Peck v. Peck, 133 So.3d 587 (Fla. 2d DCA February 26, 2014)

Thinking outside the box is more than just a business cliché. It means approaching problems in new, innovative ways; conceptualizing problems differently; and understanding your position in relation to any particular situation in a way you’d never thought of before.

Part IV of Florida’s Trust Code provides precise, comprehensive, and easily accessible guidance on how to modify or terminate irrevocable trusts. (Click here for an excellent chart visually summarizing all of these provisions). That being said, our Trust Code doesn’t legislate on every issue. To the extent a specific trust-law scenario isn’t addressed or modified by our Trust Code, F.S.  736.0106 tells us common law still rules. This general reservation of the common law’s application to trusts in our state is reiterated in those subsections of our Trust Code where it’s especially relevant, as in F.S. 736.04113(4), which provides as follows:

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.

Case Study:

The linked-to case above starts with a father’s estate plan that provided for the ultimate residuary distribution of the family inheritance to two separate trusts established by each of his two children, a son named Daniel and a daughter named Constance. In other words, each child was the settlor of his or her own separate trust. After their father’s death, Daniel stepped in as co-trustee of his sister’s trust, which is referred to as the “CLP Trust”. According to the 2d DCA:

In 2012, Constance filed a petition to terminate the CLP Trust. Her children agreed to the termination. Daniel, as co-trustee, objected because Constance might unwisely dissipate the assets. Our record suggests that in crafting his estate plans, [Constance’s father], too, had concerns about Constance’s ability to maintain financial stability. Daniel also argued that the trial court could not terminate the CLP Trust because under section 736.04113, Florida Statutes (2012), the trust’s purposes remained unfulfilled.

Florida common law requires the trial court to allow modification or termination of a trust if the settlor and all beneficiaries consent, even if the trust is irrevocable and even if the trust’s purposes have not been accomplished. See Preston v. City National Bank of Miami, 294 So.2d 11 (Fla. 3d DCA 1974). Based on this common law, the trial court authorized termination of Constance’s trust over the objections of her co-trustee — even if the trust’s purposes remained unfulfilled (a pre-requisite to termination under F.S. 736.04113(1)). Why? Because this trust code provision doesn’t limit a trial court’s common-law authority to terminate a trust. As explained by the 2d DCA:

Because . . . Constance . . . was the grantor/settlor, she could modify or terminate the trust, with the beneficiaries’ consent, even if it defeated her father’s intent as to how she could access his assets once distributed to the CLP Trust. The trial court correctly relied on Preston. Pursuant to subsection (4), section 736.04113 does not abrogate the common law. Accordingly, termination of the CLP Trust was not improper.

Lesson learned?

Don’t limit yourself to the four corners of our Trust Code — think outside the box!