PROBATE CORNER
Limitations On A Trustee ’ s Absolute Discretion
DAVID M . GARTEN
Let ’ s cut to the chase : In Florida , there is no such thing as a trustee ’ s “ absolute ”, “ sole ”, or “ uncontrolled ” discretion . Irrespective of the scope of the discretion given to a trustee , the trustee must still exercise his discretionary power in good faith , in accordance with the terms and purposes of the trust , and in the interests of the beneficiaries . See § 736.0814 ( 1 ), F . S . This is a mandatory provision under the Trust Code ; therefore , this statute controls over the terms of the Trust . See § 736.0105 ( 2 )( b ), F . S .
“ It is contrary to sound policy , and a contradiction in terms , to permit the settlor to relieve a " trustee " of all accountability … Once it is determined that the authority over trust distributions is held in the role of trustee …, words such as " absolute " or " unlimited " or " sole and uncontrolled " are not interpreted literally . Even under the broadest grant of fiduciary discretion , a trustee must act honestly and in a state of mind contemplated by the settlor . Thus , the court will not permit the trustee to act in bad faith or for some purpose or motive other than to accomplish the purposes of the discretionary power .” See Restatement 3d of Trusts , § 50 , Comments & Illustrations .
So why expand the trustee ’ s discretion at all ? The obvious reason is to make it more difficult to challenge the trustee ’ s actions / inactions . A grant of discretion establishes a range within which the trustee may act . The greater the grant of discretion , the broader the range . See UTC § 814 ( a ), Comment . As a result , the beneficiaries ’ expectations as to a responsibility that is exercised with " sole discretion " should reasonably be more limited than those for a responsibility that is exercised under a higher standard . See Sepe v . City of Safety
Harbor , 761 So . 2d 1182 ( Fla . 2nd DCA 2000 ).
SETTLOR ' S INTENT : The starting point in any analysis in determining the scope of the trustee ’ s discretion is to effectuate the settlor ' s intent from the four corners of the trust . A court must strive to discern the intent of the settlor and give effect to his wishes . Ask : Is the settlor ’ s intent clear from the wording of the trust ? If not , it may be necessary to resort to extrinsic evidence to aid in the construction of the trust . In such instance , it is generally recognized that evidence relating to the attendant facts and circumstances existing at the time of the execution of the trust and of which the settlor had knowledge may be admitted , not to vary nor to contradict any of the terms of the trust , but to explain or resolve the ambiguity and so to enable the court to effectuate the dispositive intent of the settlor . Although the testimony of the drafting attorney is admissible in latent ambiguity cases , such testimony is limited to the surrounding circumstances of the settlor when the trust was made and executed .
“ Specific language , facts , and circumstances in a situation are properly to be considered in the process of interpretation , and may overcome , alter , or reinforce a particular presumption . Realistically , however , these factors often reveal little of a settlor ' s actual intent . The settlor may have formed no intention on the matter at issue , or whatever intention may have existed might not have been ascertained by counsel or preserved in the drafting . In any event , the significance of particular facts and circumstances is often highly speculative , or they may cut both or several ways even if judicial opinions sometimes mention but one side . Furthermore , to be influenced by and draw meaning from subtle details of wording may well ignore the realities of how drafting is done , not to mention that the words were those of one whose work product suggests inattention to the particular issue or circumstances for which it has become necessary to discover , or attribute , an intention . Frequently , therefore , the most revealing and reliable guides for resolving these types of questions are the underlying or general purposes of the trust or provision in question . From these it may be deduced what objectives the settlor had in mind , and thus what intention might appropriately be attributed to the settlor on the matter at issue . Accordingly , rather than relying on speculation about the import of specific details of fact or wording , it is often more instructive to analyze the variety of beneficial interests and other provisions of the trust as a whole , with any other available evidence , in a broader effort to ascertain why the trust was created and what role the particular discretionary power was to play in the trust plan .” See Restatement 3d of Trusts , § 50 , Comments & Illustrations . See also Mesler v . Holly , 318 So . 2d 530 ( Fla . 2nd DCA 1975 ) ( the settlor ' s intent is the polestar by which a trust instrument should be interpreted and construed ).
( Continued on next page )
Annual Sponsorship Opportunities Available
Become a PBCBA annual sponsor and receive 12 months of benefits , including signage online and in print , plus person-to-person networking .
For more information , please visit : www . palmbeachbar . org / sponsorship
PBCBA BAR BULLETIN 17