Who Is the “Qualified Beneficiary” of a Trust?

Trust disputes often arise between the beneficiaries of the trust. According to Florida law, a beneficiary is “a person who has a present or future beneficial interest in a trust, vested or contingent, or who holds a power of appointment over trust property in a capacity other than that of trustee.” There is also a subset of “qualified beneficiaries” whom the trustee must keep “reasonably informed of the trust and its administration.”

A qualified beneficiary in this context refers to someone who is either currently entitled to receive the income or principal of the trust, someone who would be entitled to receive the income or principal if the current recipients’ rights are terminated, or someone entitled to receive the income or principal upon the termination of the trust itself.

Florida Court Allows Children to Sue Father’s Trustee

Recently, the Florida Fourth District Court of Appeals weighed in on how to determine who is a qualified beneficiary for purposes of challenging the trustee’s administration of a trust. As is often the case with trust disputes, this is an intra-family disagreement that escalated into litigation. The original settlor of the trust is a man with two adult children. The current trustee is the now-deceased settlor’s widow.

Under the terms of the trust, the trustee–i.e., the wife–had sole discretion to distribute both the income and principal of the trust to herself for the remainder of her own life. Upon her death, the trust will terminate, with any remaining assets distributed to the settlor’s children.

The children sued the wife, accusing her of improperly administering the trust. More specifically, they accused her of using the trust assets to fuel her gambling addiction. She replied the children lacked standing to bring such a lawsuit as they were not “qualified beneficiaries” of the trust.

The Fourth District disagreed. It held the children were qualified beneficiaries. There was no question the children were “beneficiaries” of the trust, as they have a “future beneficial interest in any property remaining” in the trust when the wife dies. More precisely, they would be entitled to receive the “trust principal” if the trust is terminated by the wife’s death. And although the wife, acting as trustee, has the “unlimited power” to spend the trust assets, it is still “subject to implied limitations to protect beneficiaries with an interest in any property that might remain” upon her death. The children therefore may proceed with their lawsuit.

Contact a Florida Trust & Estate Attorney Today

When creating a trust you need to consider the potential legal rights of the beneficiaries you name. This is why you should always work with an experienced Fort Myers estate planning lawyer who understands Florida trust law. Call the Kuhn Law Firm, P.A., at 239-333-4529, or contact us online today to schedule a free confidential consultation with a member of our legal team. There is no obligation. We simply want to learn more about your estate planning needs and apprise you of your options.

Sources:

leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0700-0799/0736/Sections/0736.0103.html

scholar.google.com/scholar_case?case=2857845500121523212