Summary of a Recent
Judicial Development in
Estate Planning and Taxation

Court Declares Trustee's Transfer of Trust Property to Himself Void

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Brigham v. Brigham, 11 So.3d 374 (Fla. Dist. Ct. App. 2009), the Florida District Court of Appeals held that a transfer of trust property made by the trustee to himself without court approval or written assignment violated Florida law and the terms of the trust, and therefore the court voided the transfer.

Background

After the trustee of a multi-million dollar land trust transferred the trust property to himself, the trust beneficiaries sought to void the transfer. Id. at *1. The terms of the trust provided that the trust assets "may be assigned or transferred only if the consent of persons holding in excess of fifty percent . . . of all such interests is first obtained," and required "that any interest of the beneficiaries be transferred by written assignment signed by the beneficiary and delivered to the trustee"; otherwise, any such attempted transfer would be void. Id. The trustee had nonetheless transferred the trust property to himself without court approval or any written assignment, and he subsequently sold the property for $2.4 million. Id. at *2. The district court ruled in favor of the trustee, finding that he did not violate his fiduciary duty, and the beneficiaries appealed. Id. at *5.

Arguments

Appellants argued that the trustee was required by Fla. Stat. 737.403(2) to obtain court approval before transferring assets to himself, and that he was required to obtain a written assignment pursuant to the terms of the trust. Id. at *6.

The trustee argued that Fla. Stat. 737.403(2) did not apply to land trusts. Id. at *7.

Analysis and Holdings

A trustee is required to seek court approval from a court for the exercise of a trust power when it conflicts with the trustee's individual interest pursuant to Fla. Stat. 737.403(2). Id. The appellate court determined that that section does apply to land trusts, and therefore the trustee was required to obtain court approval before transferring the trust assets to himself. Id. at *8. The court held that his failure to do so was a violation of Florida law, and that his failure to obtain a written assignment was contrary to the clear and unambiguous terms of the trust. Id. at *8-11. Lastly, the court concluded that the trustee and his wife had breached his fiduciary duty to the beneficiaries because, as fiduciaries, they were required to show "not only that they exercised no undue influence, but also that they gave their clients all the information and advice which it would have been their duty to give if the transaction were made with a stranger." Id. at *11. The court found that they had failed to meet that burden, and therefore set aside the transfer. Id. at *12-13.

The case was decided on February 25, 2009.