Revocable trusts are used for two primary purposes – to avoid probate, and to keep assets out of a guardianship. The Florida Guardianship Code, however, can allow a guardian to take control of the assets of a revocable trust, thereby eliminating one of the primary purposes of having a revocable trust established.
In Rene v. Sykes-Kennedy (Fla. 5th DCA 2015), the Ward, White, had established a revocable trust whereby her granddaughter, Rene, became trustee on the incapacity of White. White was adjudicated incapacitated in 2013 as a result of senile dementia. The Florida guardianship court appointed White’s sister, Sykes-Kennedy, as guardian.
Florida Guardianship Code Gives Guardian the Same Power that the Ward had Over the Trust
Florida statute 744.441(2) gives the guardian the authority to exercise any power as trustee that the ward may have had, if the best interest of the ward requires such exercise. The power of the guardian to amend a revocable trust to appoint a new trustee has been confirmed before, in the case of Guardianship of Muller, 650 So.2d 698 (Fla. 4th DCA 1995).
In the present case, the guardian argued that she needed to become trustee in order to access the assets of the trust to pay for the ward’s care. The guardianship court also noted the guardian’s education, business experience and relationship with the ward. The court went out of its way to note that it was not finding any wrongdoing on the part of the prior trustee, the granddaughter.
The intersection of revocable trusts and guardianships presents a host of issues to work through. Several lessons can be drawn from this case.
Guardian Prevails Over Trustee
1. If the trustee of the revocable trust wants to maintain such status, the appointment of the guardian needs to be fought from the beginning. Under Florida guardianship law, even after finding someone incapacitated, the court must consider whether there are any less restrictive alternatives to a guardianship. If most of the ward’s assets were in the revocable trust, the trustee could have (or should have) argued against the appointment of a guardian, contending that the revocable trust should be kept in place and allowed to function as intended. Once the guardian was appointed, it may have been too late to stop the guardian’s attempt to control all of the assets.
2. The Court’s opinion makes some reference to making sure that the assets of the trust were available for the care of the ward. Although the opinion does not so state, I infer that the granddaughter-trustee may not have been completely cooperative in using the trust assets to pay for care of the ward. A trustee in this position must make every effort to be cooperative; indeed, the trustee should take active measures to work with the guardian to come up with a spending plan.
3. From an estate planning perspective, it appears that the planning documents may not have been completely in sync. Florida law allows for the designation of a pre-need guardian, whereby a person can designate who the person wants to serve as guardian, before a guardian is needed. Many estate plans will appoint the same person as successor trustee of the revocable trust, pre-need guardian, and financial power of attorney. This avoids multiple fiduciaries from fighting over control of assets.
4. The opinion does not address the destination of assets upon the ward’s death. I have seen situations where assets are spread out into various “buckets,” each bucket with its own beneficiary at death. So, once the owner becomes incapacitated, the fiduciaries have a great deal of control over who gets estate assets once the owner dies, by spending money out of some buckets but not others. Using beneficiary designations and pay on death designations to allocate different assets to different people certainly has the possibility of avoiding probate, but it does create the possibility for fights over which assets to use to pay for the care of the incapacitated person. The alternative is to have all assets go into a revocable trust, with one set of beneficiaries listed in the trust for all assets on a consolidated basis. Such planning has a better chance of preserving the true testamentary intent of the client.