Trusts and Trust Administration
Domain overview
Trusts and Trust Administration tests creation, funding, fiduciary duty, beneficiary rights, creditor exposure, modification, and termination under the Florida Trust Code, Chapter 736. The exam favors default rules, trustee liability, and the difference between revocable and irrevocable trusts.
Core rules
- A trust requires intent, trust property, a trustee, and a beneficiary. The settlor must have capacity and the trust must have a lawful purpose. Title must actually be transferred to the trustee; an unfunded trust is a planning failure, not a transfer.
- A spendthrift provision under § 736.0502 restrains voluntary and involuntary alienation of a beneficiary's interest. Exceptions include claims for support and necessary services, and certain governmental claims.
- A revocable trust is revocable unless the terms expressly make it irrevocable (§ 736.0601). While revocable, the trustee's duty to inform and account is owed exclusively to the settlor.
- The duty of loyalty under § 736.0802 bars self-dealing and conflicts unless the trust terms or court authorize the transaction. A trustee may not use trust property for personal profit.
- The trustee must administer prudently under § 736.0804 and invest under the prudent investor rule in § 518.11, considering risk, return, diversification, and the purposes of the trust.
- Qualified beneficiaries are entitled to accountings and trust information under § 736.0813. Co-trustees act by majority unless the trust provides otherwise.
- Modification tools include nonjudicial settlement under § 736.0111, decanting under § 736.04117, and cy pres for charitable trusts. A trustee may be removed for serious breach or unfitness under § 736.0706.
Worked example
A trustee sells trust real estate to an LLC the trustee owns, at 70% of appraised value, without disclosure. The sale breaches § 736.0802. The transaction is voidable by the beneficiaries, who may seek rescission, disgorgement of profit, surcharge, and an accounting. The trustee bears the burden of proving fairness and full disclosure; lack of bad motive is no defense.
Traps that cost marks
Assuming a revocable trust avoids probate without funding; confusing a discretionary interest with a support interest; missing the duty to inform qualified beneficiaries after the settlor's death; treating co-trustee silence as consent; and ignoring creditor exceptions to spendthrift protection.