At it’s core, the job of trustee is as much about keeping beneficiaries adequately informed as anything else. Most trust litigation can be traced back to a trustee’s inability to adequately explain him or herself to the trust beneficiaries. The importance of the trustee’s duty to "inform and report" is summarized nicely in The Trustee’s Duty to Inform and Report Under the Uniform Trust Code," 40 Real Property, Probate and Trust J. 373 (Summer 2005), by author and Denver, Colorado, trusts-and-estates attorney Kevin Millard:
To be able to enforce the trustee’s duties, the beneficiary of a trust must know of the existence of the trust and be informed about the administration of the trust. If there were no duty to inform and report to the beneficiary, the beneficiary might never become aware of breaches of trust or might be unaware of breaches until it is too late to obtain relief. In addition, providing information to the beneficiary protects the trustee from claims being brought long after events that allegedly constituted a breach, because the statute of limitations or the doctrine of laches will prevent the beneficiary from pursuing stale claims. As a result, the duty to inform and report to the beneficiary is fundamental to the trust relationship.
Florida Trust Code: Duty to Inform and Account
Under F.S. 736.0813 a Florida trustee has the duty to keep the "qualified beneficiaries" of an irrevocable trust reasonably informed of the trust and its administration. The extent of this duty – which is limited solely to qualified beneficiaries – includes, but is not limited to, the following 5 specifically defined reporting duties:
- Within 60 days after acceptance of the trust, the trustee shall give notice to the qualified beneficiaries of the acceptance of the trust and the full name and address of the trustee.
- Within 60 days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, the trustee shall give notice to the qualified beneficiaries of the trust’s existence, the identity of the settlor or settlors, the right to request a copy of the trust instrument, and the right to receive trust accountings.
- Upon reasonable request, the trustee shall provide a qualified beneficiary with a complete copy of the trust instrument.
- A trustee of an irrevocable trust shall provide a trust accounting, as set forth in F.S. 736.08135, to each qualified beneficiary annually and on termination of the trust or on change of the trustee.
- Upon reasonable request, the trustee shall provide a qualified beneficiary with relevant information about the assets and liabilities of the trust and the particulars relating to administration.
The term “qualified beneficiary” is used pervasively throughout the Florida Trust Code, not just with respect to a trustee’s duty to inform and report. So if you’re a Florida trustee, you need to know this term cold.
As used in the Florida Trust Code, the term “beneficiary” refers to the universe of persons who have a beneficial interest in a trust, as well as to any person who has a power of appointment over trust property in a capacity other than as trustee. F.S. 736.0103(4) It is immaterial for this purpose whether the beneficial interest is present or future, vested or contingent, or whether the person having the interest is ascertainable or even living. By contrast, the term “qualified beneficiary” encompasses only a limited subset of all trust beneficiaries. In effect, the class is limited to living persons who are current beneficiaries, intermediate beneficiaries, and first-line remainder beneficiaries, whether vested or contingent. Here’s how its defined in F.S. 736.0103(14):
(14) "Qualified beneficiary" means a living beneficiary who, on the date the beneficiary’s qualification is determined:
(a) Is a distributee or permissible distributee of trust income or principal;
(b) 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
(c) Would be a distributee or permissible distributee of trust income or principal if the trust terminated in accordance with its terms on that date.