The revocable trust as beneficiary of the estate and the effectiveness of "full waiver" forms.

• Author: Randolph, Jr., John W.
• Position: Florida

This article provides a recommended legal course of action to be followed in administering a probate estate which has an inter-vivos revocable trust as a beneficiary. In these instances, the attorney representing the fiduciary must be aware of the potential conflict of interest issues which arise if the personal representative is also designated to serve as the successor trustee of the decedent's revocable trust. This article discusses the law and rules addressing these conflict of interest situations. Often, the fiduciary may be inclined to avoid undertaking a formal judicial accounting for the probate administration by closing out the probate administration through the use of full waiver and receipt and consent to discharge forms. This article describes the pitfalls which await the personal representative if the trust beneficiaries are not provided with all material estate administration information.

The following example provides the framework for the ensuing analysis of the beneficiary aspects of administering an estate which has an inter-vivos revocable trust as a beneficiary:

Decedent is an unremarried widow and at her death is survived by her adult daughter (Daughter) and her adult son (Son). Prior to her demise, Decedent established a revocable trust (trust). Upon Decedent's death, her longtime friend (Friend) is designated as successor trustee. The trust provides for a $100,000 pre-residuary devise to decedent's sister (Sister) and an outright distribution of the residue one-half to Daughter and one-half to Son. The trust was partially funded during Decedent's lifetime and at her death holds $2,000,000 of marketable securities. Decedent's will designates Friend as personal representative. The will contains no pre-residuary devises and devises the residue to trust. The probate estate consists of $1,000,000 in vacant land and $500,000 of cash. You have been contacted by Friend to represent her as personal representative and trustee. At the initial meeting, Friend would like for you to provide her with a preliminary analysis of significant issues pertaining to the probate administration. Friend mentioned that she believes that the probate administration should be straightforward since she, as trustee of the trust, is the "sole beneficiary" of the estate. You commence the analysis and initially focus on the beneficiary aspects of the forthcoming administration.

Identifying Interested Parties in Administration of Estate

Under the Florida Probate Code, who are the beneficiaries and interested persons of the estate? These questions must be answered at the outset of the estate administration in that, among other requirements, beneficiaries must receive a copy of the notice of administration (F.S. [section] 733.212 and Fla. Prob. R. 5.240) and residuary beneficiaries must receive a copy of the inventory (Fla. Prob. R. 5.340). Interested persons must be served with any interim accountings (Fla. Prob. R. 5.345) and the petition for discharge and the final accounting (Fla. Prob. R. 5.400). Importantly, can Friend, as trustee of the trust, act on behalf of trust beneficiaries Sister, Daughter, and Son? Is Friend, as trustee, the estate beneficiary or are Sister, Son, and Daughter, the estate beneficiaries?

F.S. [section] 731.201(2) states that "In the absence of a conflict of interest of the trust, the trustee is a beneficiary of the estate." (Emphasis added.) There is a conflict of interest under this example in that Friend is serving as both personal representative and trustee. (1) The nature of the conflict is that Friend would be in a position to approve her own accounting as personal representative of the estate. (2) Under the fiduciary duty of loyalty, Friend, as personal representative, must administer the estate solely in the interests of the beneficiaries. (3) The ability to approve her own probate accounting causes Friend to be personally interested in the accounting. It is difficult, if not impossible, for any person to act fairly in the same transaction (here, the submission and approval of the accounting) on behalf of himself or herself and in the interest of the beneficiaries. (4) It is only human that the personal representative/trustee will tend to favor his or her individual interests, whether consciously or unconsciously, over that of the beneficiaries. (5) Since there is a conflict of interest, F.S. [section] 731.201(2) deems all owners of beneficial interests in the trust to be beneficiaries of the estate. Thus, the beneficiaries of the estate are Sister, Daughter, and Son. Accordingly, Sister, Daughter, and Son should receive service of the notice of administration. (6) Pursuant to F.S. [subsection] 731.201(31) and 731.201(9), the trust is the residuary devisee of the estate. Since F.S. [section] 731.201(2) causes all of the trust beneficiaries to be estate beneficiaries, pursuant to F.S. [section] 733.212 and Fla. Prob. Rs. 5.240 and 5.340, Sister, Daughter, and Son should be served with copies of the notice of administration and the inventory.

The term "interested person" is defined in F.S. [section] 731.201(21). Under [section]731.201(21), Friend, as trustee of the trust, is an interested person in all probate proceedings dealing with estate administration expenses and claims against the estate...