.