In Re: Trust of: Salah, James M.

Summary

In Mastriana v. Brown Brothers Harriman Trust Co., a Florida trial court held that a removed trustee did not breach its fiduciary duties by retaining a 7.98% reserve of trust assets under Fla. Stat. § 736.0707(2), finding the amount reasonable and within the trustee’s broad discretion given potential litigation, complex accountings, and objections. The court also ruled that investing the reserve in fixed-income and cash assets was prudent under Florida’s Prudent Investor Rule (Fla. Stat. § 518.11) and prudent administration standard (Fla. Stat. § 736.0804), as the conduct—not the resulting performance—is the test. The decision underscores that a court will not second-guess a trustee’s discretionary decisions absent arbitrary action or bad faith.

Holdings

1. Under Fla. Stat. § 736.0707(2), a trustee who has resigned or been removed has the right to retain a reasonable reserve for the payment of debts, expenses, and taxes.
2. A trustee has broad discretion to act in good faith, and a court will not find an abuse of discretion merely because it would have exercised discretion differently. The decision to retain a reserve of 7.98% of trust assets, based on potential litigation, complex final accountings, and anticipated objections, was not arbitrary, was reasonable, and fell within the trustee's discretion.
3. The Defendant's investment of the reserve in fixed-income assets and cash, which were liquid, low-risk, and suitable for the immediate payment of debts and expenses, satisfied the Prudent Investor Rule under § 518.11 and the prudent administration standard under § 736.0804. A court will not interfere with a fiduciary's good-faith, non-arbitrary decisions regarding investment.

Questions Presented

1. Whether Defendant breached its fiduciary duties by retaining an excessive and unreasonable reserve after being discharged as trustee.
2. Whether Defendant imprudently invested the reserve funds and should be surcharged or required to disgorge fees.

Disposition

other