In Giller v. Grossman, a September 1, 2021 opinion from the Florida Third District Court of Appeal, the court determined that a beneficiary’s children were intended beneficiaries of the trust in a trust construction dispute and that reformation of the trust was not supported by the evidence. This opinion gives a quick refresher on the basics of trust construction and reformation in Florida.
The Facts of Giller v. Grossman
Norman Giller created seven trust instruments during his lifetime.
Pursuant to the trusts, Norman’s children – Brian, Anita, and Ira – were each allocated one-third of the assets and accumulated income. Anita and Ira received their one-third allocations outright. Brian had financial difficulties and elected to place his one-third trust allocation into separate subtrusts attached to the seven primary trusts as a means of protecting his share of trust assets from creditors.
Other than the subtrust to the Giller Family Trust, the subtrusts provide that Brian and his two now-adult children, Jamie and Jason (“issue”), are equal beneficiaries. In the Giller Family Trust, Brian is the primary beneficiary, and his children are remaindermen.
Norman appointed Anita as Trustee of the seven trusts, with Brian’s agreement. At some point, with Norman’s approval, Brian borrowed money from one of the family businesses and agreed to repay the loan. As it became obvious over time that Brian would never repay the loan, family relationships deteriorated.
Brian began to request distributions from his subtrusts in 2005. Anita would make a needs assessment and then issue modest checks to Brian. After Anita’s husband became ill in 2008, Anita continued to write small checks to Brian, but did not conduct any needs assessments.
After Norman’s death in 2009, Brian requested all of the accumulated income from his subtrusts. An attorney advised Anita that because Brian was not the sole beneficiary of six of the seven subtrusts, Anita would be in breach of her fiduciary duties if she granted Brian’s request and distributed principal to him.
In late 2009, Brian demanded all of the income generating assets of the subtrusts as well as the accumulated income. Anita refused his demand. Subsequently, the board of the Giller family company, from which Brian had borrowed money, sued him to recover the loan balance.
In March 2011, Brian filed a fifteen-count complaint to, among other things, remove Anita as Trustee, for breach of trust, and for civil theft, etc. Brian sought declaratory judgment as to the construction and meaning of the subtrusts’ language, claiming the language of the subtrusts shows it was intended to benefit him solely as a Florida trust beneficiary, not his children.
The Florida probate court found the trust document language unambiguous, found no conflict of interest, and no breach of trust by Anita as Trustee.
How Do You Construe a Trust In Florida?
The polestar of trust interpretation and construction in Florida is the settlor’s intent. Intent is ascertained from the four corners of the trust by considering all the provisions in context, rather than from individual, select portions or forms of words. The meaning applied to those provisions, words, or phrases cannot lead to absurd results. Roberts v. Sarros, 920 So. 2d 193, 196 (Fla. 2d DCA 2006).
Brian argued on appeal that the Florida probate court should have ruled the subtrust language ambiguous and required introduction of extrinsic evidence regarding whether his children were intended beneficiaries. He urged that the Florida probate court should have then reformed the language to conform to his own interpretation that subtrust property was solely for his benefit, to the exclusion of his children.
The Florida appellate court looked at the plain language of the trusts. Six of the seven subtrusts contain the following identical and dispositive language, in pertinent part:
Any share established under this paragraph 2 for BRIAN J. GILLER shall be held as a separate trust for the benefit of BRIAN J. GILLER and administered and disposed of as follows:
(a) the Trustee may distribute to or for the benefit of such beneficiary or his issue (whether equal or unequal, and whether the whole or a lesser amount) so much of the net income of such beneficiary’s separate trust as the Trustee, in the Trustee’s discretion, deems necessary for such beneficiary’s reasonable health, support, maintenance or education of such beneficiary or for the reasonable health, support, maintenance . . . or for the reasonable health, support, maintenance or education of any issue of such beneficiary . . . In determining the amount to be distributed, the Trustee may, but need not consider any income or resources of such beneficiary or his issue.
(b) The Trustee shall have the power and authority, at any time and from time, to time, in the Trustee’s discretion, to make a payment or payments out of the principal of such beneficiary’s separate trust of any amount as the Trustee, in the Trustee’s discretion, deems necessary for the reasonable health, support, maintenance or education of such beneficiary or for the reasonable support, maintenance or education of any issue of such beneficiary. In making such invasions of principal the Trustee may, but need not, consider any other income of such beneficiary or his issue. (emphasis added).
The Florida appellate court determined that, construing the subtrusts in their entirety, the phrase “for the benefit of” does not render the subtrusts ambiguous as a matter of law with respect to the inclusion of Brian’s children as beneficiaries.
Clear And Convincing Evidence Required To Reform a Florida Trust
In order for the Florida trial court to reform a trust instrument, there must be clear and convincing evidence that the trust, as written, does not reflect the settlor’s intent. See Schroeder v. Gebhart, 825 So. 2d 442, 446 (Fla. 5th DCA 2002).
The Florida appellate court stated:
Here, the record reflects that Norman created the subtrusts to protect Brian’s share from his creditors; reformation of the trust language to eliminate any mention of Brian’s “issue” would go against Norman’s intent as the one who created and oversaw the trusts for Brian’s debt management benefit.
The Florida appellate court also affirmed the trial court’s finding of no breach of fiduciary duty, and upheld the award of trustee’s attorney’s fees pursuant to section 736.0802(10)(b), which provides: “If a trustee incurs attorney fees or costs in connection with a claim or defense of a breach of trust which is made in a filed pleading, the trustee may pay such attorney fees or costs from trust assets without the approval of any person and without any court authorization.” Read about attorney’s fees in breach of trust actions in Florida here.
