Chuck Rubin writes about a case of first impression in Florida’s 5th District Court of Appeals, Harrell and Dake v. Badger, 5th DCA, Case Nos. 5D14-1145 and 5D14-3469 (2015), relating to a trustee’s ability to decant one trust into a new trust.
In Harrell and Dake, a trustee transferred the funds of a trust held for the current beneficiary into a special needs trust also held for the current beneficiary of that same beneficiary. The trustee could do this since the trustee had the right under the first trust agreement to distribute all or part of the principal to the son in his absolute discretion.
The appellate court found two deficiencies with the decanting.
First, Fla.Stats. §736.04117(1)(a)1. requires that the “beneficiaries of the second trust may include only beneficiaries of the first trust.” Under the special needs trust the remaindermen after the death of the son were other beneficiaries of the pooled trust. Such other beneficiaries were not beneficiaries of the first trust – instead, the remaindermen under the first trust were other relatives of the settlor.
The second deficiency was that the trustee did not provide the 60 days advanced notice of the intent to decant to the qualified beneficiaries, as required by Fla.Stats. §736.04117(4).
Pursuant to these violations, the appellate court ordered the funds of the special trust returned to the original trust.
See full article at: Improper Decanting [Florida] | Charles (Chuck) Rubin – JDSupra
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.