Understanding Florida's Trust Garnishment Laws

Florida law provides detailed guidelines on how a trust should be administered, including accounting, notifications to beneficiaries, and trustee compensation. Trustees have several obligations under the Trust code and the Trust Agreement. Trustees must administer the trust in good faith, in accordance with its terms and purposes, and in the interests of the beneficiaries. A trust is a legal entity created to hold and manage assets for the benefit of designated individuals or entities. While Florida law offers certain protections for assets held within trusts from creditors, there are exceptions. For example, a beneficiary's interest in a trust can be garnished by creditors to satisfy debts or obligations. Additionally, in 2008, the Florida Supreme Court authorized the garnishment of a lawyer's trust account.

Spendthrift protection

A spendthrift provision in a will or trust protects against the "imprudence, extravagance, and inability to manage financial affairs" of a beneficiary. Under Florida law, a spendthrift provision is only valid if it stops both voluntary and involuntary transfers of the beneficiary's interests.

A spendthrift trust prevents creditors of a beneficiary from accessing assets held in the trust before they are distributed to the beneficiary. In other words, it protects the beneficiary's assets from creditors and lawsuits.

However, there are some exceptions to the enforceability of spendthrift provisions in Florida. The spendthrift provision is not valid if there is an enforceable support order against the beneficiary (e.g., a child or spousal support order). Additionally, if the beneficiary owes money to the federal or state government, the spendthrift provision does not apply.

Florida law also makes two exceptions to spendthrift protection. Firstly, the law prohibits a trustee of an irrevocable trust from withholding a distribution required under the trust agreement solely to protect the distribution from the beneficiary's creditors. Overdue mandatory distributions can be garnished from a spendthrift trust. Secondly, the second exception from spendthrift trust protection applies to "special creditors" or "creditors of last resort." These special creditors include claims by a beneficiary's child, claims of a former spouse for support and maintenance, and claims by creditors (such as an attorney) who have provided services for the protection of a beneficiary's interest.

If you are considering creating a spendthrift trust, it is essential to consult with an experienced estate planning attorney in Florida. They can help you review your objectives and the size of your estate to devise a plan that fulfills your wishes.

Irrevocable trusts

An irrevocable trust is an agreement between a settlor, trustee, and beneficiaries that cannot be revoked or amended. It is a powerful tool for estate planning, allowing the settlor to manage their assets while avoiding probate and providing asset protection from future creditors. In Florida, irrevocable trusts offer greater protection from creditors than revocable trusts.

Florida law provides that a spendthrift provision must expressly restrain voluntary and involuntary transfers of a beneficiary's trust interest to protect the beneficiary's interest from creditors. This is known as a "spendthrift" clause, designed to prevent a beneficiary from squandering their inheritance by assigning their trust interest to another person. Spendthrift protection ensures that a beneficiary's creditors cannot force the beneficiary to do involuntarily what they cannot do voluntarily under the trust document.

However, Florida law makes two exceptions to spendthrift protection. Firstly, it prohibits a trustee of an irrevocable trust from withholding a distribution required under the trust agreement solely to protect it from the beneficiary's creditors. Overdue mandatory distributions can be garnished from a spendthrift trust. Secondly, the second exception applies to "special creditors" or "creditors of last resort," including claims by a beneficiary's child, a former spouse for support and maintenance, and creditors who have provided services for the protection of a beneficiary's interest.

To be valid, an irrevocable trust must be executed properly. Under Section 736.0403 of Florida law, if a revocable trust has any testamentary provisions, the trust must be executed with the same formalities as a will, including being signed in the presence of two witnesses and a notary. An irrevocable trust can be modified if written correctly, but it typically requires court approval and consent from the beneficiaries.

Trustee obligations

A trustee is a person who acts as a custodian for the assets held within a trust and is responsible for managing and administering the finances of a trust per the instructions given. Trustees must ensure that the trust is administered in good faith, aligning with the trust's terms and the grantor's intentions and wishes. The grantor, also known as the settlor, is the person who creates the trust.

The trustee has a fiduciary duty to act in the best interest of the trust and its beneficiaries, who will receive the assets after the grantor dies. Trustees must not mix trust assets with their own and should not use trust assets for their benefit unless the trust authorises it. They must treat all beneficiaries equally unless instructed otherwise. Trustees are also responsible for recording expenses and income, distributing funds to beneficiaries, filing taxes on any income the trust makes, and keeping records of other transactions.

The trustee must act reasonably and competently in all matters of the trust. While they are not liable for losses incurred due to events beyond their control, they are liable for losses resulting from imprudent investment decisions. Trustees must also provide an accounting to the beneficiaries of the trust, including notifications and reporting as required by law.

In Florida, irrevocable trusts offer greater protection from creditors than revocable trusts. However, there are exceptions to spendthrift protection, including overdue mandatory distributions and claims by "special creditors".

Trust administration

Trusts are legal entities created to hold and manage assets for the benefit of designated individuals or entities. In Florida, trusts are designed to manage and distribute assets for the benefit of specific individuals or entities. A trust is established by an individual known as the settlor or trustor, and it is managed by a trustee, who has a fiduciary duty to act in the best interest of the beneficiaries.

Florida trust law provides detailed guidelines on how a trust should be administered, including accounting, notifications to beneficiaries, and trustee compensation. Beneficiaries have specific rights under Florida law, including the right to information, accounting, and court intervention for malfeasance by a trustee. Florida law also offers certain protections for assets held within trusts from creditors, although there are exceptions, such as irrevocable trusts, which often offer greater protection than revocable ones.

Upon the trustmaker's death, Florida law requires that the successor trustee file a "notice of trust" with the court of the county of the trustmaker's domicile, which includes the trustmaker's name, date of death, the title of the living trust, the date of trust execution, and the successor trustee's address. The trustee should notify any beneficiaries named in the trust and provide them with information on the terms of the trust. The trustee should also determine whom the trust may be indebted to and notify them of the trust, obtain copies of any claims against the trust, and take the proper steps to pay any valid debts. Before distributing the assets, the beneficiaries must be provided with an accounting of the trust.

It is important to note that mistakes in trust administration can lead to challenges, and beneficiaries may not receive what was intended. Choosing the type of trust and appointing a trustee are critical steps, and an estate planning lawyer can advise on state-specific issues and ensure the trust is properly drafted to avoid issues.

Beneficiary rights

Trusts are legal entities created to hold and manage assets for the benefit of designated individuals or entities. In Florida, trusts are established by an individual known as the settlor or trustmaker and are managed by a trustee, who has a fiduciary duty to act in the best interest of the beneficiaries.

Under Florida law, beneficiaries have specific rights, including the right to information, accounting, and court intervention for malfeasance by a trustee. Trustees are required to keep qualified beneficiaries reasonably informed of the trust and its administration, including providing a complete copy of the trust document and its amendments, and an annual accounting showing all trust gains, losses, and distributions. This accounting must be detailed and provided at least every year, and possibly more frequently. Trustees must also notify beneficiaries of their acceptance of the role of trustee within 60 days, providing their full name and address, and inform beneficiaries of the existence of an irrevocable trust within 60 days of learning of its creation, as well as the identity of the settlor or trustmaker.

Florida law also requires trustees to treat all beneficiaries impartially, showing no preference or applying different standards among them. Trustees should also take steps to defend claims made against trust property and enforce claims of the trust, such as using trust funds to secure an asset or filing lawsuits to defend the trust. There are strict rules for the holding, investing, and spending of trust assets, and trustees must ensure that trust property is not commingled with their own. Any expenses incurred by the trustee should be limited, reasonable, and documented.

In the case of irrevocable trusts, Florida law makes two exceptions to the spendthrift protection. Firstly, the law prohibits a trustee from withholding a required distribution from the trust agreement to protect it from the beneficiary's creditors. Overdue mandatory distributions can be garnished from a spendthrift trust. Secondly, "special creditors" or "creditors of last resort" may garnish a beneficiary's interest and distributions from a spendthrift trust. These special creditors include claims by a beneficiary's child, claims of a former spouse for support, and claims by creditors who have provided services for the protection of a beneficiary's interest.

It is important to note that Florida law has specific rules for setting up a trust, including age and mental capacity requirements for the settlor, and signing requirements for the trust document to be valid. Consulting an attorney specializing in trusts is highly recommended to navigate the complex regulations and procedures involved.

Frequently asked questions