Administering a trust in Florida can be a complex and demanding task. If you’ve been named as a trustee, you have a legal obligation to manage the trust’s assets and distribute them to beneficiaries according to the terms of the trust agreement. This isn’t a responsibility to be taken lightly, and even honest mistakes can lead to significant legal and financial consequences.
At Michael T. Heider, P.A., we guide trustees through the trust administration process to help ensure a smooth and proper transition. We’ve seen firsthand the common pitfalls that can derail an administration. Here are some of the top mistakes to avoid during Florida trust administration.
Failing to understand your fiduciary duties
The most significant mistake a trustee can make is not fully grasping their role. In Florida, a trustee is a fiduciary, which means they have a legal and ethical obligation to act in the best interest of the trust and its beneficiaries. This duty of loyalty and care is paramount. It means you must act with honesty, impartiality, and prudence.
A lack of understanding can lead to critical errors, such as mismanaging assets, making improper distributions, or engaging in conflicts of interest. For example, using trust funds for your personal benefit, even for a short time, is a breach of fiduciary duty. Similarly, favoring one beneficiary over another, like a sibling or a close friend, is a violation of the trustee’s obligation to act impartially. We work with trustees to help them understand their responsibilities from day one and avoid these costly missteps.
Delaying the administration process
After a loved one passes away, it’s natural to need time to grieve. However, Florida law requires that a trustee begin the trust administration process in a timely manner. Delays can cause complications, including beneficiary frustration and the potential for legal action. It’s also a practical matter; the longer you wait, the more difficult it can be to locate assets, access accounts, and gather necessary documents.
A prompt start includes tasks like notifying beneficiaries, gathering and inventorying assets, and opening a bank account for the trust. Waiting too long can put the trustee at risk of personal liability for any damages caused by the delay. If you are a trustee and need to begin the administration process, we can help you get started on the right foot.
Not properly funding the trust
A common issue we encounter is an improperly funded trust. A trust is only as effective as the assets it holds. For a trust to work as intended, the grantor must transfer ownership of their assets—such as bank accounts, real estate, and investments—into the name of the trust. If an asset is not properly retitled, it will not be part of the trust and may have to go through the lengthy and expensive Florida probate process.
This can undermine the entire purpose of the trust and create unexpected complications for the beneficiaries. A knowledgeable Florida estate planning attorney can help you determine if the trust was properly funded.
Improperly managing trust assets
Trustees are responsible for managing and preserving the trust’s assets for the beneficiaries. Florida law requires trustees to act as a “prudent investor.” This means you must invest and manage the trust’s funds with a reasonable degree of care and caution. This includes diversifying investments to avoid excessive risk and ensuring assets are not neglected.
Failing to properly manage trust assets can lead to significant financial losses. For example, leaving large sums of money in a low-interest checking account for an extended period could be seen as a breach of duty. Attempting to make high-risk, speculative investments is also a mistake. We help trustees navigate these financial responsibilities to protect the trust’s value.
Overlooking tax obligations
Trust administration in Florida involves several tax considerations, and a trustee is responsible for ensuring all tax obligations are met. This can include filing a final personal income tax return for the deceased, as well as an income tax return for the trust itself. Missing a deadline or failing to properly report income can result in penalties and interest. Working with a qualified CPA who has experience with trust taxation is crucial to avoid this common mistake.
Inadequate communication with beneficiaries
While a trustee’s duties are primarily to the trust itself, keeping beneficiaries informed is a critical part of the process. Florida law requires trustees to keep beneficiaries reasonably informed about the trust’s administration and to provide annual accountings. A lack of transparency can lead to suspicion, disputes, and even litigation.
We recommend maintaining open and regular communication, providing a clear accounting of all income and expenses, and being prepared to answer reasonable questions. This simple practice can prevent a great deal of conflict and maintain family harmony.
We are here to guide trustees through the process
Serving as a trustee is an important responsibility, but you do not have to handle it alone. At Michael T. Heider, P.A., we work closely with trustees across Florida to provide clear guidance, prevent mistakes, and ensure the trust is administered according to state law and the trust document itself.
If you are serving as a trustee and want peace of mind that you are on the right track, call us today at 727-235-6005 or schedule your free consultation. We are here to make the process easier and to protect both you and the beneficiaries you serve.
