Trustee Not Paying Beneficiaries in Florida

One of the most common complaints beneficiaries bring to our office is that the trustee is not making distributions from the trust. Whether the trustee is delaying payments, refusing to distribute altogether, or making partial distributions while withholding the rest, a trustee's failure to pay beneficiaries can constitute a serious breach of fiduciary duty under Florida law. At the Law Offices of Albert Goodwin, PA, we represent trust beneficiaries throughout South Florida who are being denied what they are rightfully owed under the terms of the trust.

Understanding why a trustee may be withholding distributions, what the trust terms actually require, and what legal remedies are available is the first step toward resolving the situation. Not every delay is a breach of trust, but beneficiaries have enforceable rights under the Florida Trust Code, and those rights should not be ignored.

Mandatory Distributions vs. Discretionary Distributions

The first and most important question in any dispute over trust distributions is whether the distribution is mandatory or discretionary. The distinction determines the trustee's obligations and the beneficiary's ability to compel payment.

Mandatory Distributions

A mandatory distribution is one that the trust terms require the trustee to make. Common examples include provisions directing the trustee to distribute all income to a named beneficiary on a quarterly basis, to distribute a specific dollar amount or percentage to a beneficiary at stated intervals, or to distribute the entire trust principal to the beneficiaries upon the occurrence of a specified event such as the settlor's death or the beneficiary reaching a certain age.

When a distribution is mandatory, the trustee has no discretion to withhold it. The trustee must make the distribution as directed by the trust terms, and failure to do so is a breach of trust. A beneficiary who is owed a mandatory distribution has a clear legal right to petition the court to compel the trustee to pay.

Discretionary Distributions

A discretionary distribution is one that the trust terms authorize but do not require the trustee to make. The trust may grant the trustee discretion to distribute income or principal for the beneficiary's health, education, maintenance, and support (often called an "ascertainable standard"), or the trust may give the trustee absolute or sole discretion over distributions with no stated standard at all.

When distributions are discretionary, the beneficiary's ability to compel payment is more limited, but it is not nonexistent. Under Florida Statutes § 736.0814, even when a trustee has discretion over distributions, the trustee must exercise that discretion in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries. A trustee who categorically refuses to consider a beneficiary's needs, who withholds distributions out of spite or self-interest, or who abuses their discretion may be subject to judicial review and correction.

If the trust includes an ascertainable standard such as "health, education, maintenance, and support," a court may review the trustee's decision and order a distribution if the court finds that the trustee's refusal to distribute was unreasonable in light of the beneficiary's demonstrated needs that fall within the standard. Courts are more deferential to trustees who hold absolute discretion, but even absolute discretion is not a license to act in bad faith.

Common Reasons Trustees Withhold Distributions

There are both legitimate and illegitimate reasons why a trustee may delay or refuse distributions.

Pending tax obligations. After a settlor's death, the trustee may need to hold back funds to pay federal estate taxes, state taxes, income taxes on trust earnings, or other tax obligations. The trustee has a duty to ensure that the trust can meet its tax liabilities before distributing assets. In many cases, the IRS does not issue a closing letter for months or even years after the estate tax return is filed, and the trustee may prudently reserve funds during that period.

Creditor claims and pending litigation. If the trust or the settlor's estate is subject to creditor claims, a pending trust contest, or other litigation, the trustee may reasonably hold distributions in reserve pending resolution of those claims. Distributing trust assets while creditor claims are outstanding could expose the trustee to personal liability.

Administrative costs. The trustee may need to retain funds to pay for trust administration expenses, including legal fees, accounting fees, property management costs, and the trustee's own compensation.

Improper motives. Unfortunately, not all trustees act in good faith. Some trustees withhold distributions to maintain control over the trust assets, to generate fees for themselves or their allies, to punish a beneficiary they dislike, or to use the trust funds for their own benefit. These are clear breaches of the trustee's fiduciary duties and warrant immediate legal action.

Remedies Available to Beneficiaries Under Florida Law

Florida's Trust Code provides beneficiaries with several powerful remedies when a trustee fails to make required distributions or abuses their discretion.

Petition to Compel Distribution

Under F.S. § 736.0201, the court may intervene in the administration of a trust to the extent that its jurisdiction is invoked by an interested person. A beneficiary may file a petition in the circuit court asking the court to compel the trustee to make a distribution. If the distribution is mandatory under the trust terms, the court will order the trustee to comply. If the distribution is discretionary, the court will review the trustee's exercise of discretion and may order a distribution if the trustee acted unreasonably or in bad faith.

Petition to Compel Accounting

Before a beneficiary can fully understand why distributions are being withheld, they may need to see a complete accounting of the trust. Under F.S. § 736.0813, qualified beneficiaries have a right to receive a trust accounting. If the trustee has not provided an accounting, or if the accounting provided is incomplete or inaccurate, the beneficiary can petition the court to compel the trustee to provide a full and accurate accounting. The accounting will reveal how trust funds have been invested, what expenses have been paid, and what assets are available for distribution.

Removal of the Trustee

Under F.S. § 736.0706, the court may remove a trustee if the trustee has committed a serious breach of trust, if the trustee has failed to comply with a court order, if lack of cooperation among co-trustees substantially impairs the administration of the trust, if the trustee is unfit or unwilling to administer the trust effectively, or if there has been a substantial change of circumstances and removal best serves the interests of all beneficiaries. A trustee who repeatedly refuses to make distributions, fails to account, or engages in self-dealing may be removed by the court and replaced with a successor trustee.

Surcharge Action

A surcharge action is a claim for monetary damages against a trustee for breach of trust. Under F.S. § 736.1002, if the trustee's failure to distribute has caused financial harm to the beneficiary, the beneficiary may seek to recover the amount of the withheld distributions plus any additional damages, which may include lost investment returns on the funds that should have been distributed, interest on the delayed payments, and consequential damages in appropriate cases.

If the trustee has used trust funds for their own benefit, the beneficiary may also seek disgorgement of any profits the trustee earned from the misappropriated funds. The court may also deny or reduce the trustee's compensation as a sanction for breach of trust.

Attorneys' Fees

Under F.S. § 736.1004, the court may award costs and attorneys' fees to any party in a trust proceeding as the court deems equitable. A beneficiary who is forced to bring a court action to compel distributions may be awarded their attorneys' fees from the trust estate or from the trustee personally, particularly if the court finds that the trustee's conduct was unreasonable or in bad faith.

Steps to Take When a Trustee Is Not Paying

If you are a trust beneficiary and the trustee is not making distributions you believe you are entitled to, consider the following steps:

Review the trust document. Obtain a copy of the trust instrument and review the distribution provisions carefully. Determine whether the distributions you are seeking are mandatory or discretionary, and identify any conditions or standards that apply.

Request an accounting. Send a written request to the trustee for a complete trust accounting. This is your right under the Florida Trust Code, and the trustee must comply within a reasonable time.

Communicate in writing. Put your distribution request in writing and send it to the trustee. Document all communications. If the trustee provides reasons for withholding distributions, evaluate whether those reasons are legitimate and supported by the trust terms.

Consult a trust litigation attorney. If the trustee continues to refuse distributions or fails to respond to your requests, consult an attorney experienced in Florida trust litigation. An attorney can evaluate your claims, send a demand letter on your behalf, and if necessary, file a petition in court to compel distributions, compel an accounting, or seek the trustee's removal.

Time Is Important

Delay in addressing a trustee's failure to distribute can be harmful. Trust assets may be depleted by excessive fees, poor investments, or the trustee's own mismanagement. Evidence of the trustee's misconduct may become harder to obtain over time. Florida's statute of limitations for breach of trust actions limits the time within which a beneficiary can bring a claim, and under F.S. § 736.1008, a beneficiary's claim may be barred if the beneficiary received an adequate accounting and failed to object within the statutory period. Acting promptly preserves your rights and maximizes the likelihood of a successful outcome.

Contact a Florida Trust Beneficiary Attorney

If a trustee is not paying you what you are owed under a trust, you have legal rights and remedies under the Florida Trust Code. At the Law Offices of Albert Goodwin, PA, located at 121 Alhambra Plz #1000, Coral Gables, FL 33134, we represent trust beneficiaries in disputes over distributions, accountings, trustee misconduct, and trust litigation. We can help you understand the trust terms, evaluate your options, and take the legal steps necessary to protect your interests. Call us at 786-522-1411 or email [email protected] to schedule a consultation.