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Settlor’s Removal of Funds from Revocable Trust: No Undue Influence Remedy

In MacIntyre v. Wedrall, 12 So.3d 273 (4th DCA 2009), the Court dismissed a challenge to the settlor’s removal of funds from her revocable trust on the grounds of undue influence.

Twenty five years ago, the Florida Supreme Court, in Genova v. Florida National Bank of Palm Beach County, 460 So.2d 895 (Fla. 1984), barred an undue influence challenge to a settlor’s removal of funds from her revocable trust.  The litigation in that case occured while the settlor was still alive.  In MacIntyre, the settlor had died before the litigation commenced.

The MacIntyre Court relied on the reasoning from Genova in dismissing the trust complaint.

The courts have no place in trying to save persons such as Mrs. Genova, the otherwise competent settlor of a revocable trust, from what may or may not be her own imprudence with her own assets. When she created this trust, she provided a means to save herself from her own incompetence, and the courts can and should zealously protect her from her own mental incapacity. However, when she created this trust, she also reserved the absolute right to revoke if she were not incompetent. In order for this to remain a desirable feature of a trust instrument, the right to revoke should also be absolute.

This opinion received adverse commentary from several sources.   I believe the decision is defensible, due to the unique nature of revocable trusts.  A challenge to a competent settlor withdrawing money out of a revocable trust should fail in the same way that a competent person withdrawing money out of his or her bank account should fail.  The reported case does not address what happened to the funds after they were withdrawn.  Had the plaintiff attacked the destination of the funds, rather than the removal of the funds from the revocable trust, the case may have withstood dismissal.

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