Trust administration refers to the management and distribution of a trust’s assets according to the stipulations set out in the trust agreement and in compliance with the laws of the jurisdiction where the trust is administered. In Florida, trust administration is governed by the Florida Trust Code, which provides guidelines and requirements for how trusts are to be managed and administered within the state.
Overview of Florida Trust Laws
Florida’s trust laws offer a comprehensive framework for establishing, managing, and eventually distributing trusts within the state. Governed primarily by the Florida Trust Code, these regulations ensure that the rights and interests of all parties involved—the settlor, trustee, and beneficiaries—are protected and upheld.
The Florida Trust Code details specific requirements for the valid trust creation. For instance, the settlor must have the legal capacity to create a trust, and the trust’s intentions must be lawful, possible, and clear. In addition to these foundational principles, the Code provides guidelines for modifying, revoking, or terminating trusts, catering to the diverse and evolving needs of Floridian families and their unique situations.
One important feature of Florida’s trust laws is their clear stance on the responsibilities and obligations of trustees. These fiduciary duties emphasize the importance of acting in the best interest of the beneficiaries, avoiding conflicts of interest, and ensuring the proper and prudent management of trust assets. Moreover, Florida law grants beneficiaries specific rights to information regarding the trust, emphasizing transparency and accountability in the trust administration process.
Understanding Florida’s trust laws is paramount for those tasked with trust administration.
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Role of Trustee in Trust Administration
In the realm of trust administration in Florida, the trustee stands central to ensuring the settlor’s wishes are honored and upholding the best interests of the beneficiaries. In Florida, as in many jurisdictions, a trustee’s responsibilities are legally defined and rooted in a strong ethical obligation.
Upon the trust’s inception or the triggering event that necessitates trustee intervention—often the death or incapacitation of the settlor—the trustee assumes control of the trust’s assets. Their primary duty is administering these assets per the trust’s provisions and Florida law. This may involve gathering, managing, investing, and eventually distributing assets to the designated beneficiaries.
Florida’s Trust Code explicitly outlines the duties and obligations of a trustee. Among these are the duty of loyalty, which mandates trustees act solely in the interest of the beneficiaries, and the duty of prudence, which requires them to manage the trust’s assets with care and skill. Additionally, trustees in Florida are bound by the duty of impartiality, ensuring that they consider the needs and rights of all beneficiaries, not favoring one over another unless explicitly stipulated in the trust.
Transparency is another cornerstone of a trustee’s role in Florida. Trustees are generally required to provide regular accountings to beneficiaries, detailing all transactions, expenses, and any other pertinent activities related to the trust.
However, the responsibilities don’t end with these statutory duties. Depending on the intricacy of the trust, a trustee might also need to engage in tax planning, handle real estate or business interests, mediate disputes among beneficiaries, and more.
Trust Administration Steps
To complete a trust administration in Florida, a trustee must first (1) deposit the original will with the Court, (2) order death certificates, and (3) review the living trust agreement.
- Deposit original will with the Court. Florida Statutes 732.901 requires that within ten (10) days of death, the decedent’s original Last Will and Testament be deposited with the Circuit Court-Probate division in the county where we resided at the time of death.
- Order Death Certificates. Death certificates will probably be needed to obtain the proceeds of any life insurance policies and for other transfers. The funeral home will provide certified death certificates for a small fee est. Order at least three or four certified copies of the short form death certificate (which omit the cause of death).
- Review the living trust agreement. The written trust agreement will tell the successor trustee what to do with trust assets after the trustmaker’s death. In most cases, a deceased spouse’s share of trust property will be held in further trust for the benefit of a surviving spouse. After the death of both spouses, or parents, trust assets will be distributed to individuals or charities named as successor trust beneficiaries. An attorney will review and explain the trust agreement and help with trust accounting.
Tax Identification Number for Successor Trustee
In most cases, the successor trustee should obtain a TIN, or EIN, for the trust. The TIN allows the successor trustee to manage the trust, open financial accounts for the trust, and report financial information to the IRS.
A revocable trust typically uses the trustmaker’s social security number during their lifetime. The social security number can no longer be used upon the trustmaker’s death. Instead, the successor trustee must obtain a TIN or EIN for the trust.
The successor trustee can apply for a TIN directly on the IRS website. The requirements for a successor trustee to get a TIN include:
- Name of the trust.
- Name of the successor trustee.
- Social security number for the trustmaker
- Type of trust (typically irrevocable)
- Trust mailing address
Once they obtain the TIN for the trust, the successor trustee can consolidate financial accounts for distribution. The TIN also enables the trust to file a tax return. Trusts that have more than $600 in income for any tax year must file a federal tax return using the trust’s TIN.
Common Challenges in Trust Administration
The process of trust administration can present a maze of complexities. In Florida, trustees often encounter challenges that require careful navigation, attention to detail, and sometimes, difficult decisions. Recognizing these challenges early can equip trustees with the knowledge to address them head-on.
- Ambiguous Trust Terms: One of the most frequent challenges arises from trust terms that are unclear or ambiguous. When a trust document lacks clarity, it can lead to disagreements among beneficiaries or confusion for the trustee about the settlor’s true intentions. A legal interpretation or even court intervention might become necessary in such cases.
- Investment Decisions: Trustees must invest and manage trust assets prudently. Determining the best investment strategy while balancing risk and return, especially in a volatile market, can be demanding.
- Beneficiary Disputes: Beneficiaries might have differing opinions about how a trust should be administered, leading to potential conflicts. These disagreements can stem from perceived inequities in distributions, dissatisfaction with the trustee’s decisions, or personal disputes that spill over into trust matters.
- Tax Implications: Navigating the tax implications of trusts, including state-specific guidelines in Florida, can be intricate. Ensuring proper tax filings, understanding the impact of distributions on tax liabilities, and optimizing strategies for tax minimization are all common challenges.
- Asset Management Difficulties: Some trust assets, such as real estate, businesses, or unique collectibles, require specialized management or attention. Determining the value of such assets or deciding on their sale or preservation can be complex.
- Legal and Regulatory Changes: Trust laws and tax regulations can evolve. Trustees must stay abreast of any changes in Florida’s Trust Code or federal tax laws that could impact the trust’s administration.
- Resignation or Replacement of a Trustee: There are situations where a trustee may need to step down due to personal reasons, incapacity, or conflicts with beneficiaries. Finding and transitioning to a suitable replacement promptly is crucial.
What Is a Notice of Trust?
In Florida, a notice of trust is the formal notice that a trustee provides to the public that the trustmaker has deceased. Upon the trustmaker’s death, Florida Statute 736.05055 requires that the successor trustee file a “notice of trust” with the court of the county of the trustmaker’s domicile. “Domicile” is where the decedent resided at the time of their death.
The statute requires certain information to be included in the Notice of Trust. The Notice of Trust must contain the trustmaker’s name, date of death, the title of the living trust, if any, the date of trust execution, and the successor trustee’s address. A Notice usually includes a statement that the trust is liable for expenses of probate administration and the decedent’s debts if the probate estate is insufficient to pay all debts.
The Notice of Trust is filed in the probate case if the decedent’s personal representative has initiated a probate proceeding. Absent an existing probate, the Clerk of Court will file and index the Notice.
The purpose of the Notice of Trust is to give public notice of the trust’s existence and the successor trustee’s contact information so that creditors are aware of assets available to pay creditor claims.
Notice to Trust Beneficiaries
In Florida, a Notice to Trust Beneficiaries is a formal document that is provided to all beneficiaries of a trust after the death of the settlor (the person who created the trust). This document is sent by the trustee (the person or entity responsible for managing the trust assets), and it notifies the beneficiaries about the trust’s existence, the identity of the settlor and trustee, the right to request a copy of the trust documents, and the right to account information.
According to Florida Trust Code (Sections 736.0101-736.1301), within 60 days after acceptance of the trust, the trustee must give notice to the qualified beneficiaries of the trust’s existence, the identity of the settlor, the right to request a copy of the trust instrument, and the right to a trustee’s report.
Moreover, if a beneficiary requests it, the trustee is obligated to provide complete and accurate information about the nature and amount of the trust property. A trustee who fails to comply with the duty to inform and report commits a breach of trust, which could have legal consequences.
How Long Does a Trustee Have to Distribute Assets in Florida?
In Florida, there is no definitive timeline set by law for a trustee to distribute assets to the beneficiaries. The amount of time it takes can vary widely and depends on the specifics of the trust and the types of assets involved. However, the trustee is expected to act promptly and efficiently, and undue delay may be viewed as a breach of the trustee’s fiduciary duties.
Generally, trustees may take several months to even a few years to fully distribute the trust assets. This is because trustees have various responsibilities they must fulfill before distribution can occur. These responsibilities can include:
- Identifying and gathering all the trust assets.
- Paying any debts or taxes owed by the trust.
- Resolving any disputes or claims against the trust.
- Making sure all the trust provisions are correctly interpreted and followed.
- Distributing the trust assets according to the terms of the trust.
Beneficiaries of a trust have a right to a timely settlement and should be kept informed about the administration process. If beneficiaries feel that the trustee is taking an unreasonable amount of time, they may be able to take legal action to compel distribution or replace the trustee.
What Assets are Involved in Living Trust Administration?
Trust administration involves handling assets titled in the name of the living trust. The successor trustee must find out what the trust owns. The trustee can gather the trustmaker’s recent bank statement, financial statements, and reports received by email or posted online to see what financial accounts are owned in the name of the living trust.
The trustee should examine the title of assets held in the decedent’s personal name individually or jointly with another person. The successor trustee may find assets held jointly with a surviving spouse or made payable on death to a child. Jointly titled marital assets will automatically be conveyed to the surviving spouse by operation of law. Pay-on-death assets are automatically transferred to the named beneficiary, often the trustmaker’s child. Assets owned in the decedent’s own name will be administered through probate. The heir of the probate usually will be the living trust because most living trust plans specify the “pour over” of the probate estate into the decedent’s living trust.
The successor trustee should check any safe deposit box or house safe owned by the decedent. The trustee needs a copy of the death certificate and a copy of our living trust, together with the safe deposit box key, to gain access to a safe deposit box at a bank.
Accounting in Living Trust Administration
A successor trustee should begin administration with an inventory of trust assets. A trust inventory includes a list of assets titled in the trust name and the market value of the assets at the date of death. An accurate value of trust assets affects future tax liability when the trust beneficiaries sell the assets. Trust beneficiaries can “step-up” in the basis ( the “tax cost”) of some living trust assets so that the beneficiaries will pay tax on value increase after the date of death rather than the decedent’s original purchase price.
If all or part of a living trust has become irrevocable after the death of a trustmaker, the successor trustee must obtain a federal Taxpayer Identification Number for that trust. Use IRS Form SS-4 to get this number. If the trust thereafter has taxable income, The trustee may have to file IRS Form 1041S income tax return if the trust has taxable income.
Estate tax reporting is not required for most living trusts. The estate tax form 706 form will need to be filed only if federal estate taxes are due. An accountant or tax attorney should prepare the 706 form because estate taxation is complicated.
Legal Issues in Trust Administration
It may be appropriate for a trust beneficiary to “disclaim” an interest in all or part of their share of trust property. A disclaimer treats the disclaiming beneficiary as pre-deceasing so that the disclaimed property will automatically pass to the next beneficiary in line. An estate planning or tax attorney can explain the benefits and the procedures for a proper disclaimer under Florida statutes.
Some trust agreements include powers of appointment that give the trust beneficiaries the right to change the allocation of their inherited trust property after the beneficiary’s own death. The appointment must be expressed in the beneficiary’s own will or living trust. An attorney can explain the benefits and procedures for exercising a power of appointment.
A trustee is obligated to keep trust beneficiaries reasonably informed of the progress of trust administration. Upon a beneficiary’s reasonable request, the successor trustee should provide the beneficiary a copy of the decedent’s trust agreement, including amendments, and provide a beneficiary with relevant information about trust assets.
Trust Administration Fees
Florida trust administration is hard work and time-consuming. Some trust agreements provide that successor trustees are entitled to reasonable compensation or fees for their role in trust administration. The amount of “reasonable compensation” depends upon the complexity of trust administration and the trustee’s professional expertise.
Florida Statutes provide that successor trustees are entitled to trust administration fees based upon a percentage of the value of trust assets and atypical legal issues, if any, that are part of trust administration. Florida trust administration fees earned by the successor trustee are 1% to 3% of the total trust assets. The statute provides higher fees for trust administration involving unusual legal and tax issues.
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About the Author
Jon Alper is an expert in estate planning for individuals and small businesses.
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