Litigating Breach of Fiduciary Duty in Trust Administration

Those who manage a trust are supposed to hold to the highest standard of conduct in business law—fiduciary duty. Trustees must carry out their responsibilities carefully without enriching themselves or favoring any particular trust beneficiary. 

Not every trustee manages to meet this standard. Some are simply neglectful and do not do what they were appointed for. Others mismanage the trust property—losing money, letting real estate decay—or even work against the interests of the people they should protect. How can attorneys challenge these trustees and defend the interests of the trust?

The Elements of Fiduciary Duty

In Florida law, trustees have a fiduciary duty to the beneficiaries of an irrevocable trust—a trust that cannot be revoked by the person who created it. Trustees of a revocable trust have a fiduciary duty to the trust’s creator instead (the settlor) or a person with the power of withdrawal. See Fla. Stat. § 736.0603.

Fiduciary duty consists of several elements:

• The duty of loyalty. A trustee must administer the trust “solely in the interest of the beneficiaries,” avoiding conflicts of interest (unless properly authorized). See § 736.0802.
• The duty of impartiality. Trustees cannot favor one beneficiary over another. See § 736.0803.
• The duty of prudence. A trustee must “administer the trust as a prudent person would” and “exercise reasonable care, skill, and caution” in investing the trust’s money and maintaining its property. See § 736.0804.
• The duty of disclosure. Trustees must provide specific information to beneficiaries of an irrevocable trust or settlors of a revocable trust. This includes an accounting each year or on the appointment of a new trustee, as well as statements upon reasonable request. See § 736.0813. The accounting must fulfill requirements set out by law.

Common Breaches of Fiduciary Duty by Trustees

These include:

• Failing to provide information as requested or to give adequate annual accountings
• Self-dealing—transactions that take personal advantage of trust property 
• Conflicts of interest—transactions that favor relatives or business interests of the trustee
• Failure to provide required distributions from the trust
• Favoring some beneficiaries over others
• Neglecting administrative duties 
• Outright misappropriation

A trustee may breach fiduciary duty without intending to, especially if they neglect disclosure duties, but the effects can be no less damaging.

When a Trustee Fails: Legal Remedies

If a trustee breaches their fiduciary duty, the settlor or beneficiary concerned can petition the court to order that trustee to make it right. A trust litigation attorney will file the petition in the county’s circuit court. In Florida, the court has power in equity over trustees. That means it can grant almost any appropriate request for relief, including:

• Declaring a trustee’s act void 
• Ordering a trustee to do their job
• Suspending or removing a trustee
• Reducing a trustee’s compensation
• Issuing an injunction against ongoing or future acts of the trustee

See Fla. Stat. § 736.1001. A trustee can be held personally liable for damages from a breach of trust, including any profit they made. See § 736.1002.

Acting Quickly to Preserve Your Rights

Unfortunately, the statute of limitations in Florida can cut off an action against a trustee within as little as six months, depending on how and when you learned about the problem. See § 736.1008. If not, you will likely have four years to file a complaint, although concealed wrongdoing could allow a more extended period. See § 95.11. Only an experienced trust litigation attorney can review this issue properly, so be sure to speak to one as soon as you can.

Approaching the Trustee 

In many situations, the most effective lawsuit is the one you don’t have to file. Your trust attorney will analyze the situation and determine what penalties the trustee could face. They can then send a formal demand for the trustee to act, setting out the consequences and letting them know they face legal action. 

Often, this is enough to get the results you need. Experienced attorneys know how to avoid litigation when possible—and to handle it effectively when it is.

Filing a Petition and Requesting Relief

For example, a trustee might be actively working against your interests in planning a sale of trust property that will enrich their personal business. Your attorney may need to file immediately to ask the court to enjoin the trustee from what they are doing and stop them from carrying out their plans. 

If a trustee has made a profit by acting against the trust’s interests, the attorney can request the court to order disgorgement—forcing the trustee to turn over “ill-gotten” money to the trust. In some cases, the court can order a trace and recovery of property that the trustee disposed of. The court can also order the trustee to return misappropriated funds. A trustee cannot rely on any waiver of liability if they acted in bad faith or were “recklessly indifferent” to their duty. See § 736.1011. 

Where a trustee can no longer be expected to carry out their duties, an attorney can request that the court remove that trustee entirely. If no replacement is available, the court can put a “special fiduciary” in their place to manage the trust for a time.

Let Us Defend Your Rights

Even when the injustice is apparent, trust law is complicated. Our Orlando legal team has years of experience holding trustees to account. If you know—or even just suspect—that a Florida trustee has breached their duty, we want to talk to you as soon as possible before any statute of limitations can expire. Call (407-449-8958) to schedule your first appointment in our Orange County offices.