A trust can be amended it a number of ways depending on whether the trust is revocable or irrevocable. Usually, an irrevocable trust cannot be modified unless there is a judicial modification or the trust terms allow for a modification. A recent court ruling in Florida now provides that a “trust protector” may amend a trust.
What is a trust protector? A trust protector is a person that is appointed to watch over the trust and to ensure the trust is not adversely affected by a change of law or other circumstance. A trust protector can be appointed when the terms of the trust specifically confer on a trustee or other person the power to direct the modification or termination of the trust. The law concerning trust protectors in Florida stems from section 808 of the Uniform Trust Code, or UTC, and the case, Minassian v. Rachins, was the first major court decision to interpret this provision of the Florida Trust Code.
Zaven Minassian created the trust in question, and the trust named both him and his wife as co-trustees. Once Minassian died, his wife became the sole remaining trustee, and the current trust dictated that she was to create a new family trust from the remaining trust assets.
The debate became what was to happen to this new family trust once the wife passed. Either the family trust was to be divided into two separate shares for each of the settlor’s two children, as the children contended; or the family trust was to be terminated and distributed to two separate trusts for each of the settlor’s two children, as the wife believed was Minassian’s intent.
The settlor’s children sued the settlor’s wife for breach of fiduciary duties in administering the trust. The wife moved to dismiss the claim for lack of standing based on the argument that the children were not beneficiaries of the family trust, but rather were beneficiaries of two new trusts to be created after the family trust was terminated. The trial court sided with the children, and held the children had shares in the trust and it would be unfair to deny the children standing to litigate the issue.
The settlor’s wife, then decided to appoint a “trust protector,” who in this case was the attorney that drafted the trust, to amend the trust. The trust protector amended the trust to clarify that upon the wife’s death, the family trust would terminate and the assets distributed to a new trust with a separate share for each child. The children moved for summary judgment as to the validity of the trust protector’s amendment. The trial court sided with the children again and held the amendment to be invalid because it did not further the settlor’s intent, which the court found to be ambiguous.
The appellate court did not agree with the trial court and reversed. The court held the trust protector provision of the trust was itself valid, because a provision of the trust allowed the wife to appoint a trust protector after the settlor’s death. The trust protector was empowered to modify and amend the trust in this case, and also had the ability to correct any ambiguities that might otherwise require court construction or to correct the trust in a way that defeats the settlor’s purpose.
The appellate court held that, contrary to the trial court’s findings, the trust was ambiguous regarding the settlor’s intent, and that the trial court should have looked to extrinsic evidence of this intent. The appellate court asked the trust protector to testify, and he testified that he had met the settlor twice and that the settlor intended for a new trust to be created for the children. He further stated the settlor did this to prevent the children to challenge the manner in which the wife spend the family trust assets during her lifetime.
As the trust document noted, it was the settlor’s preference to have a trust protector appointed for the purpose of resolving any ambiguities or imperfections in the drafting of the trust. A trust protector provision can be a great tool to help protect a trust from one day no longer serving the purpose of the person who created the trust. For more information on how to amend a trust and a trust protector, contact us today.