§ 736.0802 — Duty of loyalty

Florida § 736.0802

• Jurisdiction: Florida
• Title: XLII
• Ch. 736: FLORIDA TRUST CODE

Text

(1) As between a trustee and the beneficiaries, a trustee shall administer the trust solely in the interests of the beneficiaries.

(2) Subject to the rights of persons dealing with or assisting the trustee as provided in s. 736.1016, a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee’s own personal account or which is otherwise affected by a conflict between the trustee’s fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless: (a) The transaction was authorized by the terms of the trust; (b) The transaction was approved by the court; (c) The beneficiary did not commence a judicial proceeding within the time allowed by s. 736.1008; (d) The beneficiary consented to the trustee’s conduct, ratified the transaction, or released the trustee in compliance with s. 736.1012; (e) The transaction involves a contract entered into or claim acquired by the trustee when that person had not become or contemplated becoming trustee; (f) The transaction was consented to in writing by a settlor of the trust while the trust was revocable; (g) The transaction is one by a corporate trustee that involves a money market mutual fund, mutual fund, or a common trust fund described in s. 736.0816(3); or (h) With regard to a trust that is administered by a family trust company, licensed family trust company, or foreign licensed family trust company operating under chapter 662, the transaction is authorized by s. 662.132(4)-(8).

(3)(a) A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if the sale, encumbrance, or other transaction is entered into by the trustee with: 1. The trustee’s spouse; 2. The trustee’s descendants, siblings, parents, or their spouses; 3. An officer, director, employee, agent, or attorney of the trustee; or 4. A corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee’s best judgment. (b) This subsection does not apply to a trust being administered by a family trust company, licensed family trust company, or foreign licensed family trust company operating under chapter 662 if the sale, encumbrance, or other transaction is authorized by s. 662.132(4)-(8).

(4) A transaction not concerning trust property in which the trustee engages in the trustee’s individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust.

(5)(a) An investment by a trustee authorized by lawful authority to engage in trust business, as defined in s. 658.12, in investment instruments, as defined in s. 660.25(6), that are owned or controlled by the trustee or its affiliate, or from which the trustee or its affiliate receives compensation for providing services in a capacity other than as trustee, is not presumed to be affected by a conflict between personal and fiduciary interests provided the investment otherwise complies with chapters 518 and 660 and the trustee complies with the requirements of this subsection. (b) A trustee who, pursuant to this subsection, invests trust funds in investment instruments that are owned or controlled by the trustee or its affiliate shall disclose the following to all qualified beneficiaries: 1. Notice that the trustee has invested trust funds in investment instruments owned or controlled by the trustee or its affiliate. 2. The identity of the investment instruments. 3. The identity and relationship to the trustee of any affiliate that owns or controls the investment instruments. (c) A trustee who, pursuant to this subsection, invests trust funds in investment instruments with respect to which the trustee or its affiliate receives compensation for providing services in a capacity other than as trustee shall disclose to all qualified beneficiaries, the nature of the services provided by the trustee or its affiliate, and all compensation, including, but not limited to, fees or commissions paid or to be paid by the account and received or to be received by an affiliate arising from such affiliated investment. (d) Disclosure required by this subsection shall be made at least annually unless there has been no change in the method or increase in the rate at which such compensation is calculated since the most recent disclosure. The disclosure may be given in a trust disclosure document as defined in s. 736.1008, in a copy of the prospectus for the investment instrument, in any other written disclosure prepared for the investment instrument under applicable federal or state law, or in a written summary that includes all compensation received or to be received by the trustee and any affiliate of the trustee and an explanation of the manner in which such compensation is calculated, either as a percentage of the assets invested or by some other method. (e) This subsection shall apply as follows: 1. This subsection does not apply to qualified investment instruments or to a trust for which a right of revocation exists. 2. For investment instruments other than qualified investment instruments, paragraphs (a), (b), (c), and (d) shall apply to irrevocable trusts created on or after July 1, 2007, which expressly authorize the trustee, by specific reference to this subsection, to invest in investment instruments owned or controlled by the trustee or its affiliate. 3. For investment instruments other than qualified investment instruments, paragraphs (a), (b), (c), and (d) shall apply to irrevocable trusts created on or after July 1, 2007, that are not described in subparagraph 2. and to irrevocable trusts created prior to July 1, 2007, only as follows: a. Such paragraphs shall not apply until the statement required in paragraph (f) is provided and a majority of the qualified beneficiaries have provided written consent. All consents must be obtained within 90 days after the date of delivery of the written request. Once given, consent shall be valid as to all investment instruments acquired pursuant to the consent prior to the date of any withdrawal of the consent. (I) Any qualified beneficiary may petition the court for an order to prohibit, limit, or restrict a trustee’s authority to make investments under this subsection. The burden shall be upon the petitioning beneficiary to show good cause for the relief sought. (II) The court may award costs and attorney fees relating to any petition under this subparagraph in the same manner as in chancery actions. When costs and attorney fees are to be paid out of the trust, the court, in its discretion, may direct from which part of the trust such costs and fees shall be paid. b. The consent of a majority of the qualified beneficiaries under this subparagraph may be withdrawn prospectively by written notice of a majority of any one of the class or classes of the qualified beneficiaries. (f)1. The trustee of a trust as defined in s. 731.201 may request authority to invest in investment instruments described in this subsection other than a qualified investment instrument, by providing to all qualified beneficiaries a written request containing the following: a. The name, telephone number, street address, and mailing address of the trustee and of any individuals who may be contacted for further information. b. A statement that the investment or investments cannot be made without the consent of a majority of each class of the qualified beneficiaries. c. A statement that, if a majority of each class of qualified beneficiaries consent, the trustee will have the right to make investments in investment instruments, as defined in s. 660.25(6), which are owned or controlled by the trustee or its affiliate, or from which the trustee or its affiliate receives compensation for providing services in a capacity other than as trustee, that such investment instruments may include investment instruments sold primarily to trust accounts, and that the trustee or its affiliate may receive fees in addition to the trustee’s compensation for administering the trust. d. A statement that the consent may be withdrawn prospectively at any time by written notice given by a majority of any class of the qualified beneficiaries. A statement by the trustee is not delivered if the statement is accompanied by another written communication other than a written communication by the trustee that refers only to the statement. 2. For purposes of paragraph (e) and this paragraph: a. “Majority of the qualified beneficiaries” means: (I) If at the time the determination is made there are one or more beneficiaries as described in s. 736.0103(19)(c), at least a majority in interest of the beneficiaries described in s. 736.0103(19)(a), at least a majority in interest of the beneficiaries described in s. 736.0103(19)(b), and at least a majority in interest of the beneficiaries described in s. 736.0103(19)(c), if the interests of the beneficiaries are reasonably ascertainable; otherwise, a majority in number of each such class; or (II) If there is no beneficiary as described in s. 736.0103(19)(c), at least a majority in interest of the beneficiaries described in s. 736.0103(19)(a) and at least a majority in interest of the beneficiaries described in s. 736.0103(19)(b), if the interests of the beneficiaries are reasonably ascertainable; otherwise, a majority in number of each such class. b. “Qualified investment instrument” means a mutual fund, common trust fund, or money market fund described in and governed by s. 736.0816(3). c. An irrevocable trust is created upon execution of the trust instrument. If a trust that was revocable when created thereafter becomes irrevocable, the irrevocable trust is created when the right of revocation terminates. (g) Nothing in this chapter is intended to create or imply a duty for the trustee to seek the application of this subsection to invest in investment instruments described in paragraph (a), and no inference of impropriety may be made as a result of a trustee electing not to invest trust assets in investment instruments described in paragraph (a). (h) This subsection is not the exclusive authority under this code for investing in investment instruments described in paragraph (a). A trustee who invests trust funds in investment instruments described in paragraph (a) is not required to comply with paragraph (b), paragraph (c), or paragraph (f) if the trustee is permitted to invest in such investment instruments pursuant to subsection (2). (i) This subsection does not apply to a trust administered by a family trust company, licensed family trust company, or foreign licensed family trust company operating under chapter 662.

(6) In voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in the best interests of the beneficiaries. If the trust is the sole owner of a corporation or other form of enterprise, the trustee shall elect or appoint directors or other managers who will manage the corporation or enterprise in the best interests of the beneficiaries.

(7) This section does not preclude the following transactions, if fair to the beneficiaries: (a) An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee; (b) A payment of reasonable compensation to the trustee; (c) A transaction between a trust and another trust, the decedent’s estate, or a guardian of the property of which the trustee is a fiduciary or in which a beneficiary has an interest; (d) A deposit of trust money in a regulated financial service institution operated by the trustee; or (e) An advance by the trustee of money for the protection of the trust.

(8) This section does not preclude the employment of persons, including, but not limited to, attorneys, accountants, investment advisers, or agents, even if they are the trustee, an affiliate of the trustee, or otherwise associated with the trustee, to advise or assist the trustee in the exercise of any of the trustee’s powers and to pay reasonable compensation and costs incurred in connection with such employment from the assets of the trust; to act without independent investigation on their recommendations; and, instead of acting personally, to employ one or more agents to perform any act of administration, whether or not discretionary.

(9) The court may appoint a special fiduciary to act with respect to any proposed transaction that might violate this section if entered into by the trustee.

(10) Unless otherwise provided in this subsection, payment of costs or attorney fees incurred in any proceeding may be made by a trustee from assets of the trust without the approval of any person and without court authorization, as provided in ss. 736.0816(20) and 736.1007(1). (a) As used in this subsection, the term “pleading” means a pleading as defined in Rule 1.100 of the Florida Rules of Civil Procedure. (b) If a trustee incurs attorney fees or costs in connection with a claim or defense of breach of trust which is made in a filed pleading, the trustee may pay such attorney fees or costs from trust assets without the approval of any person and without any court authorization. However, the trustee must serve a written notice of intent upon each qualified beneficiary of the trust whose share of the trust may be affected by the payment before such payment is made. The notice of intent does not need to be served upon a qualified beneficiary whose identity or location is unknown to, and not reasonably ascertainable by, the trustee. (c) The notice of intent must identify the judicial proceeding in which the claim or defense of breach of trust has been made in a filed pleading and must inform the person served of his or her right under paragraph (e) to apply to the court for an order prohibiting the trustee from using trust assets to pay attorney fees or costs as provided in paragraph (b) or compelling the return of such attorney fees and costs to the trust. The notice of intent must be served by any commercial delivery service or form of mail requiring a signed receipt; the manner provided in the Florida Rules of Civil Procedure for service of process; or, as to any party over whom the court has already acquired jurisdiction in that judicial proceeding, in the manner provided for service of pleadings and other documents by the Florida Rules of Civil Procedure. (d) If a trustee has used trust assets to pay attorney fees or costs described in paragraph (b) before service of a notice of intent, any qualified beneficiary who is not barred under s. 736.1008 and whose share of the trust may have been affected by such payment is entitled, upon the filing of a motion to compel the return of such payment to the trust, to an order compelling the return of such payment, with interest at the statutory rate. The court shall award attorney fees and costs incurred in connection with the motion to compel as provided in s. 736.1004. (e) Upon the motion of any qualified beneficiary who is not barred under s. 736.1008 and whose share of the trust may be affected by the use of trust assets to pay attorney fees or costs as provided in paragraph (b), the court may prohibit the trustee from using trust assets to make such payment and, if such payment has been made from trust assets after service of a notice of intent, the court may enter an order compelling the return of the attorney fees and costs to the trust, with interest at the statutory rate. In connection with any hearing on a motion brought under this paragraph: 1. The court shall deny the motion unless it finds a reasonable basis to conclude that there has been a breach of trust. If the court finds there is a reasonable basis to conclude there has been a breach of trust, the court may still deny the motion if it finds good cause to do so. 2. The movant may show that such reasonable basis exists, and the trustee may rebut any such showing by presenting affidavits, answers to interrogatories, admissions, depositions, and any evidence otherwise admissible under the Florida Evidence Code. (f) If a trustee fails to comply with an order of the court prohibiting the use of trust assets to pay attorney fees or costs described in paragraph (b) or fails to comply with an order compelling that such payment be refunded to the trust, the court may impose such remedies or sanctions as the court deems appropriate, including, without limitation, striking the defenses or pleadings filed by the trustee. (g) Notwithstanding the entry of an order prohibiting the use of trust assets to pay attorney fees and costs as provided in paragraph (b), or compelling the return of such attorney fees or costs, if a claim or defense of breach of trust is withdrawn, dismissed, or judicially resolved in the trial court without a determination that the trustee has committed a breach of trust, the trustee is authorized to use trust assets to pay attorney fees and costs as provided in paragraph (b) and may do so without service of a notice of intent or order of the court. The attorney fees and costs may include fees and costs that were refunded to the trust pursuant to an order of the court. (h) This subsection does not limit proceedings under s. 736.0206 or remedies for breach of trust under s. 736.1001, or the right of any interested person to challenge or object to the payment of compensation or costs from the trust.

Legislative History

s. 8, ch. 2006-217; s. 3, ch. 2007-153; s. 159, ch. 2008-4; s. 2, ch. 2008-76; s. 20, ch. 2009-115; s. 18, ch. 2013-172; s. 38, ch. 2014-97; s. 5, ch. 2016-189; s. 41, ch. 2021-183; s. 18, ch. 2022-178.