Breach of Fiduciary Duty: A Trustee’s Legal Obligation
One of the most common causes of trust disputes is a breach of fiduciary duty by the trustee. Trustees have a strict responsibility to act in the best interests of the beneficiaries and follow the instructions set out in the trust document. Florida law imposes these duties to ensure that trustees administer the trust fairly, impartially, and transparently.
A trustee is prohibited from putting their personal interests above the interests of the beneficiaries. When this occurs, it can lead to self-dealing, conflicts of interest, or other actions that undermine the trust’s integrity.
Examples of Breaches of Fiduciary Duty:
Trustees have a clear duty to keep beneficiaries informed about the trust's administration. This includes providing regular accountings of the financial activities of the trust. Florida law generally requires that trustees provide an accounting at least once per year, which should include detailed information about the trust's assets, income, expenses, and distributions.
Trustees are also required to respond to reasonable requests for information from any beneficiary. Such requests may include, but are not limited to:
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Trust documents, including the original trust agreement and any amendments,
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Trustee distributions and other financial transactions,
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Payments to the trustee for services rendered, and
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Bank statements from the trust's accounts to show the flow of assets and expenditures.
If a trustee fails to provide these accountings or to respond to reasonable requests, this can lead to a breach of the duty to inform. Beneficiaries are entitled to this transparency to ensure that the trust is being managed properly, and failure to comply can undermine the trust’s integrity and lead to disputes.
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A trustee might use trust assets to benefit themselves or their family members, which is a violation of their duty of loyalty. Common examples include:
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Selling trust assets to themselves or family members at below-market value, rather than seeking competitive bids or selling the assets in a fair manner.
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Hiring themselves or relatives to manage trust assets or make investment decisions, even when better alternatives exist.
Florida law requires trustees to avoid any transaction where their personal interest conflicts with their fiduciary duties, unless such a transaction is specifically authorized by the trust or approved by the court. Failure to follow this duty may result in the trustee’s actions being voidable by the beneficiaries.
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Trustees are required to act impartially and not favor one beneficiary over another. A trustee who favors one beneficiary at the expense of others could be violating the trust’s terms and the beneficiaries' rights. For example, if a trustee decides to distribute trust assets in a way that benefits one beneficiary—perhaps a close relative—while disregarding the others, this could lead to a legal challenge.
Trustees are also required to disclose any conflicts of interest that might affect their decisions. If a trustee has a personal interest in a transaction, such as investing trust funds in their own business, they must inform the beneficiaries and ensure that all transactions are fair and transparent. If this disclosure is not made, the beneficiaries can seek legal remedies.
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