Fla. Stat. § 736.0302 - Commentary to Florida Trust Code

Legal Commentary on Fla. Stat. § 736.0302

Fla. Stat. § 736.0302 establishes the rules surrounding representation and powers of appointments. The Uniform Trust Code allows such a representation only in the absence of a conflict of interest. However, the Florida Trust Code has no such restriction.

The term “power of appointment” is never defined by the Florida Trust Code, although the code defines the term “general power of appointment”. A power of appointment is generally understood to mean the authority to designate who will receive certain property or the benefit of that property. For purposes of Fla. Stat. § 736.0302, the power does not include the power of a trustee to make discretionary distributions of trust property.

A holder of a power of appointment has the ability to represent and bind those whose interests are subject to the power of appointment. In Peck v. Peck, the Second District Court of Appeal noted that the lifetime beneficiary of a trust who also held a power of appointment had the authority to “represent and bind contingent beneficiaries” with the exercise of that power. 133 So. 3d 587, 588 (Fla. 2d DCA 2014). Similarly, the First District Court of Appeal found in Ammeen v. Sjogren that the holder of a power of appointment had the ability to consent to a trust’s termination on behalf of permissible appointees. 313 So.3d 157 (Fla. 1st DCA. 2021).

The holder of a power of appointment may not bind persons whose interests are subject to the power of appointment whenever the matter involves fraud or bad faith by the trustee, as determined by the court. Notably, the problematic behavior must be on the part of the trustee, not on the part of the holder of the power of appointment. If the power of appointment is held by someone who is the sole trustee, then that holder of a power of appointment may not represent or bind persons whose interests are subject to the power of appointment.

A taker in default of the exercise of a power of appointment may represent and bind permissible appointees of that power. A “taker in default” is someone who would receive trust assets should the power of appointment not be exercised. For example, if trust assets were left to Bob after Susan dies unless Susan specifies in her will that Hubert ought to get the assets, then Bob is the taker in default of Susan’s power to appoint who gets the trust assets in her will. Under Fla. Stat. § 736.0302(2), Bob would have the authority to represent and bind Hubert, who is a permissible appointee. Strangely, the statute does not limit a taker in default’s ability to bind a permissible appointee, whose interests would generally be adverse to the taker in default. Notably, the default rules of Fla. Stat. § 736.0105 do not restrict a settlor from altering or even eliminating the ability of a taker in default to represent permissible appointees.

Text of Fla. Stat. § 736.0302

Representation by holder of power of appointment.—

(1) The holder of a power of appointment may represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power.

(2) The takers in default of the exercise of a power of appointment may represent and bind persons whose interests, as permissible appointees, are subject to the power.

(3) Subsection (1) does not apply to:

(a) Any matter determined by the court to involve fraud or bad faith by the trustee; or

(b) A power of appointment held by a person while the person is the sole trustee.

(4) As used in this section, the term “power of appointment” does not include a power of a trustee to make discretionary distributions of trust property.

History of Fla. Stat. § 736.0302

Fla. Stat. § 736.0302 became law in 2007. The initial version of the statute section read:

Representation by holder of power of appointment.--

(1)  The holder of a power of appointment may represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power.

(2)  Subsection (1) does not apply to:

(a)  Any matter determined by the court to involve fraud or bad faith by the trustee;

(b)  A power of a trustee to distribute trust property; or

(c)  A power of appointment held by a person while the person is the sole trustee.

History.--s. 3, ch. 2006-217.

This initial version of the Fla. Stat. § 736.0302 was based on § 302 of the Florida Trust Code, although subsection (2) was taken from Fla. Stat. § 731.303(1)(a).

In 2009, Fla. Stat. § 736.0302 was updated. First, the language from Fla. Stat. § 731.303(1)(a) was modified and split up between two subsections. More significantly, a new subsection was added giving takers in default of an exercise of a power of appointment the ability to represent persons subject to the power.

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