A Florida trustee can charge a trust for incurred expenses if the services are necessary and incurred for the benefit of the trust. In the June 2020 opinion of In re Bloom, the Florida appeals court reminded practitioners that the trustee must actually be the trustee to charge expenses to the trust.
The Facts of In re Bloom
Leon Bloom executed a Trust in 1988. After Leon became temporarily incapacitated in 2012, Robert Johnson (Leon’s attorney) assumed the role as trustee of the Florida Trust.
Johnson filed a guardianship proceeding and sought to have Leon’s nephew, Marshall, appointed as emergency temporary guardian. Dorothy, Leon’s wife, sought reimbursement from the Trust for money that she spent to care for Leon. Dorothy was represented by Marc Soss.
The parties entered into a settlement agreement, which was ratified by the Florida guardianship court.
The Trust was added as a party to the guardianship proceeding, Johnson resigned as trustee, and a trust company became trustee.
The Florida Guardianship Court Orders That A Successor Trustee “Shall Be Presented For Appointment”
In 2015, after Leon died, the trust company trustee was permitted to resign, and the court ordered that “a successor trustee shall be presented for appointment by” July 23, 2015. The court found that Johnson was “an interested party for purpose of notice and objection to [the] successor trustee.”
Dorothy appointed her lawyer, Marc Soss, and Raymond James Trust, N.A. as successor trustees, but did not file her notice or present it to the court. Johnson objected to Soss serving as successor trustee due to a conflict of interest. Raymond James declined to serve.
In August 2015, Johnson died. Marshall, as personal representative of Leon’s estate, was substituted for Johnson as petitioner in the guardianship proceeding. Marshall sought to disqualify Soss as successor trustee.
Two days before the hearing on Soss’ disqualification, Soss withdrew as Dorothy’s counsel in the guardianship proceeding. Marshall, as personal representative of Leon’s estate, filed a motion to compel Soss to return any fees paid from the Trust.
Soss was removed as successor trustee. As summarized the Florida appeals court:
The court found that Soss’s representation of Dorothy in her claim against the Trust while simultaneously serving as Successor Trustee of the Trust created an irreconcilable conflict of interest that was not cured by his subsequent withdrawal as counsel for Dorothy. The court further found that Dorothy’s purported appointment of Soss was never confirmed by the court as mandated by its order approving of Caldwell’s resignation. The court also removed Marshall as personal representative of Leon’s estate and appointed Robert M. Elliott to serve as Trustee of the Trust and personal representative of Leon’s estate.
Hearing To Return Fees From The Trust
After being removed as personal representative of Leon’s estate, Marshall appeared individually in the Florida guardianship proceeding and filed an amended motion for an order compelling Soss to return any fees paid from the Trust during his purported service as trustee. Soss noticed his appearance as co-counsel for Dorothy.
The evidence at hearing showed that Soss, while purporting to act as trustee during a roughly eight-month period, paid:
- $45,360 to himself from the Trust
- $82,500 to the attorney that defended him in the disqualification proceeding
- Overpaid Dorothy by about $62,000.
Of those amounts:
- Soss’ attorney paid back almost $19,000.
- Soss did not return any of the funds that Soss took from the Trust.
Soss testified that he held $20,000 from the Trust. The court sua sponte ordered Soss to return the $20,000 to the Trust.
The circuit court asked Soss about the order permitting the corporate trustee to resign that stated that “a successor trustee shall be presented for appointment by the end of” July 23, 2015, and that “Robert M. Johnson is an interested party for purpose of notice and objection to [the] successor trustee.” Soss responded that the order did not specifically say that it had to be presented to the court; instead, it had to be “presented for appointment to the beneficiaries of the trust and Robert Johnson, as an interested party.”
Marshall filed a supplemental motion for order compelling Soss to return the funds to the Trust.
The circuit court found that ” it was clear that there was an objection to Mr. Soss serving as co-trustee or trustee [and] that he was on notice of that fact throughout the time.” The court also found “it incredible to believe in good faith that [the order approving of Caldwell’s resignation as successor trustee] was somehow misinterpreted” and that “it was clear that a successor trustee had to be presented and approved by the court or confirmed by the court,” which was never done.
Is A Person Serving As A “De Facto” Trustee Entitled To Fees From The Trust?
A person serving as a “de facto” trustee who knows that he is not serving as an appropriate trustee is not entitled to payment of fees and expenses from a Florida trust.
“A trustee has the burden of proving the necessity of all expenses incurred by him or her, including attorneys’ fees.” Ortmann v. Bell, 100 So. 3d 38, 46 (Fla. 2d DCA 2011).
When a trustee seeks to charge a trust corpus with an expense incurred by him, including attorney fees, the burden of proof is upon the trustee to demonstrate that the expense was reasonably necessary and that such expense was incurred for the benefit of the trust, and not for his own benefit nor the benefit of others. Barnett v. Barnett, 340 So. 2d 548, 550 (Fla. 1st DCA 1976) (emphasis added).
Soss testified about the services he performed while he served s successor trustee. Soss argued that he was entitled to compensation for acting as a “de facto” trustee. However, the Florida guardianship court determined that Soss was not entitled to compensation when “he knew or should have known that he should not have made the payments because he was not an appropriate trustee.”
Soss knew that the Florida court’s order required the proposed successor trustee to be presented to the court, and that his appointment by the court to serve as trustee had not been approved. Therefore, the court concluded that Soss, who should have known that he was not actually the trustee, was not entitled to his fees from the trust.
Do Payment Of A Trustee’s Attorneys Fees Have To Benefit The Trust?
Yes, payment of a trustee’s attorneys fees must benefit the trust, not just the trustee. Here, the Florida guardianship court did not order non-trustee Soss to return the payment of fees from the Trust to Soss’ attorney, Waskom. Although the court found that the payments to Waskom were “ill-advised and inappropriate,” the court did not order Soss to return the payments. The court concluded that it “would be inappropriate and an undue punishment” to Soss, because the payments had gone to Waskom, not Soss directly.
The Florida appeals court reversed the guardianship court and required non-trustee Soss to return all of the fees paid to his attorney from the Trust, stating:
However, as Marshall correctly contends, those funds went to his attorney for the benefit of Soss—not for the benefit of the Trust. Cf. McCormick v. Cox, 118 So. 3d 980, 987 (Fla. 3d DCA 2013) (affirming disallowance of attorney’s fees that trustee paid to law firm in beneficiaries’ action to remove trustee for breaches of fiduciary duties). Given that Soss failed to demonstrate that his payments to Waskom were “for the benefit of the trust, and not for his own benefit,” the circuit court abused its discretion in failing to order Soss to return those funds to the Trust. See Barnett, 340 So. 2d at 550.
Here, Soss was not actually the trustee of the trust. He should have known that based upon the court’s order requiring that the nominated successor trustee was to be presented to the court. Soss was not entitled to payment of his expenses from the Trust, and was not entitled to pay his attorney from the Trust.