Sunday, December 14, 2014

PROTECTOR POWER TO AMEND TRUST UPHELD, BUT LITIGANTS ALSO RAISE AN INTERESTING ACCOUNTING ISSUE [FLORIDA]–PART I

A recent Florida appellate court decision upholds the ability of a trust “protector” to amend the provisions of a trust.

Florida Statutes Section 736.0808(e) provides that “[t]he terms of a trust may confer on a trustee or other person a power to direct the modification or termination of the trust.” In the trust at issue, the trust instrument authorized a third party to modify or amend the trust provisions to correct ambiguities in the trust or correct a drafting error that defeats the settlor’s intent. During litigation involving the rights of children to challenge the administration of a trust held for the settlor’s spouse, the protector modified the trust language in an attempt to restrict the children’s right to challenge. The trial court disallowed the amendment. The appellate court found ambiguity in the trust document that was eligible for modification by the protector, and reversed the trial court and allowed the amendment to stand.

The children argued that the amendment power violated common law as an unauthorized delegation by the trustee of discretionary powers to another. The appellate court rejected this because it was not the trustee that delegated a duty here – it was the settlor. Further, Fla.Stats. 736.0106 allows common law to be overridden by the statutory provisions of the trust code.

The children also argued that Sections 736,0410-.0415 and 736.0412 are the sole means of modifying a trust under the Florida Trust Code, and that the terms of the trust are not permitted to override this limit, pursuant to Section 736.0105(2)(k). The appellate court did not agree to this restrictive reading, since otherwise Section 736.0808(3) would have no effect.

I have updated our Irrevocable Trust Amendment Mechanisms diagram for this case. You can download the new version here. The first page is a shortened version – the second page has the detail which you will need to zoom in on to read.

The more interesting question to me is what the wife and the protector were trying to accomplish by the amendment vis-à-vis the obligation to account to the children. This is addressed in Part II of this posting, to follow.

Minassian v. Rachins and Minassian, 4th DCA, Case No. 4D13-2241, December 3, 2014

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