How a Sibling Squabble Can Lead to Allegations of Breach of Fiduciary Duties

It is fairly common for people creating a revocable trust to name a family member as their successor trustee. This can lead to some confusion over the successor trustee’s role, particularly if they are also a beneficiary of the trust. In some cases, the trustee may confuse their rights as a beneficiary with their responsibilities as the trustee, which in turn can lead to allegations of breach of fiduciary duty.

Daughter Charged for Living Rent-Free in Home Owned by Mother’s Trust

Consider this recent Florida trust case, Kersey v. Abraham. The parties in this case are a brother and sister. The siblings’ mother created a revocable trust. The trust’s assets included a five-acre residential property in Kissimmee.

The mother died in 2017. At that point, the trust became irrevocable under Florida law. The sister was named as the successor trustee. Under the terms of the trust, the trustee had to distribute the Kissimmee home 2/3 to herself and 1/3 to her brother. The remainder of the trust assets were then to be split equally (50/50) between the siblings.

But the sister, acting as trustee, never distributed the Kissimmee home. She wanted to buy out her brother’s 1/3 share and keep the house for herself as her personal residence. The brother was apparently agreeable to that idea. But the siblings could not agree on a sales price for the house. Indeed, the brother rejected separate valuations proposed by his sister and an appraiser that he retained.

Eventually, litigation ensued. The brother sued his sister, alleging she breached her fiduciary duty as trustee by failing to distribute the house as directed in the trust. Among other things, the brother demanded the sister pay rent while she continued to live in the house as long as it remained in trust. The sister maintained that she was a co-owner of the property, and as such did not have to pay rent. But she offered to resign in favor of a third-party trustee.

The court subsequently appointed an attorney to serve as trustee. But the attorney also refused to distribute the property as the brother demanded. The attorney felt it was best to sell the property and distribute the proceeds.

Meanwhile, the trial court agreed with the brother that the sister did owe back rent to the trust. The trust–not the beneficiaries–was the lawful owner of the property during the period she resided on the property. Essentially, the sister’s failure to collect rent from herself while she was trustee constituted a breach of fiduciary duty. But the Florida Sixth District Court of Appeal subsequently clarified that the sister could not be held responsible for any rent uncollected after the attorney was named successor trustee. After all, once the sister was no longer the trustee, she no longer owed the trust any fiduciary duty.

Speak with a Pompano Breach of Fiduciary Duties Lawyer Today

All Florida trustees must strictly comply with the terms of their trust and any applicable state laws. They must also take care not to act in a manner that would place their own interests ahead of any other trust beneficiaries. If you are involved in a dispute over a possible breach of a trustee’s duty, contact the Pompano Beach estate and trust litigation attorneys at the offices of Mark R. Manceri, Attorney at Law, today to schedule a consultation.

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