A Trustee’s Accounting Duties Begin When A Revocable Trust Becomes Irrevocable And Will Not Retroactively Apply To The Period When The Trust Was Revocable

The issue on appeal in Hilgendorf v. Estate of Coleman, No. 4D15-4870, 2016 WL 15934 (Fla. 4th DCA 2016) was whether “an estate or beneficiary of a revocable trust created by the defendant may compel the trustee to render an accounting of receipts and disbursements made during the life of the decedent, where the trust did not require accountings, the settlor never requested accountings during her lifetime, and there is no show of any breach of fiduciary duty on the part of the trustee.”

In 2000, Thelma Coleman appointed herself as trustee and Jennilynn Smith, her granddaughter, as successor trustee to her revocable trust. The revocable trust was designed so that the net income and principle would be paid to Coleman. Upon her death the trust was to be divided into four equal shares and distributed as follows: One share to Coleman’s daughter, one share to Coleman’s son, One share to her three grandchildren, and one share to her six surviving siblings. Betty Hilgendorf, appellant in this case, is one of Coleman’s surviving siblings. 

Coleman died in 2007. Attempting to remove some family feuding, Coleman thought it was best to voluntarily resign as trustee, and named Smith as the new trustee. After the changes were implemented, Coleman still managed and controlled the trust assets as she had done before, allowing no outside assistance. Although accounting for the trust was not necessary, the trust instrument did require “that the books and records of the trust be open and available for inspection by the grantor or any beneficiary of the trust”. Upon Coleman’s death the trust instrument further required that “the successor trustee provide an accounting of the trust to each beneficiary, at least annually, of all receipts and disbursements from the trust account, including an inventory of the amounts held in trust for each beneficiary”.

After Coleman’s death in 2007, Smith and Hilgendorf were appointed co-personal representatives of the estate. The notes and mortgages executed were controlled by the trust as the sole residuary beneficiary of the estate.  As co-personal representative of the estate, Hilgendorf executed a note for $80,000 and the estate assigned the note to the trust.

Litigation began when Hilgendorf filed suit against Smith, as trustee, for pre-death accounting of the trust. Hilgendorf alleges that “Coleman had created a revocable trust for her benefit during her lifetime, and Smith had become the trustee”. Hilgendorf also alleges that as the trust was a beneficiary to the estate, her status of personal representative entitled her to an accounting for the trust for the years prior to Coleman’s death, that Smith was the trustee.  In response to Hilgendorf’s assertions, Smith moved to remove Hilgendorf as personal representative on the basis of personal conflict in addition to her contesting the promissory note held by the trust.

The Court agreed with Smith and removed Hilgendorf as personal representative of the estate.  Hilgendorf amended her claim to include an accusation of pre-death accounting brought individually as a beneficiary, in addition to being a personal representative of the estate.

Smith moved to dismiss this pre-death accounting complaint from the trust because there was no longer a party available to maintain the accounting action, since Hilgendorf was removed as personal representative. Additionally, Smith argued that neither the estate nor Hilgendorf as a post-death beneficiary of the trust were entitled to pre-death accounting. Hilgendorf sought to have an administrator ad litem appointed but the court denied this request.  The court dismissed the accounting case “on the ground that as a matter of law a trustee has no duty to account to a remainder beneficiary of a revocable trust”, reasoning that when Coleman created a revocable trust, which upon her death became irrevocable, and until that time the trust only benefitted her. So long as the records were open and available for inspection there was no duty for the trustee to account during Coleman’s lifetime. 

Florida Statue 736.0813 states that “the trustee’s duties under this section extend only to the settlor while a trust is revocable.” Thus, when Coleman died in 2007, Smith became responsible for the accounting from this point forward. Consequently, the court established there was no authority to impose a duty retroactively after the settlor is deceased and the trust has become irrevocable, unless a breach of fiduciary duty claim arises for failure to implement the terms of the trust.

In conclusion, the court held that based upon the facts presented in this case the trust has no duty to account to the estate or the beneficiary for the years during which the trust was revocable.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.