Fla. Stat. § 736.04115 - Commentary to Florida Trust Code

Legal Commentary on Fla. Stat. § 736.04115

Fla. Stat. § 736.04115 establishes a means for judicial modification of an irrevocable trust based on the “best interests of the beneficiaries.” Such a modification can be made without meeting any of the requirements of Fla. Stat. § 736.04113. The modification can be made by the court after petition is made by a trustee or any qualified beneficiary.

When making modifications under Fla. Stat. § 736.04115, the court is bound to “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.” The House of Representatives’ Staff Analysis notes that this exact language in Fla. Stat. § 736.04113 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.” However, Fla. Stat. § 736.04115 takes this a step further by explicitly requiring the court to conform “to the extent possible with the intent of the settlor, taking into account the current circumstances and best interests of the beneficiaries.” The Second District Court of Appeal held in Horgan v. Cosden that a court could not terminate an irrevocable trust under Fla. Stat. § 736.04115 simply because of the administrative expenses of said trust when the settlor’s clear intent was to keep the funds in trust. 249 So.3d 683, 687 (Fla. 2nd DCA 2018) (“In essence, the beneficiaries simply prefer a different course of action than that chosen by the Settlor: they want their money now. But on this record, the desire to have the money now would be in direct contravention of the Settlor's intent, including her intent that the income beneficiary would only receive incremental distributions of income rather than a lump sum distribution of principal”).

However, despite the clear language directing courts to modify in line with the settlor’s intent whenever possible, the House of Representatives’ Staff Analysis for Fla. Stat. § 736.04115 still recognizes that “it is possible that section 736.04115 could be used to modify a trust in a manner that is inconsistent with the settlor's intent.” Because of this, the statute section provides a means for a settlor to block such a modification. This is accomplished by expressly prohibiting modification under the terms of trust and by complying with the rule against perpetuities. Both requirements must be met to block modification. However, compliance with the 360 or 1000 year substitutes in Fla. Stat. § 689.225(2)(f) and (g) will not be sufficient to meet the rule against perpetuities requirement; the stricter common law rule (lives in being plus 21 years) or Florida's shorter 90 year statutory substitute must be followed.

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. This is similar to spendthrift requirement in Fla. Stat. § 736.04113. Thus, a court should not feel constrained by a spendthrift provision when considering a modification request under Fla. Stat. § 736.04115. 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. § 736.04115.

Finally, Fla. Stat. § 736.04115 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).

Text of Fla. Stat. § 736.04115

Judicial modification of irrevocable trust when modification is in best interests of beneficiaries.—

(1) Without regard to the reasons for modification provided in s. 736.04113, if compliance with the terms of a trust is not in the best interests of the beneficiaries, upon the application of a trustee or any qualified beneficiary, a court may at any time modify a trust that is not then revocable as provided in s. 736.04113(2).

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

(a) The court shall exercise discretion in a manner that conforms to the extent possible with the intent of the settlor, taking into account the current circumstances and best interests of the beneficiaries.

(b) 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.

(c) 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.

(3) This section shall not apply to:

(a) Any trust created prior to January 1, 2001.

(b) Any 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) and (g).

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

(4) For purposes of subsection (3), a revocable trust shall be treated as created when the right of revocation terminates.

(5) 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. § 736.04115

Fla. Stat. § 736.04115 became law in 2007 as part of the larger Florida Trust Code. In 2022, a reference was added to Fla. Stat. § 689.225(2)(g)—which at the time was brand new law—in Fla. Stat. § 736.04115(3)(b)1.

Fla. Stat. § 736.04115 was heavily based on Fla. Stat. § 737.4031(2), which was found in former chapter 737 of the Florida Statutes. The full 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.