PROBATE CORNER
DAVID M . GARTEN
Limitations On A Trustee ’ s Absolute Discretion ( Continued )
EXERCISE OF DISCRETIONARY POWERS : After determining the scope of the trustee ’ s discretion , you need to review the trustee ’ s actions / inactions :
• Did the trustee exercise his discretion in good faith ? For example , in Estate of
Herskowitz , 338 So . 2d 210 ( Fla . 3rd DCA 1976 ), the court found that the trustee ’ s refusal to make support payments constitutes arbitrary and capricious conduct and " nothing more than a strategical ploy to wear down the guardian of the persons and natural mother ."
• Did the trustee exercise his discretion in accordance with the terms and purposes of the trust ?
• Did the trustee exercise his discretion impartially among the trust beneficiaries ? See § 736.0803 ( same ). Did the trustee treat the beneficiaries even-handedly ? See Friedman v . Friedman , 844 So . 2d 789 ( Fla . 4th DCA 2003 ). In DeMello v . Buckman , 916 So . 2d 882 ( Fla . 4th DCA 2005 ), the trustee was removed for making decisions with respect to the administration of the trust and disposition of its assets based upon her personal interests . In addition , special rules apply to discretionary decisions by a trustee who is also a beneficiary . See § 736.0814 ( 2 ), F . S .
• Did the trustee consciously consider whether or not to exercise his discretion ? The trustee can decide not to make a distribution , but he cannot fail to deliberate . The trustee cannot remain passive . A trustee breaches his duty to the beneficiary if he refuses to make a determination . The court will prevent the trustee from failing to act , either arbitrarily or from a misunderstanding of the trustee ' s duty or authority . See Restatement 3d of Trusts , § 50 , Comments & Illustrations .
• Did the trustee consider the beneficiary ’ s other assets ? When the trustee has discretion regarding distribution of assets for a beneficiary ’ s health , education , maintenance , and support , uncertainty can arise regarding whether the trustee should consider other assets and income available to that beneficiary , such as the beneficiary ’ s own resources , when the trust does not require such consideration . In Florida , when a trustee has sole discretion to make a distribution , his request for information of outside sources of income is not an abuse of discretion where there is no evidence that he acted dishonestly , arbitrarily or from an improper motive . See NCNB Nat . Bank of Florida v . Shanaberger , 616 So . 2d 96 ( Fla . 2d DCA 1993 ).
• Did the trustee comply with all of his statutory duties ? See § 736.0801- § 736.0817 , F . S .
JUDICIAL REVIEW : “[ A ] lthough there is a field , often a wide field , within which the trustee may determine whether to act or not and when and how to act , beyond that field the court will control him . How wide that field is depends upon the terms of the trust , the nature of the power , and all the circumstances .” See DeMello v . Buckman , supra , citing Scott on Trusts . A trustee ' s exercise of discretion is not subject to control by the court except to prevent an abuse of discretion . See NCNB Nat . Bank of Florida v . Shanaberger , supra . “ A court shall not determine that a trustee abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion .” See § 736.0814 ( 1 ), F . S . However , a court may be more inclined to find an abuse of discretion when “ simple [ or reasonable ] discretion ” and not “ absolute discretion ” is involved . See Bogert , Trusts and Trustees , § 560 ( 2d ed . 1992 ).
Restatement ( Second ) of Trusts § 187 Comment d , lists the following six factors for determining whether a trustee has abused his discretion : ( 1 ) the extent of the discretion conferred upon the trustee by the terms of the trust ; ( 2 ) the purposes of the trust ; ( 3 ) the nature of the power ; ( 4 ) the existence or non-existence , the definiteness or indefiniteness , of an external standard by which the reasonableness of the trustee ' s conduct can be judged ; ( 5 ) the motives of the trustee in exercising or refraining from exercising the power ; ( 6 ) the existence or nonexistence of an interest in the trustee conflicting with that of the beneficiaries .
TRUSTEE ’ S SOLE DISCRETION : Reference to a trustee ’ s " sole discretion " and " binding and conclusive determinations ," though they ostensibly suggest an intent to dispense with judicial review entirely , are construed to signify an intent to limit the scope of judicial review of the trustee ’ s discretion in applying that standard . See In re Estate of Mayer , 176 Misc . 2d 562 ; 672 N . Y . S . 2d 998 ( Sur Ct . NY 1998 ). If the trustee has sole discretion , the courts will not find an abuse of discretion unless he acted with willful negligence or gross unfaithfulness , dishonestly , arbitrarily , or from an improper motive . See Griffin v
Griffin , 463 So . 2d 569 ( Fla . 1st DCA 1985 ); NCNB Nat . Bank of Florida v . Shanaberger , supra ; American Cancer Soc ., St . Louis Div . v . Hammerstein , 631 S . W . 2d 858 ( Mo App . 1981 ); Scott v . McDonald , 26 Cal . App . 5th 463 , 237 Cal . Rptr . 3d 137 ( Cal . App . 2018 ). This elevated standard is consistent with the UTC Comment : “ the greater the grant of discretion , the broader the range .”
In Memoriam
Edward Tancer 1961 - 2020
PBCBA BAR BULLETIN 18