HB 743

1
A bill to be entitled
2An act relating to duties, powers, and liabilities of
3trustees; amending s. 660.417, F.S.; revising criteria for
4investments in certain investment instruments; amending s.
5660.46, F.S.; conforming cross-references to changes made
6by the act; amending s. 736.0802, F.S.; specifying
7additional trust property transactions not voidable by a
8beneficiary; revising certain disclosure and applicability
9requirements; broadening authority for investing in
10certain investment instruments; excusing trustees from
11certain compliance requirements under certain
12circumstances; amending s. 736.0808, F.S.; revising
13provisions relating to powers to direct; providing
14additional criteria and requirements relating to grants of
15powers to trustees to direct, consent to, or disapprove
16investment actions; specifying absence of liability of
17trustees for certain losses; specifying absence of trustee
18obligations to perform certain activities relating to
19investment under certain circumstances; subjecting trust
20advisors to jurisdiction of state courts under certain
21circumstances; amending s. 736.0816, F.S.; defining the
22term "mutual fund" for certain purposes; amending s.
23736.1008, F.S.; revising limitations on proceedings
24against trustees; providing additional limitations;
25amending s. 736.1011, F.S.; providing construction
26relating to trustee drafts of exculpatory terms in a trust
27instrument; providing an effective date.
28
29Be It Enacted by the Legislature of the State of Florida:
30
31     Section 1.  Subsection (3) of section 660.417, Florida
32Statutes, as amended by section 18 of chapter 2006-217, Laws of
33Florida, is amended to read:
34     660.417  Investment of fiduciary funds in investment
35instruments; permissible activity under certain circumstances;
36limitations.--
37     (3)  The fact that such bank or trust company or an
38affiliate of the bank or trust company owns or controls
39investment instruments shall not preclude the bank or trust
40company acting as a fiduciary from investing or reinvesting in
41such investment instruments, provided such investment
42instruments:
43     (a)  Are held for sale by the bank or trust company or by
44an affiliate of the bank or trust company in the ordinary course
45of its business of providing investment services to its
46customers and do not include any such interests held by the bank
47or trust company or by an affiliate of the bank or trust company
48for its own account.
49     (b)  Are sold primarily to accounts for which the bank or
50trust company is not acting as a fiduciary, or are not sold to
51accounts for which the bank or trust company is acting as a
52fiduciary upon terms that are normally less not more favorable
53to the buyer than the terms upon which they are normally sold to
54accounts for which the bank or trust company is not acting as a
55fiduciary.
56     Section 2.  Paragraphs (a) and (e) of subsection (1)  and
57subsection (9) of section 660.46, Florida Statutes, as amended
58by section 19 of chapter 2006-217, Laws of Florida, are amended
59to read:
60     660.46  Substitution of fiduciaries.--
61     (1)  The provisions of this section shall apply to the
62transfer of fiduciary accounts by substitution, and for those
63purposes these provisions shall constitute alternative
64procedures to those provided or required by any other provisions
65of law relating to the transfer of fiduciary accounts or the
66substitution of persons acting or who are to act in a fiduciary
67capacity. In this section, and only for its purposes, the term:
68     (a)  "Limitation notice" has the meaning ascribed in s.
69736.1008(6)(4).
70     (e)  "Trust disclosure document" has the meaning ascribed
71in s. 736.1008(6)(4)(a).
72     (9)  Unless previously or otherwise barred by adjudication,
73waiver, consent, limitation, or the provisions of subsection
74(8), an action for breach of trust or breach of fiduciary duties
75or responsibilities against an original fiduciary in whose place
76and stead another trust company or trust department has been
77substituted pursuant to the provisions of this section is barred
78for any beneficiary who has received a trust disclosure document
79adequately disclosing the matter unless a proceeding to assert
80the claim is commenced within 6 months after receipt of the
81trust disclosure document or the limitation notice that applies
82to the trust disclosure document, whichever is received later.
83In any event, and notwithstanding lack of adequate disclosure,
84all claims against such original fiduciary which has complied
85with the requirements of s. 736.1008 are barred as provided in
86chapter 95. Section 736.1008(6)(4)(a) and (c) applies to this
87subsection.
88     Section 3.  Subsections (2) and (5) of section 736.0802,
89Florida Statutes, are amended to read:
90     736.0802  Duty of loyalty.--
91     (2)  Subject to the rights of persons dealing with or
92assisting the trustee as provided in s. 736.1016, a sale,
93encumbrance, or other transaction involving the investment or
94management of trust property entered into by the trustee for the
95trustee's own personal account or which is otherwise affected by
96a conflict between the trustee's fiduciary and personal
97interests is voidable by a beneficiary affected by the
98transaction unless:
99     (a)  The transaction was authorized by the terms of the
100trust;
101     (b)  The transaction was approved by the court;
102     (c)  The beneficiary did not commence a judicial proceeding
103within the time allowed by s. 736.1008;
104     (d)  The beneficiary consented to the trustee's conduct,
105ratified the transaction, or released the trustee in compliance
106with s. 736.1012;
107     (e)  The transaction involves a contract entered into or
108claim acquired by the trustee when that person had not become or
109contemplated becoming trustee; or
110     (f)  The transaction was consented to in writing by a
111settlor of the trust while the trust was revocable; or.
112     (g)  The transaction is one described in s. 736.0816(1),
113(3), or (6).
114     (5)(a)  An investment by a trustee authorized by lawful
115authority to engage in trust business, as defined in s.
116658.12(20), in investment instruments, as defined in s.
117660.25(6), that are owned or controlled by the trustee or its
118affiliate, or from which the trustee or its affiliate receives
119compensation for providing services in a capacity other than as
120trustee, is not presumed to be affected by a conflict between
121personal and fiduciary interests provided the investment
122otherwise complies with chapters 518 and 660 and the trustee
123complies with the disclosure requirements of this subsection.
124     (b)  A trustee who, pursuant to authority granted in this
125subsection, invests trust funds in investment instruments that
126are owned or controlled by the trustee or its affiliate shall
127disclose the following to all qualified beneficiaries:
128     1.  Notice that the trustee has invested trust funds in
129investment instruments owned or controlled by the trustee or its
130affiliate.
131     2.  The identity of the investment instruments.
132     3.  The identity and relationship to the trustee of any
133affiliate that owns or controls the investment instruments.
134     (c)  A trustee who, pursuant to authority granted in this
135subsection, invests trust funds in investment instruments with
136respect to which the trustee or its affiliate receives
137compensation for providing services in a capacity other than as
138trustee shall disclose to all qualified beneficiaries, the
139nature of the services provided by the trustee or its affiliate,
140and all compensation, including, but not limited to, fees or
141commissions paid or to be paid by the account and received or to
142be received by an affiliate arising from such affiliated
143investment.
144     (d)  Disclosure required by this subsection shall be made
145at least annually unless there has been no change in the method
146or increase in the rate at which such compensation is calculated
147since the most recent disclosure. The disclosure may be given in
148a trust disclosure document as defined in s. 736.1008, in a copy
149of the prospectus for the investment instrument, in any other
150written disclosure prepared for the investment instrument under
151applicable federal or state law, or in a written summary that
152includes all compensation received or to be received by the
153trustee and any affiliate of the trustee and an explanation of
154the manner in which such compensation is calculated, either as a
155percentage of the assets invested or by some other method.
156     (e)  This subsection shall apply as follows:
157     1.  This subsection does not apply to qualified investment
158instruments or to a trust for which a right of revocation
159exists.
160     2.  For investment instruments other than qualified
161investment instruments, paragraphs (a), (b), (c), and (d) shall
162apply to irrevocable trusts created on or after July 1, 2007,
163which expressly authorize the trustee, by specific reference to
164this subsection, to invest in investment instruments owned or
165controlled by the trustee or its affiliate.
166     3.  For investment instruments other than qualified
167investment instruments, paragraphs (a), (b), (c), and (d) shall
168apply to irrevocable trusts executed on or after July 1, 2007,
169that are not described in subparagraph 2. and to irrevocable
170trusts executed prior to July 1, 2007, only as follows:
171     a.  Such paragraphs shall not apply until 60 days after the
172statement required in paragraph (f) is provided and no objection
173is made or any objection which is made has been terminated.
174     (I)  An objection is made if, within 60 days after the date
175of the statement required in paragraph (f), a super majority of
176the eligible beneficiaries deliver to the trustee written
177objections to the application of this subsection to such trust.
178An objection shall be deemed to be delivered to the trustee on
179the date the objection is mailed to the mailing address listed
180in the notice provided in paragraph (f).
181     (II)  An objection is terminated upon the earlier of the
182receipt of consent from a super majority of eligible
183beneficiaries of the class that made the objection or the
184resolution of the objection pursuant to this subparagraph.
185     (III)  If an objection is delivered to the trustee, the
186trustee may petition the court for an order overruling the
187objection and authorizing the trustee to make investments under
188this subsection. The burden shall be on the trustee to show good
189cause for the relief sought.
190     (IV)  Any qualified beneficiary may petition the court for
191an order to prohibit, limit, or restrict a trustee's authority
192to make investments under this subsection. The burden shall be
193upon the petitioning beneficiary to show good cause for the
194relief sought.
195     (V)  The court may award costs and attorney's fees relating
196to any petition under this subparagraph in the same manner as in
197chancery actions. When costs and attorney's fees are to be paid
198out of the trust, the court, in its discretion, may direct from
199which part of the trust such costs and fees shall be paid.
200     b.  The objection of a super majority of eligible
201beneficiaries under this subparagraph may thereafter be removed
202by the written consent of a super majority of the class or
203classes of those eligible beneficiaries that made the objection.
204     (f)1.  Any time prior to initially investing in any
205investment instrument described in this subsection other than a
206qualified investment instrument, the trustee of a trust
207described in subparagraph (e)3. shall provide to all qualified
208beneficiaries a statement containing the following:
209     a.  The name, telephone number, street address, and mailing
210address of the trustee and of any individuals who may be
211contacted for further information.
212     b.  A statement that, unless a super majority of the
213eligible beneficiaries objects to the application of this
214subsection to the trust within 60 days after the date the
215statement pursuant to this subsection was delivered, this
216subsection shall apply to the trust.
217     c.  A statement that, if this subsection applies to the
218trust, the trustee will have the right to make investments in
219investment instruments, as defined in s. 660.25(6), which are
220owned or controlled by the trustee or its affiliate, or from
221which the trustee or its affiliate receives compensation for
222providing services in a capacity other than as trustee, and that
223the trustee or its affiliate may receive fees in addition to the
224trustee's compensation for administering the trust.
225
226A statement by the trustee is not delivered if the statement is
227accompanied by another written communication other than a
228written communication by the trustee that refers only to the
229statement.
230     2.  For purposes of paragraph (e) and this paragraph:
231     a.  "Eligible beneficiaries" means:
232     (I)  If at the time the determination is made there are one
233or more beneficiaries as described in s. 736.0103(14)(c), the
234beneficiaries described in s. 736.0103(14)(a) and (c); or
235     (II)  If there is no beneficiary described in s.
236736.0103(14)(c), the beneficiaries described in s.
237736.0103(14)(a) and (b).
238     b.  "Super majority of the eligible beneficiaries" means:
239     (I)  If at the time the determination is made there are one
240or more beneficiaries as described in s. 736.0103(14)(c), at
241least two-thirds in interest of the beneficiaries described in
242s. 736.0103(14)(a) or two-thirds in interest of the
243beneficiaries described in s. 736.0103(14)(c), if the interests
244of the beneficiaries are reasonably ascertainable; otherwise,
245two-thirds in number of either such class; or
246     (II)  If there is no beneficiary as described in s.
247736.0103(14)(c), at least two-thirds in interest of the
248beneficiaries described in s. 736.0103(14)(a) or two-thirds in
249interest of the beneficiaries described in s. 736.0103(14)(b),
250if the interests of the beneficiaries are reasonably
251ascertainable; otherwise, two-thirds in number of either such
252class.
253     c.  "Qualified investment instrument" means a mutual fund,
254common trust fund, or money market fund described in and
255governed by s. 736.0816(3).
256     d.  An irrevocable trust is created upon execution of the
257trust instrument. If a trust that was revocable when created
258thereafter becomes irrevocable, the irrevocable trust is created
259when the right of revocation terminates.
260     (g)  Nothing in this chapter is intended to create or imply
261a duty for the trustee to seek the application of this
262subsection to invest in investment instruments described in
263paragraph (a), and no inference of impropriety may be made as a
264result of a trustee electing not to invest trust assets in
265investment instruments described in paragraph (a).
266     (h)  This subsection is not the exclusive authority for
267investing in investment instruments described in paragraph (a).
268A trustee who invests trust funds in investment instruments
269described in paragraph (a) is not required to comply with
270paragraph (b), paragraph (c), or paragraph (f) if the trustee is
271permitted to invest in such investment instruments pursuant to
272subsection (2) or any other law that would authorize the
273investments described in paragraph (a).
274     Section 4.  Section 736.0808, Florida Statutes, is amended
275to read:
276     736.0808  Powers to direct.--
277     (1)  Subject to ss. 736.0403(2) and 736.0602(3)(a), the
278trustee may follow a direction of the settlor that is contrary
279to the terms of the trust while a trust is revocable. For
280purposes of this section, the acts of the settlor of a trust
281while the trust is revocable shall be treated as acts of a trust
282advisor.
283     (2)  The terms of a trust instrument may confer on a person
284one or more powers and discretions of a trust advisor which may
285be exercised or not exercised, in the best interests of the
286trust, in the sole and absolute discretion of the trust advisor
287whose actions are binding on all other persons. A trust advisor
288may be granted the power to direct, consent to, or disapprove
289any investment action of the trustee, any distribution of trust
290assets, and any modification or termination of the trust. For
291purposes of this section, investment actions of the trustee
292include, but are not limited to, acquisition, retention,
293purchase, sale, exchange, tender, encumbrance, or other
294transactions affecting ownership or rights of trust property and
295the investment and reinvestment of principal and income of the
296trust.
297     (3)(2)  If the terms of a trust confer on a person one or
298more powers and discretions of a trust advisor other than the
299settlor of a revocable trust the power to direct certain actions
300of the trustee, the trustee shall act in accordance with an
301exercise of the power unless the attempted exercise is
302manifestly contrary to the terms of the trust or the trustee
303knows the attempted exercise would constitute a serious breach
304of a fiduciary duty that the person holding the power owes to
305the beneficiaries of the trust. The trustee shall not be liable,
306individually or as a fiduciary, for any loss that results from
307compliance with a direction of the trust advisor; for any loss
308that results from a failure to take any action that requires
309prior approval of the trust advisor if the trustee timely sought
310but failed to obtain that authorization; or for any failure to
311correct, address, or pursue redress against the trust advisor
312for any breach of trust or other act of the trust advisor in the
313exercise or failure to exercise the power of the trust advisor.
314The trustee is also relieved from any obligation to perform
315investment or suitability reviews, inquiries, or investigations
316or to make recommendations or evaluations with respect to any
317investments to the extent the trust advisor had authority to
318direct investment actions of the trustee. This subsection does
319not apply to a trust advisor appointed by the trustee unless the
320trust was revocable at the time of appointment, and the trustee
321who appointed the trust advisor was also the settlor of the
322trust.
323     (3)  The terms of a trust may confer on a trustee or other
324person a power to direct the modification or termination of the
325trust.
326     (4)  A person, other than a beneficiary, who holds a power
327to direct is presumptively a fiduciary who, as such, is required
328to act in good faith with regard to the purposes of the trust
329and the interests of the beneficiaries. The holder of a power to
330direct is liable for any loss that results from breach of a
331fiduciary duty.
332     (5)  By accepting an appointment to serve as a trust
333advisor of a trust that is subject to the laws of this state,
334the trust advisor submits to the jurisdiction of the courts of
335this state even if investment advisory agreements or other
336related agreements provide otherwise, and the trust advisor may
337be made a party to any action or proceeding if issues relate to
338a decision or action of the trust advisor.
339     Section 5.  Subsection (3) of section 736.0816, Florida
340Statutes, is amended to read:
341     736.0816  Specific powers of trustee.--Except as limited or
342restricted by this code, a trustee may:
343     (1)  Collect trust property and accept or reject additions
344to the trust property from a settlor, including an asset in
345which the trustee is personally interested, and hold property in
346the name of a nominee or in other form without disclosure of the
347trust so that title to the property may pass by delivery but the
348trustee is liable for any act of the nominee in connection with
349the property so held.
350     (3)  Acquire an undivided interest in a trust asset,
351including, but not limited to, a money market mutual fund,
352mutual fund, or common trust fund, in which asset the trustee
353holds an undivided interest in any trust capacity, including any
354money market or other mutual fund from which the trustee or any
355affiliate or associate of the trustee is entitled to receive
356reasonable compensation for providing necessary services as an
357investment adviser, portfolio manager, or servicing agent. A
358trustee or affiliate or associate of the trustee may receive
359compensation for such services in addition to fees received for
360administering the trust provided such compensation is fully
361disclosed in writing to all qualified beneficiaries. As used in
362this subsection, the term "mutual fund" includes an open-end or
363closed-end management investment company or investment trust
364registered under the Investment Company Act of 1940, 15 U.S.C.
365ss. 80a-1 et seq., as amended.
366     (6)  Borrow money, with or without security, and mortgage
367or pledge trust property for a period within or extending beyond
368the duration of the trust and advance money for the protection
369of the trust.
370     Section 6.  Section 736.1008, Florida Statutes, is amended
371to read:
372     736.1008  Limitations on proceedings against trustees.--
373     (1)  Except as provided in subsection (2), all claims by a
374beneficiary against a trustee for breach of trust are barred as
375provided in chapter 95 as to:
376     (a)  All matters adequately disclosed in a trust disclosure
377document issued by the trustee, with the limitations period
378beginning on the date of receipt of adequate disclosure.
379     (b)  All matters not adequately disclosed in a trust
380disclosure document if the trustee has issued a final trust
381accounting and has given written notice to the beneficiary of
382the availability of the trust records for examination and that
383any claims with respect to matters not adequately disclosed may
384be barred unless an action is commenced within the applicable
385limitations period provided in chapter 95. The limitations
386period begins on the date of receipt of the final trust
387accounting and notice.
388     (2)  Unless sooner barred by adjudication, consent, or
389limitations, a beneficiary is barred from bringing an action
390against a trustee for breach of trust with respect to a matter
391that was adequately disclosed in a trust disclosure document
392unless a proceeding to assert the claim is commenced within 6
393months after receipt from the trustee of the trust disclosure
394document or a limitation notice that applies to that disclosure
395document, whichever is received later.
396     (3)  When a trustee has not issued a final trust accounting
397or has not given written notice to the beneficiary of the
398availability of the trust records for examination and that
399claims with respect to matters not adequately disclosed may be
400barred, a claim against the trustee for breach of trust based on
401a matter not adequately disclosed in a trust disclosure document
402accrues when the beneficiary has actual knowledge of the facts
403upon which the claim is based or actual knowledge of the
404trustee's resignation, repudiation of the trust, or adverse
405possession of trust assets, or termination of the trust and is
406barred as provided in chapter 95.
407     (4)  Notwithstanding subsection (1), subsection (2), or
408subsection (3), all claims by a beneficiary against a trustee
409shall be barred 10 years after the date of the act or omission
410of the trustee complained of. The running of the 10-year period
411is tolled by the minority of the beneficiary entitled to sue
412during any period of time in which a parent, guardian, or
413guardian ad litem does not exist, has an interest adverse to
414that of the minor, or is adjudicated to be incapacitated to sue.
415     (5)  The failure of the trustee to take corrective action
416shall not be construed as a separate act or omission and shall
417not be construed to extend any period of limitations otherwise
418established by law, including, but not limited to, the
419limitations established by this section.
420     (6)(4)  As used in this section, the term:
421     (a)  "Trust disclosure document" means a trust accounting
422or any other written report of the trustee. A trust disclosure
423document adequately discloses a matter if the document provides
424sufficient information so that a beneficiary knows of a claim or
425reasonably should have inquired into the existence of a claim
426with respect to that matter.
427     (b)  "Trust accounting" means an accounting that adequately
428discloses the information required by and that substantially
429complies with the standards set forth in s. 736.08135.
430     (c)  "Limitation notice" means a written statement of the
431trustee that an action by a beneficiary against the trustee for
432breach of trust based on any matter adequately disclosed in a
433trust disclosure document may be barred unless the action is
434commenced within 6 months after receipt of the trust disclosure
435document or receipt of a limitation notice that applies to that
436trust disclosure document, whichever is later. A limitation
437notice may but is not required to be in the following form: "An
438action for breach of trust based on matters disclosed in a trust
439accounting or other written report of the trustee may be subject
440to a 6-month statute of limitations from the receipt of the
441trust accounting or other written report. If you have questions,
442please consult your attorney."
443     (7)(5)  For purposes of this section, a limitation notice
444applies to a trust disclosure document when the limitation
445notice is:
446     (a)  Contained as a part of the trust disclosure document
447or as a part of another trust disclosure document received
448within 1 year prior to the receipt of the latter trust
449disclosure document;
450     (b)  Accompanied concurrently by the trust disclosure
451document or by another trust disclosure document that was
452received within 1 year prior to the receipt of the latter trust
453disclosure document;
454     (c)  Delivered separately within 10 days after the delivery
455of the trust disclosure document or of another trust disclosure
456document that was received within 1 year prior to the receipt of
457the latter trust disclosure document. For purposes of this
458paragraph, a limitation notice is not delivered separately if
459the notice is accompanied by another written communication,
460other than a written communication that refers only to the
461limitation notice; or
462     (d)  Received more than 10 days after the delivery of the
463trust disclosure document, but only if the limitation notice
464references that trust disclosure document and:
465     1.  Offers to provide to the beneficiary on request another
466copy of that trust disclosure document if the document was
467received by the beneficiary within 1 year prior to receipt of
468the limitation notice; or
469     2.  Is accompanied by another copy of that trust disclosure
470document if the trust disclosure document was received by the
471beneficiary 1 year or more prior to the receipt of the
472limitation notice.
473     (8)(6)  This section applies to trust accountings for
474accounting periods beginning on or after July January 1, 2007
4752008, and to written reports, other than trust accountings,
476received by a beneficiary on or after July January 1, 2007 2008.
477     Section 7.  Subsection (2) of section 736.1011, Florida
478Statutes, is amended to read:
479     736.1011  Exculpation of trustee.--
480     (2)  An exculpatory term drafted or caused to be drafted by
481the trustee is invalid as an abuse of a fiduciary or
482confidential relationship unless the trustee proves that the
483exculpatory term is fair under the circumstances and that the
484term's existence and contents were adequately communicated
485directly to the settlor. An exculpatory term is not drafted or
486caused to be drafted by the trustee within the meaning of this
487subsection when the trustee provides exculpatory language to the
488person drafting the trust instrument which the trustee requests
489or requires to be contained in the trust instrument.
490     Section 8.  This act shall take effect July 1, 2007.


CODING: Words stricken are deletions; words underlined are additions.