When creating a trust as part of one’s estate plan, it is not uncommon for the settlor to include provisions designed to provide support for a spouse or other loved one for the remainder of his or her life, with the remaining trust assets going to the settlor’s children, or another designated beneficiary. These “support trusts,” as they are commonly referred to, will give the trustee the discretion to invade the trust corpus in order to provide for the “health, education, maintenance and support” of the “life beneficiary,” when in the trustee’s discretion it is appropriate. Then, upon the death of the surviving spouse, whatever is left of the trust corpus will go to whomever the settlor designates as their “remainder beneficiary.” Additionally, many of these support trusts specify that the trustee, in exercising his or her discretion, should look to the other assets that the life beneficiary has available to determine whether additional invasions of the trust corpus are needed to provide for their “health, education, maintenance, and support.”
The stipulation that the trust corpus should only be invaded if necessary to provide for the “health, education, support, or maintenance” of the surviving spouse imposes a limitation on the discretion of the trustee. Rather than having plenary or absolute discretion, the trustee of a support trust will have the scope of his or her discretion narrowed by this “ascertainable standard,” as defined by the Florida Legislature in § 736.0504, Fla. Stat. (2013). This discretion is narrowed even further if the trust requires that the trustee look to the other assets that the life beneficiary has available, prior to making a distribution. While Florida has statutorily defined “ascertainable standard” as a standard like the one providing for the “health, education, support, or maintenance” of a life beneficiary, ascertaining the exact contours of this standard is not as simple as the statute would suggest.
Under Florida law, a trustee is required to “administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with” Florida’s statutory scheme. § 736.0801, Fla. Stat. (2013). If there are two or more beneficiaries of a trust, the trustee is required to “act impartially in administering the trust property, giving due regard to the beneficiaries’ respective interests.” § 736.0803, Fla. Stat. (2013). Aside from these two duties, the trustee of a support trust will have his or her discretion limited only by the terms of Trust Instrument itself. The practical impact of this impartiality in the support trust context is that if the remainder beneficiary and lifetime beneficiary have divergent or conflicting interests, and the settlor does not direct “primary consideration” for one beneficiary in particular, the trustee will be “legally required to give due consideration to the interests” of both beneficiaries, but will generally be afforded full discretion, within the ascertainable standards, to determine what course of action will best effect the settlor’s intent.
An interesting question that arises from the nature of Florida’s statutory scheme is exactly what obligations a trustee has when the trust commands review of the life beneficiary’s other assets in determining whether an invasion of the trust corpus is needed to provide for the “health, education, maintenance, and support.” On the one hand, the purposes for which the trust corpus may be invaded are fixed by an “ascertainable standard,” which is that invasion is only appropriate when needed to provide for the life beneficiary’s “health, education, maintenance, and support.” On the other hand, the ability to invade the trust corpus for this purpose is restricted in the sense that the trustee must consider the other assets that the life beneficiary has available before determining whether a distribution is appropriate.
If you or someone you know would like to create or has questions about a support trust, please do not hesitate to contact the experienced estate planning attorneys at Chepenik Trushin LLP.