Summary
The Florida District Court of Appeal held that remainder beneficiaries of a revocable trust have standing after the settlor’s death to challenge pre-death trust distributions that were not authorized by the trust’s terms, and that the question of whether expenditures were proper is a substantive breach-of-fiduciary-duty issue, not a preliminary standing question. The court further ruled that the trustee lacked authority to make gifts from trust principal because the trust only permitted invasion for the settlor’s support and welfare, and that the attorney-in-fact’s power to gift did not override the trust’s prohibition on partial revocations or withdrawals of principal by the attorney-in-fact. The case was remanded for an evidentiary hearing on the beneficiaries’ claims for breach of fiduciary duty against the trustee and the attorney-in-fact.
Holdings
- Under New York law, after the death of the settlor, the beneficiaries of a revocable trust have standing to challenge pre-death withdrawals that are outside the purposes authorized by the trust and not approved by the settlor. The question of whether the withdrawals were authorized is not a preliminary standing question but the substance of the breach of fiduciary duty claim.
- The trust agreement gave the trustee no power to make gifts; it only allowed invasion of principal for the settlor's support, maintenance, health, comfort, or general welfare. Gifts to others do not constitute payments for the comfort or general welfare of the settlor.
- The power of attorney limited gifts to those consistent with the settlor's pattern of giving or estate plan, and it prohibited the attorney-in-fact from revoking or withdrawing principal from the trust. Withdrawals of principal that amount to partial revocations are beyond the attorney-in-fact's authority. Whether specific gifts were proper requires factual development.
- Even where the trustee has sole discretion, a court may review for abuse of discretion or bad faith. The trial court must hold an evidentiary hearing to determine whether the expenditures were authorized and in the settlor's best interest.
Questions Presented
- Whether the trial court erred in treating the question of whether trust distributions were authorized as a preliminary standing issue rather than the merits of the breach of fiduciary duty claim.
- Whether the trust instrument authorized the trustee to make gifts from trust principal.
- Whether the attorney-in-fact's gifts and withdrawals of principal were within her authority under the power of attorney and trust.
- Whether the trial court could determine the propriety of specific expenditures without an evidentiary hearing.
Disposition
reversed_and_remanded
Cases Cited (18)
- Siegel v. Novak, 920 So. 2d 89 (Fla. 4th DCA 2006)(followed)
- Estate of Morse, 177 Misc. 2d 43, 676 N.Y.S.2d 407 (N.Y. Sur. 1998)(cited)
- Matter of Davis, 182 N.Y. 468, 75 N.E. 530 (1905)(cited)
- Matter of Silverman, 91 Misc. 2d 125, 397 N.Y.S.2d 319 (Sur. Ct. 1977)(cited)
- Gitelson v. Du Pont, 17 N.Y.2d 46, 268 N.Y.S.2d 11, 215 N.E.2d 336 (1966)(cited)
- Davis v. Rex, 876 So. 2d 609 (Fla. 4th DCA 2004)(cited)
- Kemp v. Paterson, 4 A.D.2d 153, 163 N.Y.S.2d 245 (1957)(followed)
- In re Shapley's Deed of Trust, 353 Pa. 499, 46 A.2d 227 (1946)(cited)
- In re Mueller, 19 Misc. 3d 536, 853 N.Y.S.2d 245 (N.Y. Sur. 2008)(cited)
- Matter of Ferrara, 7 N.Y.3d 244, 819 N.Y.S.2d 215, 852 N.E.2d 138 (2006)(followed)
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