Is a Trust Beneficiary Allowed to Act as the Trustee in Florida?
When you set up a trust, you will need to appoint a trustee and a beneficiary. In Florida, it is possible for the same person to be both the beneficiary and the trustee. While the arrangement can work smoothly in many cases, it does also raise some potential questions about conflicts of interest and fiduciary duties. Within this article, our St. Petersburg estate planning lawyer explains the key things to know about having a beneficiary serve as a trustee in Florida.
Know Your Terms: Trust, Beneficiary, and Trustee
As a starting point, it is important to define some key terms. Here are notable terms that you need to understand when trust planning in Florida:
- Trust: A trust is a legal arrangement in which one party (the grantor) places assets under the control of another party (the trustee) to manage for the benefit of a third party (the beneficiary). In Florida, trusts are governed by the Florida Trust Code.
- Beneficiary: A beneficiary is the individual or entity designated to receive benefits, assets, or income from a trust. In Florida, a beneficiary has legal rights under the trust, including the right to information and, in many cases, to challenge the action of the trustee.
- Trustee: A trustee is the person/entity responsible for managing the trust in accordance with its terms and for the benefit of the beneficiaries. Under Florida law, a trustee has a fiduciary duty to act prudently, loyally, and in the best interests of the beneficiaries.
A Beneficiary Can Lawfully Serve as a Trustee in Florida (Not Uncommon)
In Florida, a beneficiary can legally serve as the trustee of a trust, and this arrangement is not unusual. While it may raise concerns about potential conflicts of interest, Florida law permits it as long as the trustee upholds. They must act in the best interests of all beneficiaries. If they are the sole beneficiary, that is straightforward. However, if there are multiple beneficiaries, they need to ensure that all beneficiaries are treated fairly under the terms of the trust.
Three Reasons Why it Might Not Be the Right Choice
- A Risk of Conflict of Interest
When a beneficiary also serves as trustee, there is an increased risk of favoring their own interests over those of other beneficiaries. The mere appearance of conflicts of interests can cause issues. Even if unintentional, the dual role can create tension or mistrust within the family.
- Strained Family Dynamics
Naming one beneficiary as trustee can cause resentment or suspicion among other beneficiaries. It is an especially common issue for blended families and/or when a large inheritance(s) is involved.
- Lack of Professional Expertise
Serving as a trustee can be complicated. Among other things, it requires careful financial management, legal compliance, and ongoing recordkeeping. A beneficiary may not have the skills or experience to handle these responsibilities.
Get Help From Our St. Petersburg Trust Planning Lawyer Today
At Fisher & Wilsey, P.A., our St. Petersburg estate planning attorney is devoted to helping clients find the best solution for themselves and their families. If you have any questions about trusts, please do not hesitate to contact us today for a fully confidential initial consultation. From our St. Petersburg law office, we provide estate planning representation throughout the wider region in Florida.
