What Can a Beneficiary Sue a Trustee For in Florida?

Responsible lawyer: Leslie V. Marenco, Trust Counsel, PL, Coral Gables, Florida

A beneficiary can sue a trustee for breach of trust when the trustee breaks a duty owed to that beneficiary. Florida law says a violation of such a duty is a breach of trust. The main claims involve disloyalty, poor management, missing information and improper distributions.

If you’re reading this about a parent’s or sibling’s trust, you may be worried but not yet sure what the facts add up to. The sections below explain each type of claim, the remedies a court can order, and what to gather before you speak with a lawyer.

What can a beneficiary sue a trustee for?

A beneficiary can sue for breach of trust when the trustee fails to meet a duty the trustee owes. The trust document and Chapter 736 of the Florida Statutes, the Florida Trust Code, set those duties. Fla. Stat. § 736.1001 defines a breach as a violation of a duty the trustee owes to a beneficiary.

A claim is different from a disagreement. A beneficiary who simply dislikes a trustee’s choice usually has no claim. A beneficiary who can point to a specific duty that was broken has a stronger starting point. Florida law says a trustee “shall administer the trust solely in the interests of the beneficiaries” (Fla. Stat. § 736.0802). Most claims come back to that core duty.

Breach of loyalty and self-dealing

A trustee who puts personal interests ahead of the trust in a transaction involving trust property commits a loyalty breach, and a beneficiary affected by that transaction may void it unless an exception applies. Common examples include using trust property for personal benefit, or buying or selling trust assets in a way that helps the trustee.

Florida law makes certain deals voidable. A transaction affected by a conflict between the trustee’s personal and fiduciary interests can be undone by an affected beneficiary, unless an exception applies, such as the trust terms authorizing it, the beneficiary consenting to the trustee’s conduct, ratifying the transaction, or releasing the trustee, or a settlor consenting in writing while the trust was revocable (§ 736.0802). The statute also presumes a conflict when the trustee deals with the trustee’s spouse, among other listed people.

Profit matters here. A trustee who commits a breach of trust is liable for the greater of: the amount required to restore the value of the trust property and trust distributions to what they would have been if the breach had not occurred, including lost income, capital gain, or appreciation that would have resulted from proper administration; or the profit the trustee made by reason of the breach.

Imprudent management and investment losses

A trustee can be challenged for poor investment management when the trustee fails to invest and manage investment assets as a prudent investor would, with reasonable care and caution. Florida requires a trustee to administer the trust as a prudent person would, considering the trust’s purposes and terms (Fla. Stat. § 736.0804).

Investment losses alone don’t prove a breach. Florida’s prudent investor rule says no specific investment is, taken alone, prudent or imprudent. It is “a test of conduct and not of resulting performance” (Fla. Stat. § 518.11). The real question is how the trustee acted.

Neglect is different from a good-faith decision that went badly. Look for signs the trustee never reviewed the holdings, ignored the trust’s goals, or let assets sit without a plan. When a trust has two or more beneficiaries, the trustee must also act impartially (§ 736.0803).

Failure to account, report and inform

A trustee must keep qualified beneficiaries reasonably informed about the trust and its administration. Florida law sets specific steps for this duty (Fla. Stat. § 736.0813).

Upon reasonable request, the trustee must give a qualified beneficiary a complete copy of the trust instrument. The trustee must also share relevant information about assets, liabilities and administration. For an irrevocable trust, the trustee must provide an accounting at least annually and when the trustee changes or the trust ends, unless a family trust company, licensed family trust company, or foreign licensed family trust company is the trustee and the trust terms permit accounting only at termination, upon the removal, resignation, or other event resulting in the trustee ceasing to serve, or upon a qualified beneficiary’s demand (Fla. Stat. § 736.0813).

An accounting must show all cash and property transactions and significant transactions during the period. It must include compensation paid to the trustee and the trustee’s agents (Fla. Stat. § 736.08135). A missing, late or vague accounting can support a claim. It can also show a pattern worth investigating.

Improper distributions and ignoring the trust terms

A distribution that goes to the wrong person, in the wrong amount or at the wrong time can be challenged. The trust terms set who gets what and when.

Courts have tools to fix uneven results. If a breach gave one beneficiary too little, the court can order payment from the trust to restore that beneficiary. If a beneficiary received too much, the court can require the excess back or withhold it from future distributions (Fla. Stat. § 736.1001).

That includes income or interest from the date of distribution, unless adjudication, estoppel or limitations bars the question (Fla. Stat. § 736.1018).

Remedies a court can order

A court can order a trustee to pay money, restore property, account, or step aside. Florida’s remedy list is broad. It includes compelling the trustee to perform the trustee’s duties, enjoining the trustee from committing a breach of trust, and ordering the trustee to account.

The court can also suspend a trustee, appoint a special fiduciary to take control of trust property, or reduce or deny the trustee’s compensation. Subject to s. 736.1016, it can void an act of the trustee, impose a lien or constructive trust, and trace trust property wrongfully disposed of and recover the property or its proceeds. A separate page on constructive trusts explains that remedy in more detail.

Removal is another option. The settlor, a cotrustee or a beneficiary may ask the court to remove a trustee. The court may also act on its own (Fla. Stat. § 736.0706). Grounds include a serious breach of trust and persistent failure to administer the trust effectively.

Warning signs and evidence to gather before filing

Start with the trust document and every statement you can collect. Papers from the trustee are often the first proof of what happened.

Warning signs include unexplained transfers, missing statements, unanswered requests for information, and fees you can’t match to a service. Another sign is a trustee who limits what beneficiaries can see.

Keep these items together: the trust instrument and any amendments, bank and brokerage statements, letters and emails with the trustee, and any accountings or notices you received. Write down dates while they’re fresh.

Timing matters. A claim can be barred for matters the trustee adequately disclosed in a trust disclosure document. For a matter adequately disclosed in a trust disclosure document, a beneficiary is barred from suing the trustee for breach of trust unless a proceeding is commenced within 6 months after receiving that disclosure document or a limitation notice that applies to it, whichever is received later, unless the claim is sooner barred by adjudication, consent, or limitations (Fla. Stat. § 736.1008). For a matter not adequately disclosed, the claim is barred as provided in chapter 95, and that limitations period begins when the beneficiary receives the trustee’s final trust accounting and written notice that the trust records are available for examination and that such claims may be barred. Only if the trustee has not issued that final accounting or notice does the claim instead accrue on the beneficiary’s actual knowledge as the statute defines it, for example, actual knowledge of the facts underlying the claim, established by clear and convincing evidence. A written limitation notice can set a 6-month window. Check the dates on every accounting the day it arrives.

Common questions about suing a trustee

Short answers are below. Each one depends on the trust’s terms and the facts of the case.

Talk with a trust litigation attorney about your situation

You may be reading this for a parent or sibling while the trustee’s conduct is still unresolved. A trust litigation attorney can review your facts and explain which claims may fit.

Bring the trust document and whatever statements or letters you have. Trust Counsel’s attorneys can serve individually as trustee or personal representative, and the firm advises and represents trustees, personal representatives and beneficiaries. Our only office is in Coral Gables, and we serve clients across Florida.

Our first consultation is free, confidential, and carries no obligation to continue. Call (305) 707-7126 or schedule online to talk through your situation.