Can a Florida Trust Beneficiary Sue to Recover Trust Assets?

A key role of a trustee is to take legal action on behalf of the trust. For example, if someone owes the trust a debt, the trustee has the authority to file a lawsuit and seek a civil judgment against the debtor. But if the trustee fails to take such action, can the named beneficiaries of the trust do so instead?

Florida Court: Beneficiaries Cannot Sue to Recover Trust Assets Used to Pay Off Loan

The Florida Fifth District Court of Appeal recently addressed this question. In Roller v. Collins, the contingent beneficiaries of a trust attempted to seek reimbursement from the widow of the trust’s settlor for the use of trust assets to pay off a promissory note. The Fifth District affirmed a lower court’s ruling that the beneficiaries lacked standing to bring such a lawsuit.

The underlying facts of the case are fairly straightforward. The settlor created a revocable living trust in 2013. In 2018, acting as trustee, the settlor signed a promissory note on a $1.3 million loan, the proceeds of which went to improve their home, which was not a trust asset. The settlor died a year later, in 2019, and the spouse subsequently held sole legal title to the home.

Meanwhile, the settlor’s trust became irrevocable upon his death. A professional trust company assumed control of the trust as successor trustee. When the widow defaulted on the promissory note, the successor trustee stepped in and paid off the outstanding balance of around $980,000. To accomplish this, the successor trustee had to liquidate a number of securities accounts previously pledged by the settlor as collateral on the loan.

Three contingent beneficiaries named in the trust subsequently sued the widow and the successor trustee. They claimed that the trust was an “accommodation party” under Florida Statutes § 673.4191 and thus had the legal right to seek such reimbursement.

An accommodation party is essentially someone who agrees to incur the obligation of a debt without receiving any benefit. Basically, if you have ever cosigned a loan for someone else, you are an accommodation party. And if an accommodation party is forced to pay off the debt, they have the legal right to seek reimbursement or “contribution” from the accommodated party.

In this case, however, the Fifth District explained that while the trust was an accommodation party under § 673.4191, that gave the successor trustee the right to seek contribution. It did not confer such standing on the contingent beneficiaries of the trust. The court noted that “Florida law has long recognized that it is generally the trustee, and not a beneficiary, who is the real party in interest with authority to bring an action on behalf of the trust.” And while there are some exceptions to this rule, they did not apply to the facts of this case.

Contact a Pompano Beach Beneficiary Disputes Lawyer Today

Successor trustees and trust beneficiaries often disagree over the proper interpretation and execution of a trust. If you are involved in such a dispute it is crucial to seek out legal advice and representation from a qualified Pompano Beach beneficiary disputes attorney. Contact the offices of Mark R. Manceri, P.A., today to schedule a consultation.

Sources:

m.flsenate.gov/Statutes/673.4191

scholar.google.com/scholar_case?case=13211796096696006808