Fla. Stat. § 736.04113 - Commentary to Florida Trust Code

Legal Commentary on Fla. Stat. § 736.04113

Fla. Stat. § 736.04113 provides a means for a court to modify an irrevocable trust. Either a trustee or qualified beneficiary can petition the court for such a modification. Notably, a settlor cannot petition the court under this statue, as held by the Second District Court of Appeal in Nelson v. Nelson, 206 So.3d 818 (Fla. 2d DCA 2016).

A modification may be made under Fla. Stat. § 736.04113 if any of the following three conditions are met:

• The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill;

• Because of circumstances not anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair the accomplishment of a material purpose of the trust; or

• A material purpose of the trust no longer exists.

The first possible condition for modification is that a trust’s purposes are fulfilled, illegal, impossible, wasteful, or impracticable. If a trust purpose falls under any one of these categories, the court has the authority to modify the trust. Under Fla. Stat. § 736.0404, a trust purpose must be “lawful, not contrary to public policy, and possible to achieve.” This aligns with allowing modification in the case of a purpose that has become illegal or impossible. The trust purposes will have been fulfilled if the settlor’s intent for creating the trust has been fully carried out. The word “impracticable” is not defined in the Florida Trust Code, but a trust’s purposes are likely impracticable if a basic assumption underlying the creation of the trust turned out to be false, similar to impracticability of performance under Fla. Stat. § 672.615(1). Finally, a trust’s purposes can be “wasteful,” which is another term left undefined in the Florida Trust Code. However, we know that the term does not include customary trustee’s fees and normal administrative expenses. Horgan v. Cosden, 249 So.3d 683, 687 (Fla. 2nd DCA 2018).

The second possible condition for modification is that unanticipated circumstances resulted in a scenario in which complying with the trust terms would “defeat or substantially impair the accomplishment of a material purpose of the trust.” Put differently, the settlor did not expect some current set of circumstances, resulting in the trust purposes being set back or defeated instead of carried out. In this case, the court would need to modify the trust to adapt to these unanticipated circumstances.

The third possible condition for modification is that a material purpose of the trust no longer exists. For example, if a trust was primarily set up for the sole purpose of caring for Stephen Sadsack and his descendants, but Stephen dies childless, then the trust will likely need to be modified because the purpose of the trust no longer exists.

If any of the above conditions are met, the court has broad discretion to amend, change, or modify the trust. In addition, the court can direct or permit a trustee to act in a way that is unauthorized under the terms of the trust or can prohibit a trustee from taking actions allowed by the trust terms.

However, the court is bound under Fla. Stat. § 736.04113(3) consider “the facts and circumstances surrounding the creation of the trust.” The House of Representatives’ Staff Analysis notes that this language points to the fact that “the settlor's purposes for the trust are the guiding polestar in a court's decision to permit a modification.” The court also must consider the “extrinsic evidence relevant to the proposed modification.” Accordingly, the Third District Court of Appeal has held that a court’s determination under Fla. Stat. § 736.04113 must be supported by competent substantial evidence. Bellamy v. Langfitt, 86 So.3d 1170, 1175 (Fla. 3d DCA 2012).

The court also must consider any spendthrift provision in a trust before modifying the trust, but the existence of a spendthrift provision does not stop a court from modifying the trust. Thus, a court should not feel constrained by a spendthrift provision when considering a modification request under Fla. Stat. § 736.04113. However, a court order based on this statute section should probably mention any spendthrift provision in the trust, even if said provision is not determinative. This is something for attorneys to keep in mind if tasked with drafting a relevant proposed order for modification under Fla. Stat. § 736.04113.

Finally, Fla. Stat. § 736.04113 does not replace any options for modification under the common law; rather, it supplements the common law with an additional means of trust modification. One such method of trust modification under the common law is to gain the consent of the settlor and all beneficiaries. See Peck v. Peck, 133 So.3d 587, 591 (Fla. 2d DCA 2014).

According to Fla. Stat. § 736.0105(2)(j), trust terms may not override the court’s ability to modify a trust under Fla. Stat. § 736.04113. However, the Second District Court of Appeal still held in Bellamy v. Langfitt that a trust’s terms could prohibit judicial modification. 86 So.3d 1170, 1175 (Fla. 3d DCA 2012). This is likely because the court was interpreting Fla. Stat. § 737.4031, the predecessor to Fla. Stat. § 736.04113, which was not supported by Fla. Stat. § 736.0105(2)(j) as that statute section never co-existed with Fla. Stat. § 737.4031. Therefore, that portion of the holding in Bellamy should be considered outdated for modern trust modifications, and it should be assumed that the court has the authority to modify under Fla. Stat. § 736.04113 regardless of whether such modification is allowed under the terms of the trust.

Text of Fla. Stat. § 736.04113

Judicial modification of irrevocable trust when modification is not inconsistent with settlor’s purpose.—

(1) Upon the application of a trustee of the trust or any qualified beneficiary, a court at any time may modify the terms of a trust that is not then revocable in the manner provided in subsection (2), if:

(a) The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill;

(b) Because of circumstances not anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair the accomplishment of a material purpose of the trust; or

(c) A material purpose of the trust no longer exists.

(2) In modifying a trust under this section, a court may:

(a) Amend or change the terms of the trust, including terms governing distribution of the trust income or principal or terms governing administration of the trust;

(b) Terminate the trust in whole or in part;

(c) Direct or permit the trustee to do acts that are not authorized or that are prohibited by the terms of the trust; or

(d) Prohibit the trustee from performing acts that are permitted or required by the terms of the trust.

(3) In exercising discretion to modify a trust under this section:

(a) The court shall consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and extrinsic evidence relevant to the proposed modification.

(b) The court shall consider spendthrift provisions as a factor in making a decision, but the court is not precluded from modifying a trust because the trust contains spendthrift provisions.

(4) 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.

History of Fla. Stat. § 736.04113

Fla. Stat. § 736.04113 became law on July 1, 2007 as part of the Florida Trust Code. It has not been amended or revised since that date.

Fla. Stat. § 736.04113 was heavily based on Fla. Stat. § 737.4031, which was found in former chapter 737 of the Florida Statutes. The text of Fla. Stat. § 737.4031 read:

Judicial modification of trusts.--

(1)  If the purposes of a trust have been fulfilled or have become illegal or impossible to fulfill or, if because of circumstances not known to or anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair the accomplishment of a material purpose of the trust or, if a material purpose of the trust no longer exists, upon the application of a trustee of the trust or any beneficiary a court at any time may modify the terms of a trust which is not then revocable to:

(a)  Amend or change the terms of the trust, including terms governing distribution of the trust income or principal, or terms governing administration of the trust;

(b)  Terminate the trust in whole or in part;

(c)  Direct or permit the trustee to do acts that are not authorized or that are prohibited by the terms of the trust; or

(d)  Prohibit the trustee from performing acts that are permitted or required by the terms of the trust.

(2)  Upon the application of a trustee of the trust or any beneficiary, a trust which is not then revocable may be modified at any time by a court as provided in subsection (1), and without regard to the reasons for modification provided in subsection (1), if compliance with the terms of the trust is not in the best interest of the persons having a beneficial interest in the trust.

(a)  The court shall exercise its discretion to order a modification of the trust under this subsection in a manner that conforms to the extent possible with the intention of the settlor, taking into account the current circumstances and best interests of the beneficiaries.

(b)  This subsection shall not apply to a trust created prior to January 1, 2001.

(c)  This subsection shall not apply to a trust created after December 31, 2000, if:

1.  Under the terms of the trust, all beneficial interests in the trust must vest or terminate within the period prescribed by the rule against perpetuities in s. 689.225(2), notwithstanding s. 689.225(2)(f).

2.  The terms of the trust expressly prohibit judicial modification.

(d)  Modification of a trust, as authorized in this subsection, is not prohibited by a provision in the trust instrument that prohibits amendment or revocation of the trust if the provision does not expressly prohibit judicial modification.

(3)  In exercising its discretion to order a modification of a trust under this section, the court shall consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and extrinsic evidence relevant to the proposed modification.

(4)  To the extent the interests of any person with a beneficial interest in the trust who is unborn or unascertained, whose identity is not then known for any reason, or who is a minor or under a legal disability are not represented by another beneficiary, such person shall be represented by the person's legal guardian, if any, or, if none, by a guardian ad litem appointed by the court upon the court's own motion or upon application by the trustee or any beneficiary.

(5)  The court shall consider spendthrift provisions as a factor in making a decision whether to modify a trust under this section, but the court is not precluded from exercising authority to modify the trust because the trust contains spendthrift provisions.

(6)  For purposes of this section:

(a)  "Beneficiary" means:

1.  All current income or principal beneficiaries, whether the beneficiaries' beneficial interests are discretionary or mandatory.

2.  All reasonably ascertainable beneficiaries if all current income interests immediately terminated, determined as if any power of appointment over the trust assets were not exercised.

(b)  "Trust" means trust as defined in s. 731.201.

(c)  A trust is revocable if revocable by the settlor alone or in conjunction with any other person. A trust is not revocable for purposes of this section if revocable by the settlor only with the consent of all persons having a beneficial interest in the property.

(d)  A trust which is revocable shall be treated as created when the right of revocation terminates.

(7)  The provisions of this section are in addition to, and not in derogation of, rights under the common law to modify, amend, or revoke trusts.

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