What Are Florida Trustee Defenses Against Beneficiary Claims?

Florida attorney Reed Bloodworth handles trustee defense for clients in legal disputes with beneficiaries. Based in Orlando, Reed is the Founder and CEO of Bloodworth Law.

Reed explains that a lot of times, complaints or requests to remove a trustee may erupt over issues that a beneficiary perceives are wrong, but they’re actually not wrong at all.

What Are Florida Trustee Defenses Against Beneficiary Claims?

What are Florida trustee defenses against beneficiary claims? When you’re talking about trustee defenses, defenses are case and fact-specific. Think of a common claim against a trustee: a failure to provide an annual accounting, where a beneficiary files a lawsuit.

Trustee Doing Their Job

Maybe a year has passed, but during that year, the trustee has been doing their job. They’ve been going out and collecting and protecting the assets of the trust.

Assets Hard to Find

Sometimes there are assets that are hard to find. Or the asset may not be worth what they thought it was, and the trustee has communicated to the beneficiaries, “Hey, I’m working on this. I just need more time. I will get it to you. I just need more time.”

Beneficiary Doesn’t Trust Trustee

But you have some beneficiaries that either don’t trust the person, or they don’t trust the company. Maybe they’re just lawsuit-happy and they go ahead and file the lawsuit.

If it’s a breach of trust for failure to provide annual accounting, the court’s going to hear all the relevant evidence.

Don’t Know Asset Value

It may be a valid defense that the trustee can show, “I’ve been doing everything I should. I’ve been providing them information, but we’re not yet in a position to provide an annual accounting because we don’t know the value of everything yet. We’re not certain about what all the assets are in the trust.”

Case and Fact-Specific Defense

Reed explains that is a case and fact-specific type of defense.

“You have to think first calls of action and then, what’s the defense? So, I’ve had claims or defended trustees that the beneficiaries sued a trustee claiming a breach of trust for failing to sell a piece of property for which the beneficiaries thought was worth more than what the trustee sold it for. Well, there’s a couple of defenses to that.

Trustee Sold Asset For Appraised Price

Number one: Did the trustee sell it for the appraisal price? So, if the trustee did that and they complied with their duties, they went and got an appraisal, the appraiser came back and said the property’s worth X and they sold it for X, then that is a very valid defense.

Trustee Sold Asset for Valid Price

But beyond that, there’s actually case law out there that says a trustee can sell a piece of real property for less than what a piece of property may have priced for. And so, that again is a very good affirmative defense.

Look At Trust Document

The other thing you want to do as a trustee is you want to look for and it is in virtually every trust — if a trust holds real estate, you look to the document itself. And within a trust, you’re going to have a section of trustee powers explaining what a trustee is permitted to do.

And in virtually every trust, there is going to be a section that authorizes a trustee to sell real estate either by public, hiring an agent, putting it out on the market, or even privately.

Decision Made In Good Faith

Those decisions are governed upon a kind of a bad faith basis: Did the trustee make a decision in bad faith, or was this made in good faith?

So you would present evidence as to why this was a good faith decision. For example, think back to 2008, and you have a trustee and he or she or the company is liquidating real estate because they see the value declining.

Asset Sold To Diversify Portfolio

They’re saying, “well, I can sell this and I can then diversify the portfolio. I can put money in stocks. I can put money in bonds. I can hold cash. I can put it in CDs, a lot of different investments, and you’re more diversified.”

In that time period, you would’ve gotten out of an asset that had started to decline, and maybe that would’ve been whenever the decline actually started in real estate.

Work It Out, Or, Legal Dispute

The beneficiary and trustee can work on this and other issues. But instead, if an argument occurs, it may become a legal dispute.

Attorney Reed Bloodworth is a 2022 U.S. News & World Report Best Lawyer in Trusts & Estates Litigation. If you’re having difficulty with a beneficiary over a trust, talk with Reed about whether the Bloodworth Law Trust Litigation or Estate Litigation team can help you or your family.