The Florida Senate

¹736.0802  Duty of loyalty.--

(1)  As between a trustee and the beneficiaries, a trustee shall administer the trust solely in the interests of the beneficiaries.

(2)  Subject to the rights of persons dealing with or assisting the trustee as provided in s. 736.1016, a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee's own personal account or which is otherwise affected by a conflict between the trustee's fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless:

(a)  The transaction was authorized by the terms of the trust;

(b)  The transaction was approved by the court;

(c)  The beneficiary did not commence a judicial proceeding within the time allowed by s. 736.1008;

(d)  The beneficiary consented to the trustee's conduct, ratified the transaction, or released the trustee in compliance with s. 736.1012;

(e)  The transaction involves a contract entered into or claim acquired by the trustee when that person had not become or contemplated becoming trustee; or

(f)  The transaction was consented to in writing by a settlor of the trust while the trust was revocable.

(3)  A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if the sale, encumbrance, or other transaction is entered into by the trustee with:

(a)  The trustee's spouse;

(b)  The trustee's descendants, siblings, parents, or their spouses;

(c)  An officer, director, employee, agent, or attorney of the trustee; or

(d)  A corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee's best judgment.

(4)  A transaction not concerning trust property in which the trustee engages in the trustee's individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust.

(5)(a)  An investment by a trustee authorized by lawful authority to engage in trust business, as defined in s. 658.12(20), in investment instruments, as defined in s. 660.25(6), that are owned or controlled by the trustee or its affiliate, or from which the trustee or its affiliate receives compensation for providing services in a capacity other than as trustee, is not presumed to be affected by a conflict between personal and fiduciary interests provided the investment otherwise complies with chapters 518 and 660 and the trustee complies with the disclosure requirements of this subsection.

(b)  A trustee who invests trust funds in investment instruments that are owned or controlled by the trustee or its affiliate shall disclose the following to all qualified beneficiaries:

1.  Notice that the trustee has invested trust funds in investment instruments owned or controlled by the trustee or its affiliate.

2.  The identity of the investment instruments.

3.  The identity and relationship to the trustee of any affiliate that owns or controls the investment instruments.

(c)  A trustee who invests trust funds in investment instruments with respect to which the trustee or its affiliate receives compensation for providing services in a capacity other than as trustee shall disclose to all qualified beneficiaries, the nature of the services provided by the trustee or its affiliate, and all compensation, including, but not limited to, fees or commissions paid or to be paid by the account and received or to be received by an affiliate arising from such affiliated investment.

(d)  Disclosure required by this subsection shall be made at least annually unless there has been no change in the method or increase in the rate at which such compensation is calculated since the most recent disclosure. The disclosure may be given in a trust disclosure document as defined in s. 736.1008, in a copy of the prospectus for the investment instrument, in any other written disclosure prepared for the investment instrument under applicable federal or state law, or in a written summary that includes all compensation received or to be received by the trustee and any affiliate of the trustee and an explanation of the manner in which such compensation is calculated, either as a percentage of the assets invested or by some other method.

(e)  This subsection shall apply as follows:

1.  This subsection does not apply to qualified investment instruments or to a trust for which a right of revocation exists.

2.  For investment instruments other than qualified investment instruments, paragraphs (a), (b), (c), and (d) shall apply to irrevocable trusts created on or after July 1, 2007, which expressly authorize the trustee, by specific reference to this subsection, to invest in investment instruments owned or controlled by the trustee or its affiliate.

3.  For investment instruments other than qualified investment instruments, paragraphs (a), (b), (c), and (d) shall apply to irrevocable trusts not described in subparagraph 2. only as follows:

a.  Such paragraphs shall not apply until 60 days after the statement required in paragraph (f) is provided and no objection is made or any objection which is made has been terminated.

(I)  An objection is made if, within 60 days after the date of the statement required in paragraph (f), a super majority of the eligible beneficiaries deliver to the trustee written objections to the application of this subsection to such trust. An objection shall be deemed to be delivered to the trustee on the date the objection is mailed to the mailing address listed in the notice provided in paragraph (f).

(II)  An objection is terminated upon the earlier of the receipt of consent from a super majority of eligible beneficiaries of the class that made the objection or the resolution of the objection pursuant to this subparagraph.

(III)  If an objection is delivered to the trustee, the trustee may petition the court for an order overruling the objection and authorizing the trustee to make investments under this subsection. The burden shall be on the trustee to show good cause for the relief sought.

(IV)  Any qualified beneficiary may petition the court for an order to prohibit, limit, or restrict a trustee's authority to make investments under this subsection. The burden shall be upon the petitioning beneficiary to show good cause for the relief sought.

(V)  The court may award costs and attorney's fees relating to any petition under this subparagraph in the same manner as in chancery actions. When costs and attorney's fees are to be paid out of the trust, the court, in its discretion, may direct from which part of the trust such costs and fees shall be paid.

b.  The objection of a super majority of eligible beneficiaries under this subparagraph may thereafter be removed by the written consent of a super majority of the class or classes of those eligible beneficiaries that made the objection.

(f)1.  Any time prior to initially investing in any investment instrument described in this subsection other than a qualified investment instrument, the trustee of a trust described in subparagraph (e)3. shall provide to all qualified beneficiaries a statement containing the following:

a.  The name, telephone number, street address, and mailing address of the trustee and of any individuals who may be contacted for further information.

b.  A statement that, unless a super majority of the eligible beneficiaries objects to the application of this subsection to the trust within 60 days after the date the statement pursuant to this subsection was delivered, this subsection shall apply to the trust.

c.  A statement that, if this subsection applies to the trust, the trustee will have the right to make investments in investment instruments, as defined in s. 660.25(6), which are owned or controlled by the trustee or its affiliate, or from which the trustee or its affiliate receives compensation for providing services in a capacity other than as trustee, and that the trustee or its affiliate may receive fees in addition to the trustee's compensation for administering the trust.

A statement by the trustee is not delivered if the statement is accompanied by another written communication other than a written communication by the trustee that refers only to the statement.

2.  For purposes of paragraph (e) and this paragraph:

a.  "Eligible beneficiaries" means:

(I)  If at the time the determination is made there are one or more beneficiaries as described in s. 736.0103(14)(c), the beneficiaries described in s. 736.0103(14)(a) and (c); or

(II)  If there is no beneficiary described in s. 736.0103(14)(c), the beneficiaries described in s. 736.0103(14)(a) and (b).

b.  "Super majority of the eligible beneficiaries" means:

(I)  If at the time the determination is made there are one or more beneficiaries as described in s. 736.0103(14)(c), at least two-thirds in interest of the beneficiaries described in s. 736.0103(14)(a) or two-thirds in interest of the beneficiaries described in s. 736.0103(14)(c), if the interests of the beneficiaries are reasonably ascertainable; otherwise, two-thirds in number of either such class; or

(II)  If there is no beneficiary as described in s. 736.0103(14)(c), at least two-thirds in interest of the beneficiaries described in s. 736.0103(14)(a) or two-thirds in interest of the beneficiaries described in s. 736.0103(14)(b), if the interests of the beneficiaries are reasonably ascertainable; otherwise, two-thirds in number of either such class.

c.  "Qualified investment instrument" means a mutual fund, common trust fund, or money market fund described in and governed by s. 736.0816(3).

d.  An irrevocable trust is created upon execution of the trust instrument. If a trust that was revocable when created thereafter becomes irrevocable, the irrevocable trust is created when the right of revocation terminates.

(g)  Nothing in this chapter is intended to create or imply a duty for the trustee to seek the application of this subsection to invest in investment instruments described in paragraph (a), and no inference of impropriety may be made as a result of a trustee electing not to invest trust assets in investment instruments described in paragraph (a).

(6)  In voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in the best interests of the beneficiaries. If the trust is the sole owner of a corporation or other form of enterprise, the trustee shall elect or appoint directors or other managers who will manage the corporation or enterprise in the best interests of the beneficiaries.

(7)  This section does not preclude the following transactions, if fair to the beneficiaries:

(a)  An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee;

(b)  A payment of reasonable compensation to the trustee;

(c)  A transaction between a trust and another trust, the decedent's estate, or a guardian of the property of which the trustee is a fiduciary or in which a beneficiary has an interest;

(d)  A deposit of trust money in a regulated financial service institution operated by the trustee; or

(e)  An advance by the trustee of money for the protection of the trust.

(8)  This section does not preclude the employment of persons, including, but not limited to, attorneys, accountants, investment advisers, or agents, even if they are the trustee, an affiliate of the trustee, or otherwise associated with the trustee, to advise or assist the trustee in the exercise of any of the trustee's powers and to pay reasonable compensation and costs incurred in connection with such employment from the assets of the trust; to act without independent investigation on their recommendations; and, instead of acting personally, to employ one or more agents to perform any act of administration, whether or not discretionary.

(9)  The court may appoint a special fiduciary to act with respect to any proposed transaction that might violate this section if entered into by the trustee.

(10)  Payment of costs or attorney's fees incurred in any trust proceeding from the assets of the trust may be made by the trustee without the approval of any person and without court authorization, except that court authorization shall be required if an action has been filed or defense asserted against the trustee based upon a breach of trust. Court authorization is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has committed a breach of trust.

History.--s. 8, ch. 2006-217.

¹Note.--Effective July 1, 2007.