Florida Trustee powers

Where a trustee's powers come from

Section 736.0815 sets out three sources. First, the terms of the trust: whatever the instrument confers, and whatever it withholds. Second, unless the terms limit them, all the powers over the trust property that an unmarried competent owner has over individually owned property — the broadest grant, and the one that lets a trustee act without asking a court for permission to do ordinary things. Third, any other powers appropriate to achieve the proper investment, management and distribution of the trust property, including the specific powers §736.0816 lists. A court can add powers in a particular case; other statutes, such as the prudent investor rule in chapter 518 and the principal and income rules in chapter 738, shape how the powers are used.

The sentence that matters most is the section's opening qualification: the exercise of a power is subject to the fiduciary duties prescribed in Part VIII. A power is permission, not direction. That a trustee may sell the house says nothing about whether this trustee should sell this house now.

The §736.0816 list, grouped

The statute's list runs to more than two dozen paragraphs. Grouped by what a trustee is trying to do, it reads like this.

• Property: collect trust property and accept or reject additions; retain what the settlor left; acquire, sell, exchange, partition, lease, grant options on, mortgage, pledge or otherwise deal with real and personal property; repair, alter, subdivide and develop; insure; abandon property of no value.
• Investments and accounts: invest under the prudent investor rule (chapter 518); deposit funds in regulated financial institutions; hold securities in the name of a nominee; vote shares and exercise the rights of an owner of stock; continue or wind up a business.
• Money: borrow, with or without security; pay taxes, assessments, the compensation of the trustee and of agents, and the other expenses of administration; make loans out of trust property to a beneficiary on terms the trustee considers fair, and guarantee a beneficiary's loan.
• People: employ attorneys, accountants, investment advisers, agents and others, even ones associated with the trustee, and pay them from the trust; delegate as §736.0807 allows.
• Distributions: pay an amount distributable to a beneficiary who is under a legal disability, or whom the trustee reasonably believes is incapacitated, to a custodian, a guardian, or directly for the beneficiary's benefit; distribute in cash or in kind, in divided or undivided interests; make tax elections.
• Claims: prosecute, defend, settle, compromise, submit to arbitration or abandon claims by or against the trust.
• Closing: on termination, exercise the powers appropriate to wind up the administration and distribute the property to the persons entitled to it (§736.0816(25)).

What the instrument can change

The terms of the trust come first in §736.0815, and settlors use that priority in both directions. Many instruments enlarge the list — authorizing a trustee to hold a closely held business or a single concentrated stock position that the prudent investor rule would otherwise question, to keep a residence for a beneficiary's use, or to make loans on terms a stranger would not accept. Others restrict it — forbidding the sale of a particular property, requiring a co-trustee's consent for distributions, or removing the power to lend to a beneficiary.

A restriction in the instrument is a duty, not a suggestion, and a beneficiary can enforce it. An enlargement does not repeal the duties: a trustee authorized to retain a concentrated position still owes the beneficiaries a prudent, documented decision to keep it. Reading the powers article of the instrument beside §736.0816 once, with a highlighter, prevents most later surprises.

The duties that bound every power

Part VIII of the Trust Code is the frame the powers sit in. A trustee administers in good faith, in accordance with the terms and purposes of the trust and the interests of the beneficiaries (§736.0801); administers solely in the beneficiaries' interests, so that a transaction between the trustee personally and the trust is voidable unless the terms, a court, the beneficiaries or the statute allow it (§736.0802); acts impartially where beneficiaries' interests differ (§736.0803); acts as a prudent person would, and invests under the prudent investor rule (§736.0804, §518.11); incurs only reasonable costs (§736.0805); is held to any special skills the trustee has or claimed (§736.0806); keeps control of the property and separate, accurate records (§§736.0809, 736.0810); and informs and accounts (§736.0813).

In practice the duties turn each power into a question. The power to sell becomes: is this sale prudent, at this price, now, and does it treat the income and remainder beneficiaries fairly? The power to employ agents becomes: is this fee reasonable, and did I choose and supervise the agent with care? The power to lend to a beneficiary becomes: is this loan on terms I could defend to the other beneficiaries? A trustee who writes the question and the answer in the file has done what the code asks.

Discretionary distributions (§736.0814)

Many trusts give the trustee discretion over distributions — "as the trustee deems advisable", "in the trustee's sole and absolute discretion", or within a standard such as health, education, maintenance and support. Section 736.0814(1) answers the question those words raise: however broad the grant, the trustee exercises a discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries. "Absolute" removes a court's second-guessing of a reasonable decision; it does not remove good faith.

The section also addresses the trustee who is a beneficiary. Unless the terms of the trust expressly provide otherwise, a trustee who is also a beneficiary may not exercise discretion to make distributions to himself or herself except within the ascertainable standard of health, education, maintenance or support, and may not use discretion to satisfy a personal legal obligation (§736.0814(2)). A parent serving as trustee of a trust for the children, with discretion to distribute to the children, is exercising a power that a court will read against the parent's own interest if the money went to the household. Documentation is the answer, and a co-trustee or an independent trustee for those decisions is often the better answer.

Powers and the people who deal with the trustee

Banks, title companies and buyers need to know that the person in front of them holds the powers being exercised. Section 736.1017 lets the trustee furnish a certification of trust instead of the instrument: it states that the trust exists and when it was executed, the settlor's identity, the trustee's identity and address, the trustee's powers, whether the trust is revocable and by whom, how co-trustees act, and the manner in which title is held. A recipient may rely on it and may require the excerpts of the instrument that designate the trustee and confer the powers, but not the dispositive terms.

Section 736.1016 protects a person who in good faith assists a trustee, or deals with a trustee for value, without knowledge that the trustee is exceeding or improperly exercising the trustee's powers; such a person is not required to inquire into the extent of the powers or the propriety of their exercise. The protection runs to the third party. It does not protect the trustee who exceeded the powers; that trustee answers to the beneficiaries.

Co-trustees, delegation, and the end of a trustee's powers

When two or more trustees serve, §736.0703 governs how the powers are exercised: by majority decision unless the terms provide otherwise, with a dissenting co-trustee who records the dissent generally protected from liability for the majority's act, and with each co-trustee still bound to prevent a serious breach by another. A trustee may delegate investment and management functions under §736.0807 by choosing the agent with care, setting the scope and terms, and monitoring the agent's performance; the trustee's own judgment about the trust is not delegable.

A trustee's powers end when the trusteeship does. A trustee who resigns on 30 days' notice or with court approval (§736.0705), or who is removed (§736.0706), holds the property until a successor accepts and then delivers it, the records and an accounting; the successor's power to collect the property and to redress a known breach begins under §736.0812.

The ways trustees exceed their powers

The recurring cases are not exotic. They are ordinary powers used without the duty attached.

• Acting before accepting the trusteeship, which under §736.0701 can itself be an acceptance the trustee did not intend.
• Selling or distributing a Florida homestead before the descent and devise rules of §732.401 and §732.4015 have been sorted out.
• Buying from, selling to, or lending to oneself or one's business (§736.0802).
• Retaining or buying a concentrated investment without a documented reason the prudent investor rule accepts (§518.11).
• Paying oneself compensation with no rate, no time record and no disclosure (§736.0708).
• Distributing everything before the creditor windows have closed, with no reserve (§736.0817, §733.710).

When a licensed Florida attorney is the right next call

TrusteeClear organizes the record; it does not give legal advice and it does not tell you whether a particular exercise of a power is proper. The questions that turn on the instrument's exact words — whether a power exists at all, whether a restriction applies to this transaction, whether a discretionary distribution to yourself fits the ascertainable standard, whether a transaction with a family member needs the beneficiaries' consent or a court's approval — are the ones many trustees bring to a licensed Florida attorney of their choosing before acting, with the powers article and the proposed transaction in hand.