Trustee Defense Q&A

Written By Kaytlin Keen

Serving as a Trustee of a trust comes with significant responsibilities, including managing and administering assets that can range from a few thousand dollars to several million. In addition to overseeing these assets, Trustees must navigate a complex body of law that governs their powers and duties. Despite the weight of these obligations, many Trustees are appointed because they are close family members or friends of the Settlor (i.e., the creator of the trust), and often lack formal legal training or prior experience in trust administration. When combined with the emotional dynamics of family relationships, which are often present when managing a trust, it can quickly become a high-stakes situation ripe for litigation. If you find yourself facing such a lawsuit, this article is designed to address some of the key questions you may have at the outset of this stressful process.

What Do I Do if I Received a Demand Letter? 

First and foremost, stay calm. The way you respond to a Demand Letter can set the tone for any negotiation process or potential litigation. While receiving a Demand Letter can be an emotional moment, typically fraught with stress and anger, it is important not to act on this emotion. Do not reach out to any of the beneficiaries of the trust, demanding answers.  Do not start calling family and friends to vent about the situation.  Do not post about this on social media.  Believe it or not, these are all actions that could have serious negative consequences down the road.

Instead, come up with a plan.  A Demand Letter is not a lawsuit.  However, it is something that should be addressed and taken seriously.  It is unwise to ignore a Demand Letter, as this could (and likely will) lead to litigation.  The best course of action is to consult with an attorney.  An attorney with experience in trust litigation can evaluate what the Demand Letter is seeking to accomplish.  The attorney will ensure you understand the contents of the Demand Letter, discuss with you what your options are moving forward, and address the consequences associated with each option.

 The good news is that it is possible to resolve any brewing conflict at this stage, thereby avoiding the substantial resources associated with engaging in litigation.  While hiring an attorney may seem like an unnecessary cost at this stage, retaining an attorney this early on can save you thousands of dollars and potentially years of your time. Besides, as will be discussed later on, assets from the trust can be used to pay your attorneys’ fees.

What to do if the Demand Letter Deadline has Passed

It is possible you are stumbling onto this blog post after you have already reacted to a Demand Letter, or after having been served with a Complaint. That is ok. However, now it is important is to engage in positive damage control. This does not mean reaching out to beneficiaries with apologies, or calling back whomever you vented to the first time and telling them to forget what you said, or not tell anyone about what you told them. Here is why this is crucial: Once you receive a Demand Letter, it is time to start thinking several steps ahead. You may (hopefully!) be able to avoid a lawsuit, if a Complaint has not already been filed. However, you need to start acting as if everything you say or do will be brought up in front of a Judge.

If litigation ensues, you’ll have to participate in what is called “discovery.” Ideally, you’ll have an attorney navigating this process on your behalf. Regardless, you will almost certainly have to turn over the contents of any communications you have had with the beneficiaries of the trust, or about the trust and/or the beneficiaries. Anyone with information about the subject-matter of the litigation may also be subpoenaed for a deposition.

The reality is that anything you have said about the trust or beneficiaries could be used against you, no matter how innocuous the messages or conversations may seem. As such, best practice is to stop engaging in any behavior that could create more discovery. Instead, lean on your attorney! Thanks to attorney-client privilege, almost anything you write or say to your attorney will stay between the two of you.

What do I do if I am Being Sued? 

As will be the theme throughout this entire process, stay calm.  Do not be reactive, no matter how unfair or upsetting this may feel. If you have not already been served the Complaint, do not avoid service. Avoiding service is counterproductive, and will only serve as ammunition against you later on in front of a Judge. And again: Do not reach out to any of the beneficiaries of the trust, demanding answers.  Do not start calling family and friends to vent about the situation.  Do not post about this on social media.  As a Trustee, you have plenty of avenues and resources at your disposal to appropriately handle this, but none of the above will help you.

 If you are being sued as the Trustee, you have likely just received a Complaint.  This Complaint cannot be ignored.  In fact, you have twenty (20) days from the date that you received service of the Complaint to file a legally sufficient response. See Florida Rules of Civil Procedure Rule 1.140. This means time is of the essence.  It is highly recommended that you do not try to navigate this process on your own!  Even if all allegations against you are completely false and/or without merit, it is best to hire an attorney. An attorney who focuses on trust litigation will know how to best advocate fort you, depending on the specific facts of your situation.

Why am I Being Sued? 

If you, as a Trustee, are being sued, it is likely by a beneficiary of the trust who is alleging some sort of breach of trust. However, each case is fact specific. It is important to retain an attorney who can review the Complaint and explain to you why specifically a lawsuit is being brought against you.

A breach of trust typically stems from a breach of one of the many fiduciary duties ascribed to a Trustee.  These fiduciary duties include but may not be limited to:

The Florida Trust Code is one area of the law that proves to be more black and white than other areas of the law.  It is also less forgiving.  Even if a Trustee acted with the purest intentions, it is possible that a breach of trust was still committed.  This can be a hard pill to swallow for a Trustee who accepted their role as a favor to a loved one, and who did their best in the role with the resources they had at their disposable. Unfortunately, acting in good faith and asserting ignorance of the law will be an insufficient defense in front of the Court. This is one of the many reasons it is imperative to seek counsel if you are being sued.

Can I Be Held Personally Liable? 

Yes, a Trustee can be held personally liable in a lawsuit.  However, there are limitations and protections in place that make this unlikely (unless the Trustee has committed a tort in the course of administering a trust or for obligations arising from ownership or control of trust property only if the trustee is personally at fault).  See Section 736.1013, Florida Statutes. 

Issues of liability between the trust estate and the Trustee individually may be determined in a proceeding for accounting, surcharge, indemnification or in any other appropriate proceeding.  This is not an issue to be taken lightly. To best determine if you could be held personally liable, it is recommended that you consult with an attorney.

Does the Trust Cover Fees and Costs Associated with the Lawsuit? 

Yes, the trust can potentially cover fees and costs associated with the lawsuit.  Florida law allows the Trustee to use the assets from the trust to cover attorneys’ fees and costs in connection with a claim or defense of breach of trust that has been made in a filed pleading.  See Section 736.0802(10), Florida Statutes. This means that if you, as Trustee of a trust, have had a lawsuit filed against you for a breach of trust, the trust itself can be used to pay your legal fees.  You do not need permission from the Court or any beneficiaries to do so.  However, before any payments can be made, you must serve a written "Notice of Intent” upon each qualified beneficiary of the trust whose share of the trust may be affected by the payment before such payment is made.

What Is a Notice of Intent? 

A Notice of Intent is a document prepared by the Trustee (or more likely, the Trustee’s attorney on the Trustee’s behalf) that is served upon a qualified beneficiary.  This document is required for a Trustee to use trust assets to pay for attorneys’ fees and costs connected to a claim or defense of breach of trust. 

 The Notice of Intent must identify the judicial proceeding in which the claim or defense of breach of trust has been made in a filed pleading, and must inform the person served of his or her right under Section 736.0802(10)(e), Florida Statutes, to apply to the Court for an order prohibiting the Trustee from using trust assets to pay attorney fees or costs as provided in paragraph Section 736.0802(10)(b), Florida Statutes,  or compelling the return of such attorney fees and costs to the trust.  See Section 736.0802(10)(c), Florida Statutes.

How Do I Serve a Notice of Intent on a Qualified Beneficiary? 

The Notice of Intent must be served in one of the following three ways:

  1. By any commercial delivery service or form of mail requiring a signed receipt;

  2. The manner provided in the Florida Rules of Civil Procedure for service of process; or,

  3. As to any party over whom the court has already acquired jurisdiction in that judicial proceeding, in the manner provided for service of pleadings and other documents by the Florida Rules of Civil Procedure. 

See Section 736.0802(10)(c), Florida Statutes.

Who Is Considered a Qualified Beneficiary? 

Section 736.0103(19), Florida Statutes, defines a Qualified Beneficiary as “a living beneficiary who, on the date the beneficiary’s qualification is determined who:

  1. Is a distributee or permissible distributee of trust income or principal;

  2. Would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in paragraph (a) terminated on that date without causing the trust to terminate; or

  3. Would be a distributee or permissible distributee of trust income or principal if the trust terminated in accordance with its terms on that date.”

What Happens Next?

Trust litigation is not a simple endeavor. Litigation of this nature can take anywhere from six months to several years to be resolved, based on the complexity of the case and the amount of discovery. The trust may be able to cover the costs, but you will be the one spending untold hours a week navigating the justice system. This is said not to scare you, but to stress the impact litigation can have on you. By retaining an experienced attorney as soon as you become notified of the lawsuit, your attorney can help you shoulder the burden of litigation, and work towards an effective resolution as quickly as possible.

Our attorneys at PTM are not afraid to put in the work that comes with a trust litigation matter. They have represented both Trustees defending against a lawsuit, and beneficiaries seeking to bring a lawsuit. By hiring a PTM attorney, you’ll have not only their experience on your side, but a hand to hold as you navigate this stressful process. Schedule your free consultation today to see how we can be of service to you.

Kaytlin Keen
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