Can a Beneficiary Be the Sole Trustee of an Irrevocable Trust in Florida?

A beneficiary can serve as the sole trustee of an irrevocable trust in Florida without destroying the trust, provided the trust names other beneficiaries with present or future interests. Florida law also explicitly permits a beneficiary who serves as trustee of a discretionary trust to retain the trust’s creditor protection.

The Merger Doctrine

The doctrine of merger provides that when a single person holds both complete legal title (as trustee) and the entire equitable interest (as sole beneficiary) in trust property, the two interests merge and the trust ceases to exist. If the trust dissolves through merger, the assets become the personal property of the individual, fully exposed to creditors.

Merger applies only when one person holds the complete present and future beneficial interest. In virtually every properly drafted irrevocable trust, the trust names successor beneficiaries who receive the trust property after the initial beneficiary’s death—typically children or other descendants. Because successor beneficiaries hold a future contingent interest, the initial beneficiary does not own the complete beneficial interest, and merger does not occur.

A surviving spouse who serves as both trustee and lifetime beneficiary of a marital trust created by the deceased spouse is the most common example. The trust continues because the children hold remainder interests. The same analysis applies to any irrevocable trust that names the current beneficiary as trustee, as long as the trust also names at least one successor beneficiary.

Florida Statutes § 736.0402(1)(e) codifies this principle by providing that a trust is not valid if the same person is the sole trustee and the sole beneficiary. The statute implicitly confirms that a person who is both trustee and a beneficiary, but not the sole beneficiary, holds a valid trust.

Creditor Protection When the Beneficiary Is Trustee

The more important question for asset protection purposes is whether a beneficiary who also serves as trustee retains the trust’s creditor protection. Florida law answers this question directly.

Florida Statutes § 736.0504(2) provides that a beneficiary’s interest in a discretionary trust is protected from the beneficiary’s creditors regardless of whether the beneficiary serves as trustee. The statute uses specific language: the creditor protection applies “whether or not the beneficiary also serves as a trustee or co-trustee of the trust.”

The practical significance is substantial. A parent can create an irrevocable trust for the benefit of an adult child, name the child as trustee, and the child’s creditors still cannot compel distributions from the trust. The child controls the trust assets in a fiduciary capacity and decides when and whether to make distributions to themselves, but the trust’s discretionary distribution structure prevents creditors from forcing those distributions.

Spendthrift Protection

Spendthrift protection under § 736.0502 operates alongside discretionary distribution protection. A spendthrift clause prevents a beneficiary’s creditors from attaching the beneficiary’s interest in the trust. A creditor cannot force the beneficiary to assign their trust interest or levy on distributions before the trustee releases them.

When a beneficiary serves as trustee, the spendthrift provision continues to protect the beneficiary’s equitable interest. The beneficiary-trustee’s legal title as trustee is not the same as an ownership interest. The trustee holds legal title in a fiduciary capacity, subject to the trust terms and the obligations of the Florida Trust Code.

The combination of spendthrift and discretionary distribution protections in a trust where the beneficiary serves as trustee creates a structure that is extremely difficult for creditors to penetrate. The creditor cannot compel distributions (discretionary protection), cannot attach the beneficiary’s interest (spendthrift protection), and cannot argue that the beneficiary’s role as trustee transforms the trust into personal property (statutory protection under § 736.0504(2)).

The Self-Settled Trust Limitation

The beneficiary-as-trustee protection applies only to third-party trusts—trusts created by someone other than the beneficiary. If the beneficiary also created and funded the trust, the trust is self-settled, and § 736.0505(1)(b) allows the settlor’s creditors to reach the maximum amount distributable to the settlor regardless of any spendthrift or discretionary provisions.

A person who creates an irrevocable trust for their own benefit and names themselves as trustee has accomplished nothing from an asset protection standpoint. The self-settled trust prohibition overrides the discretionary distribution protection and the spendthrift protection. The trust must be created by a third party—a spouse, parent, or other family member—for the beneficiary-trustee arrangement to provide creditor protection.

Common Structures

Several common trust arrangements involve a beneficiary serving as trustee.

Spousal Trust

One spouse creates an irrevocable trust for the benefit of the other spouse, naming the beneficiary spouse as trustee. The trust names the couple’s children as successor beneficiaries. The beneficiary spouse controls the trust assets, makes discretionary distributions to themselves as needed, and the trust is protected from the beneficiary spouse’s creditors under § 736.0504(2). A spousal limited access trust is a specific version of this structure designed for asset protection.

Inherited Trust

A parent creates an irrevocable trust for the benefit of a child, with the child serving as trustee upon reaching a specified age. The trust names the child’s own children (grandchildren of the settlor) as successor beneficiaries. The child controls and benefits from the trust, but the child’s creditors cannot reach the trust assets.

Marital Trust After First Spouse’s Death

A married couple creates a revocable living trust that becomes irrevocable after the first spouse’s death. The surviving spouse serves as trustee and beneficiary of the deceased spouse’s trust share. The children are successor beneficiaries. The surviving spouse manages the assets and takes distributions as needed, protected from their own creditors by the trust’s discretionary and spendthrift provisions.

Fiduciary Duty Constraints

A beneficiary who serves as trustee is bound by fiduciary duties under the Florida Trust Code. The trustee must act in the best interests of all beneficiaries, not just themselves. A beneficiary-trustee who depletes trust assets through excessive self-distributions may breach their fiduciary duty to the successor beneficiaries.

A creditor cannot use the beneficiary-trustee’s fiduciary duties as a basis to compel distributions. The fiduciary duty analysis is separate from the creditor protection analysis. The trustee’s obligation to the successor beneficiaries may actually limit the trustee’s ability to distribute to themselves, which in turn reduces the pool of assets a creditor could theoretically reach.

Some trusts address this tension by appointing a co-trustee or a distribution advisor who must approve distributions to the beneficiary-trustee. An independent party involved in distribution decisions further strengthens the trust’s protective posture by eliminating any argument that the beneficiary-trustee exercises unchecked control over distributions.

Practical Considerations

Naming a beneficiary as trustee involves trade-offs. The beneficiary gains direct control over trust administration, including investment decisions, recordkeeping, and tax filings. For sophisticated beneficiaries who want hands-on management, this arrangement avoids the cost and potential friction of a corporate or independent trustee.

The risk is that a court evaluating the trust under nominee or alter ego theories could point to the beneficiary’s control as evidence that the trust lacks genuine independence. While § 736.0504(2) explicitly permits the arrangement, a trustee who treats trust assets as personal property—commingling funds, failing to maintain separate accounts, or ignoring trust formalities—invites challenges to the trust’s validity.

Maintaining rigorous trust administration practices is essential when the beneficiary serves as trustee. Separate bank accounts, formal distribution records, annual accountings, and compliance with the trust’s terms all reinforce the trust’s legitimacy and strengthen its creditor protection. These practices apply to any asset protection trust under Florida law, but they are especially critical when the beneficiary and trustee are the same person.