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Florida District Court of Appeal Upholds Trial Court's Determination that, Under Common Law, an Irrevocable Trust Can be Terminated with Consent of Settlor and All Beneficiaries

The Florida Second District Court of Appeal recently held that the trial court acted properly when it determined that, if the settlor and all beneficiaries of an irrevocable trust consented, the trust could be terminated even if the termination would be in conflict with the intentions of the party who funded the trust.

As background, Bernard Peck ("Bernard") executed a Last Will and Testament that left assets to a marital trust for the benefit of his wife. Upon the death of the wife, the remaining assets in the marital trust were to be distributed to self-settled irrevocable trusts for his children, Constance Peck ("Constance") and Daniel Peck ("Daniel"). Bernard funded Constance's trust (the "CLP Trust") with gifts he had made to her over a period of years under the Florida Uniform Transfers to Minors Act. The CLP Trust was created in 1992. Constance was the settlor of the CLP Trust and was co-trustee with Bernard. Daniel was named as the successor trustee of the CLP Trust.

The CLP Trust provided that the income was to be paid to Constance during her life. In addition, Constance had a testamentary power of appointment in favor of her descendants. The CLP Trust contained a provision that it was "irrevocable and shall not be subject to amendment, and no portion of the Trust Estate may be withdrawn from the operation of this Trust except in accordance with the terms herein before set forth." Constance also had the right to receive five thousand dollars per year from the principal of the CLP Trust until the age of fifty. That amount increased to ten thousand dollars until age fifty-five, and then fifteen thousand dollars from the age of fifty-five until her death.

Bernard died in 2009. His wife predeceased him and at his death, the CLP Trust received the assets set aside for Constance. Upon Bernard's death, Daniel became the co-trustee of the CLP Trust with Constance.

In 2012, Constance filed a petition to terminate the CLP Trust. Her children agreed to the termination, but Daniel, as co-trustee, argued that Constance would squander the assets and objected. Daniel also argued that under section 736.04113 of the Florida Statutes, termination would be improper because the purposes of the trust had not been fulfilled. The trial court terminated the CLP Trust and noted that section 736.04113 provides that "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" and so the court still had the authority to terminate the trust.  The Florida Second District Court of Appeal discussed Preston v. City National Bank of Miami (294 So. 2d 11 (Fla. 3d DCA 1974)), which notes that 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 purposes of the trust have not been accomplished.  

In affirming the trial court's decision to terminate the CLP Trust, the Florida Second District Court of Appeal noted that Bernard was the one who drafted the CLP Trust and that he knew it would receive the assets passing from his estate. The Court noted that Bernard could have been the settlor of the trust that would receive assets for Constance's benefit, but he did not do that. He should have known that she could modify or terminate the trust with the consent of the beneficiaries, even if it defeated Bernard's intentions. The Court emphasized that this termination was authorized by Florida common law and that Florida common law was not limited by the application of section 736.04113 of the Florida Statutes.

© 2022 Proskauer Rose LLP. National Law Review, Volume IV, Number 137
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About this Author

Albert W Gortz, Proskauer Rose Law Firm, Personal Planning Attorney
Partner

Albert W. Gortz is a Partner in the Personal Planning Department and has been with the firm since 1970 and in the Florida office since he opened it in 1977.

561-995-4700
George D Karibjanian, Proskauer Rose Law Firm, Personal Planning Attorney
Senior Counsel

George D. Karibjanian is a Senior Counsel in the Personal Planning Department, resident in the Boca Raton office. George is Board Certified by the Florida Bar in Wills, Trusts & Estates and is a Fellow in the American College of Trust and Estate Counsel.

561-995-4780
David Pratt, Personal Planning Attorney, Proskauer Rose Law Firm,
Partner

David Pratt is a Partner in the Personal Planning Department and head of the Boca Raton office. His practice is dedicated exclusively to the areas of trusts and estates, estate, gift and generation-skipping transfer, fiduciary and individual income taxation and fiduciary litigation. He has extensive experience in estate planning and post-mortem tax planning. He has been asked to serve as an expert witness on several occasions, and has been referred to as a “seasoned trusts and estates lawyer” in a Florida Third District Court of Appeals Opinion

561-995-4777
Mitchell M Gaswirth, Proskauer Rose Law Firm, Tax Attorney
Partner

Mitchell M. Gaswirth is a Partner in the Tax Department. His practice focuses primarily on income, gift and estate tax and related business planning. Mitchell counsels individuals, entrepreneurs and business entities in connection with the various income and other tax issues which arise in sophisticated business transactions.

310-284-5693
Andrew M Katzenstein, Proskauer Law Firm, Personal Planning Attorney
Partner

Andrew M. Katzenstein is a Partner in the Personal Planning Department in the Los Angeles office where he assists high net worth individuals, companies and charitable organizations with all aspects of tax and estate planning. He focuses his practice on tax planning matters, which include estate, gift and generation-skipping tax planning, as well as income tax of trust planning, probate and trust administration matters, resolving disputes between fiduciaries and beneficiaries, and charitable planning

310-284-4553
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