Can Selection of a Trustee Be a Material Purpose Under F.S. [section] 736.0706(2) (d)?

• Author: Lile, Laird A.
• Position: Florida Statute

Establishing a paradigm in which the settlor's intent may be respected is an important aspect of a well-drafted estate plan. An often critical aspect of that intent involves the settlor's choice as to who is in charge, that is, who is the trustee. Understanding the interplay between the Florida Statutes and the relevant caselaw regarding the rights of the beneficiaries to remove a chosen trustee can prove critical in having the estate plan play out as intended.

F.S. [section]736.0706 governs removal of a trustee in Florida. The fourth and final method of removal in that statute is sometimes referred to as "no-fault removal." F.S. [section]736.0706(2)(d) includes four requirements. The court may remove a trustee if 1) there has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries; 2) removal of the trustee best serves the interests of all the beneficiaries; 3) removal is not inconsistent with a material purpose of the trust; and 4) a suitable co-trustee or successor trustee is available.

This article begins by describing recent statutory amendments to the Florida Trust Code in connection with a trust's purpose and trust interpretation. Next, it summarizes current caselaw, none of which is Florida jurisprudence, that addresses whether the selection of a particular trustee can serve as a material purpose of a trust in determining whether removal of a trustee is appropriate pursuant to F.S. [section]736.0706(2)(d). In addressing current decisions from other states, particular attention is given to In re Trust Created by Fenske, 930 N.W.2d 43 (Neb. 2019).

Recent Amendments to the Florida Trust Code

The polestar of trust interpretation is the settlor's intent.(1) The Florida Legislature recently amended F.S. [section][section]736.01013(11), 736.0105(2)(c), and 736.0404 to remove language that obfuscated the primacy of the settlor's intent. The eradicated language placed the focus of the administration of a trust on the benefit of the beneficiaries, arguably to the exclusion of a contrary settlor's intent. In particular, the definition of "interests of the beneficiaries" under [section]736.0103(11) was amended to mean the beneficial interests intended by the settlor as provided under the terms of the trust. Specifically, the Florida Trust Code was amended as follows:

(i.) The definition of "interests of the beneficiaries" under F.S. [section]736.0103(11) was amended to mean the beneficial interests intended by the settlor as provided under the terms of the trust; (ii.) The exception to the general rule that the terms of the trust prevail over provisions of the Code contained in F.S. [section]736.0105(2)(c) was amended to remove the mandatory requirement that the terms of the trust be for the benefit of the beneficiaries; and (iii.) F.S. [section]736.0404 was likewise amended to remove the requirement that the trust and its terms be for the benefit of the beneficiaries. As amended, a trust's purpose only needs to be lawful, not contrary to public policy, and possible to achieve.(2) Accordingly, the amendments to the Florida Trust Code clarify that the "best interests of the beneficiaries" does not supplant the "intent of the settlor." Rather, the courts are bound by the settlor's intent and may not ignore that intent simply by accepting an argument that the consequence of following the settlor's intent is not in the perceived best interests of the beneficiaries. The long-standing rule of law that the settlor's intent controls remains.

Law, Prior to Fenske

The bulk of caselaw across the country, and in Florida, provides great deference to a settlor's trustee selection and disfavors the removal of such a trustee.(3) Since the adoption of the Florida Trust Code, which incorporated many provisions from the Uniform Trust Code, including F.S. [section]736.0706, no Florida cases have addressed removal pursuant to [section]736.0706(2)(d).

Other jurisdictions, however, that have also adopted the provision from the Uniform Trust Code upon which [section]736.0706(2)(d) is modeled have addressed the selection of a trustee as being a material purpose of a trust.

In In re McKinney, 67 A.3d 824 (Pa. 2013), the beneficiary of two separate trusts sought the removal of the trustee, PNC Bank, National Association (PNC), based on the family's geographic movement over time coupled with the fact that PNC had gone through approximately six different corporate mergers leading to different bank officers involved in administering the trusts.(4) Removal was sought pursuant to 20 Pa. C.S.A. [section]7766(b)(4), which provides for removal of a trustee if removal of the trustee best serves the interests of the beneficiaries of the trust, is not inconsistent with a material purpose of the trust, a suitable co-trustee or successor trustee is available, and if there has been a substantial change of circumstances.(5) The beneficiary's primary argument for removal was that she and her children had moved from Pennsylvania to Virginia, thus, leading to a change in her financial planning needs, and that the trustee had undergone several mergers, which undermined stability in the trust administration.(6) The court began its analysis by noting that this was the first instance in which it had been asked to interpret and apply [section]7766(b)(4).(7) It then explained that, prior to the legislature's adoption of Ch. 77 of Pennsylvania's Probate, Estates, and Fiduciaries Code, a person seeking removal was required to show fault or negligence by the trustee.(8) The court began its analysis of whether removal of PNC was inconsistent with a material purpose of the trust by quoting the following commentary to [section]706 of the Uniform Trust Code:

It has traditionally been more difficult to remove a trustee named by the settlor than a trustee named by the court, particularly if the settlor at the time of the appointment was aware of the trustee's failings. Because of the discretion normally granted to a trustee, the settlor's confidence in the judgment of the particular person whom the settlor selected to act as trustee is entitled to considerable weight. This deference to the settlor's choice can weaken or dissolve if a substantial change in the trustee's circumstances occurs.(9) The court then emphasized that, if a settlor chooses an individual to act as trustee, the selection "represents an expression of trust and confidence, and removal of a personally chosen individual is thus considered to be a drastic remedy."(10) In analyzing this issue, the court looked to the fact that the trusts did not explicitly provide that the trusts be administered by Pennsylvania banks.(11) The court also highlighted the fact that for a period of time when the settlor was living, one of the trusts was being managed by an Ohio bank.(12) Thus, the court concluded that, because there was no evidence before the trial court that the settlors ever even contemplated PNC serving as trustee, removal of PNC as trustee was not inconsistent with a material purpose of the trusts.(13) The court then held that...