In Covenant Trust Co. v. Ihrman, 2010 Fla. App. LEXIS 13632 (Fla. 4th DCA 9/15/10), Lillian was adjudicated incapacitated and Guardian was appointed as her plenary guardian. The trial court granted the Guardian’s motion to pay an additional retainer for his attorney from Lillian’s Trust. The Trust provides as follows:
2.01 During the lives of the Grantors, or the survivor of them, the Trustee [Covenant] shall pay so much or all the net income of the trust to the Grantors, or the survivor of them, as they direct in writing, and the Trustee shall pay any part of the principal of the trust as the Grantors, or the survivor of them, direct in writing. However, during any period in which the Grantors, or the survivor of them, are in the opinion of a licensed physician incapable of managing their own affairs, the Trustee may in its discretion pay to or use for the benefit of the Grantors or the survivor of them, so much of the income and principal of the trust as the Trustee determines to be required for their health, support and maintenance, in their accustomed manner of living, or for other purposes the Trustee determines to be for their best interests. Any excess income shall be added to principal at the discretion of the Trustee.
On appeal, Covenant, as trustee successfully argued that the trial court erred in directing expenditures of trust funds because the court was without authority to order the trustee to pay the Guardian’s attorney from the trust assets. The court reasoned:
Here, Lillian was adjudicated incapacitated and Guardian was appointed as her plenary guardian. This was enough to bring Lillian within the language of this trust provision, as Lillian is unable to manage her own affairs. Thus, the trust requires Covenant to act in its discretion to pay to Lillian that which she needs for her health, support, and maintenance, and for any other purposes within her best interests.
In Cohen v. Friedland, 450 So. 2d 905, 906 (Fla. 3d DCA 1984) (citing White v. Bacardi, 446 So. 2d 150, 155 n.5 (Fla. 3d DCA 1984)), the Third District explained that “[a] trustee, in the strictest sense, holds legal title to property which he administers for the named beneficiary in accordance with the terms of the instrument creating the trust.” The trust agreement provided that the beneficiary would receive the trust income and the trustees had sole discretion to invade the trust principal for the beneficiary’s maintenance, comfort, and welfare. Id. But”[i]n the absence of proof that the trustee has failed to perform, or has performed arbitrarily, a court is without authority to remove trust assets from control of the trustee to be administered by the court or other guardian.” Id.
In Giglio v. Perretta, 493 So. 2d 470, 470 (Fla. 4th DCA 1986), we held the “trial court erred in requiring the trustee to use trust assets to reimburse the guardian of the trust beneficiary for guardianship administration expenses, attorneys fees, and other costs.” We explained that although paying some of these costs may have been allowed, in the trustee’s discretion, these payments were “not legally mandated by the trust provisions,” so the court had “no authority to compel the trustee to make such payments,” nor any authority for the attorney’s fees award. Id. (citing Cohen, 450 So. 2d 905).
Further, in Johnson v. Guardianship of Singleton, 743 So. 2d 1152, 1153 (Fla. 3d DCA 1999), the Third District, citing Cohen, held that there was “no statutory or other satisfactory legal justification for the award” of legal expenses, where the trial court ordered the trustee “to pay from trust assets the legal expenses incurred” by the guardian.
Here, Covenant, as trustee, was granted, within the trust provision, the discretion to make payments from the trust assets. There was no evidence that Covenant acted arbitrarily. Therefore, the court lacked the authority to order Covenant to remove trust assets. As explained in Giglio, these payments were not legally mandated in the trust terms. Further, as in Johnson, there was no statutory or other legal authority for the court to order the payments. Because the trust did not provide for the payment of attorney’s fees, and Covenant could make payments in its discretion for Lillian’s best interests, the court was without authority to order Covenant to pay Guardian’s attorney $ 10,000 from the trust assets.
Although the following statutes were not cited by the court, they may be helpful in determining the Trustee’s duties when the Grantor is incapacitated:
Sec. 736.0816 (21), Fla. Stat. provides:
Except as limited or restricted by this code, a trustee may:
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(21) Pay an amount distributable to a beneficiary who is under a legal disability or who the trustee reasonably believes is incapacitated, by paying the amount directly to the beneficiary or applying the amount for the beneficiary’s benefit, or by:
(a) Paying the amount to the beneficiary’s guardian of the property or, if the beneficiary does not have a guardian of the property, the beneficiary’s guardian of the person;
(b) Paying the amount to the beneficiary’s custodian under a Uniform Transfers to Minors Act or custodial trustee under a Uniform Custodial Trust Act, and, for that purpose, creating a custodianship or custodial trust;
(c) Paying the amount to an adult relative or other person having legal or physical care or custody of the beneficiary, to be expended on the beneficiary’s behalf, if the trustee does not know of a guardian of the property, guardian of the person, custodian, or custodial trustee; or
(d) Managing the amount as a separate fund on the beneficiary’s behalf, subject to the beneficiary’s continuing right to withdraw the distribution.
Additionally, §736.0814 (1), Fla. Stat. provides:
(1) Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of such terms as “absolute,” “sole,” or “uncontrolled,” the trustee shall exercise a discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries. A court shall not determine that a trustee abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion.