Fla. Stat. § 736.0111 - Commentary to Florida Trust Code

Legal Commentary on Fla. Stat. § 736.0111

Fla. Stat. § 736.0111 first establishes who “interested persons” are for the purposes of the section. This matters greatly, as interested persons are the only individuals who may enter into a nonjudicial settlement agreement under this statute section. The term “interested persons” is defined as “persons whose interest would be affected by a settlement agreement.” This is similar to the definition of “interested person” in Fla. Stat. §731.201(23) in the Florida Probate Code, which begins “any person who may reasonably be expected to be affected by the outcome of the particular proceeding involved.” The Probate Code explicitly includes a trustee as an interested person and excludes anyone who has received a complete distribution from being an interested person. It is likely that this inclusion and exclusion would also be true for Fla. Stat. § 736.0111.

Fla. Stat. § 736.0111(2) states that interested persons may enter into nonjudicial settlement agreements “with respect to any matter involving a trust”. Note that the word “all” does not precede the phrase “interested persons” in Fla. Stat. § 736.0111(2). Thus, it appears that any group of interested persons may enter into a nonjudicial settlement agreement, regardless of whether other interested persons exists. This is similar to the private contracts allowed for probate estate beneficiaries under Fla. Stat. § 733.815. Given the broad definition of “interested persons”, this makes sense. Indeed, the term may even include creditors of the Trust. See Arzuman v. Estate of Prince Bander Bin Saud Bin, 879 So. 2d 675 (Fla. 4th DCA 2004). However, it is likely that only the interests of those entering into an agreement could be affected by such an agreement. For example, two trust beneficiaries could not validly agree among themselves that a trust creditor ought not be paid.

Fla. Stat. § 736.0111(3) establishes that a nonjudicial settlement agreement may not result in a violation of the Florida Trust Code. At first glance, this would indicate that the Florida Trust Code will always overrule a nonjudicial settlement agreement. However, a fuller reading of the Code indicates otherwise. Fla. Stat. § 736.0103(24) defines “terms of a trust” to include nonjudicial settlement agreements under Fla. Stat. § 736.0111. Thus, under the Florida Trust Code, the terms of a nonjudicial settlement agreement become terms of the trust itself. Thus, according to Fla. Stat. § 736.0105(2), a nonjudicial settlement agreement’s terms will always prevail over the Florida Trust Code unless any of the exceptions of § 736.0105(2) is violated.

Fla. Stat. § 736.0111(3) also establishes that a nonjudicial settlement agreement cannot be used to terminate or modify a trust in an “impermissible manner.” Yet, as discussed in the preceding paragraph, a nonjudicial settlement agreement is by definition a change in the terms of a trust. Thus, any nonjudicial settlement agreement will necessarily result in a trust modification. Hence, it is unclear what an impermissible trust modification would look like. One interpretation is that all nonjudicial modifications must also abide by Fla. Stat. § 736.0412. However, even Fla. Stat. § 736.0412 itself claims not to be the exclusive means of modification, as Fla. Stat. § 736.04126) states plainly, “The provisions of this section are in addition to, and not in derogation of, rights under the common law to modify, amend, terminate, or revoke trusts.” A better reading of the text is that an “impermissible” modification under Fla. Stat. § 736.0111(3) is a modification that impacts the interests of a person not made a party to the agreement. This would parallel Fla. Stat. § 736.0410(2), in which a trust beneficiary can commence a proceeding to disapprove of a nonjudicial modification made under Fla. Stat. § 736.0412. This interpretation is also consistent with Fla. Stat. § 736.0111(5), which allows for interested persons to seek court approval or disapproval of a nonjudicial settlement agreement.

The list in Fla. Stat. § 736.0111(4) of the matters that may be resolved by a nonjudicial settlement agreement is not a limitation. Rather, it is a guarantee that such an agreement may be used for the listed matters. Nothing in the text of the statute indicates that the list is exclusive, and the Final Committee Draft for the Florida Trust Code explicitly notes that the list is not intended to be exclusive.

Text of Fla. Stat. § 736.0111

Nonjudicial settlement agreements.—

(1) For purposes of this section, the term “interested persons” means persons whose interest would be affected by a settlement agreement.

(2) Except as otherwise provided in subsection (3), interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust.

(3) A nonjudicial settlement agreement among the trustee and trust beneficiaries is valid only to the extent the terms and conditions could be properly approved by the court. A nonjudicial settlement may not be used to produce a result not authorized by other provisions of this code, including, but not limited to, terminating or modifying a trust in an impermissible manner.

(4) Matters that may be resolved by a nonjudicial settlement agreement include:

(a) The interpretation or construction of the terms of the trust.

(b) The approval of a trustee’s report or accounting.

(c) The direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power.

(d) The resignation or appointment of a trustee and the determination of a trustee’s compensation.

(e) The transfer of a trust’s principal place of administration.

(f) The liability of a trustee for an action relating to the trust.

(5) Any interested person may request the court to approve or disapprove a nonjudicial settlement agreement.

History of Fla. Stat. § 736.0111

Fla. Stat. § 736.0111 became law on July 1, 2007 as part of the Florida Trust Code. It has not been amended or revised since that date.

The text of Fla. Stat. § 736.0111 is largely taken from § 111 of the Uniform Trust Code. However, the Florida statute section was significantly modified. The two most substantial modifications were the changes made to subsections (3) and (5), discussed below.

Fla. Stat. § 736.0111(3) vs Section 111(c) of the Uniform Trust Code

The Uniform Trust Code’s version of Fla. Stat. § 736.0111(3) reads:

A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the court under this [Code] or other applicable law.

The portion about not violating a “material purpose of the trust” was removed from Florida’s version. Presumably, under the Florida Trust Code, a settlement agreement could violate a material purpose of the trust.

Fla. Stat. § 736.0111(5) vs Section 111(e) of the Uniform Trust Code

The Uniform Trust Code’s version of Fla. Stat. § 736.0111(5) reads:

Any interested person may request the court to approve a nonjudicial settlement agreement, to determine whether the representation as provided in [Article] 3 was adequate, and to determine whether the agreement contains terms and conditions the court could have properly approved.

The Florida legislature removed the possibility of having a court review the adequacy of representation (see §§ Fla. Stat. 736.0301-736.0306) in regards to a nonjudicial settlement. Otherwise, the original language has been simplified to having the court “approve or disapprove” a nonjudicial settlement agreement.

This article is part of the PTM Legal Commentary to the Florida Trust Code. Click here to navigate through the entire commentary.